South America Calling

Argentine Farms Look To Paraguay

Talking to farmers across Argentina's grain belt during my recent trip, I was invariably asked the same question.

"What are the prospects for soy in Paraguay?"

The question caught me by surprise. Certainly Paraguay is a significant soybean producer, planting nearly 8 million acres this year and is solidifying its spot as the world's No. 4 exporter. But its importance pales in comparison to Brazil, where I am based and on the prospects for which Argentine farmers normally grill me.

"But why the interest," I asked and to a man they said they were assessing the possibility of producing there.

The reason: The hostile tax and economic environment they have to deal with in their own country.

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A soybean export tax of 35%, foreign exchange controls that curb profits and inflation of 40% make it tough for Argentine farms to make any money at current price levels, despite boasting some of the world's best grain lands.

"Farms see Paraguay as an opportunity to produce without all the difficulties here," said Carlos Robertson, an Argentine farm manager who recently went to Paraguay to assess investment options.

The focus of the Argentine's interest is Chaco, a vast region to the north of Ascuncion where soybean production is growing fast.

Trading companies have made significant investments in the region and there are decent logistics via the River Paraguai to Argentine ports.

Soybean production expanded first in southern Paraguay, along the border with Brazil. The region on the Brazilian side, western Parana, is a big grain area and it was natural for the Brazilian to start producing on the other side of the border too.

A couple of years back, the heavy involvement of foreigners in production and the expulsion of indigenous peoples to make room for further planting caused a backlash, with the government threatening to kick Brazilians and others off land.

However, Horacio Cartes, the current Paraguayan president, is much more sympathetic to business interests and wants foreign help developing the interior.

Taxes are much lower in Paraguay, although there is the threat of a 5% soybean export tax hanging over the sector.

Argentine interest is also great in Bolivia, where soybean farmers have been established in the Santa Cruz region for some time.

(CZ)

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