Argentina will increase exports of soybeans and oil thanks to reforms, which have already led to lower prices
The new government of Argentina has developed a plan for shock therapy of the economy, which will lead the country out of the biggest crisis in recent decades. The Minister of Economy announced the reduction of ministries by half, the reduction of energy subsidies and the cancellation of tenders for public works.
The government, which took office only on Monday, already on Tuesday evening introduced a package of economic measures, including a significant devaluation of the peso, and on Wednesday announced a reduction in the duty on soybeans, which will contribute to an increase in its exports and has already led to a decrease in world quotations. The country's new finance minister said the official peso rate is now rising from 365 to 800 pesos to the dollar, and the export duty on wheat and corn and some other agricultural products is increasing from 12% to 15%, although the duty on soybeans is being reduced from 33% to 15%. However, the tax hike legislation still needs to be approved by Congress.
Argentina is one of the world's largest exporters of soybean oil and meal and the third largest producer of corn, as well as a significant producer of wheat and beef.
The budget deficit in the country has existed for 113 of the last 123 years, and now it is 5.5% of GDP. Inflation approached 150%, and National Bank reserves became negative, the debt to the IMF reached 44 billion dollars, and 40% of the population lives in poverty.
The challenge is whether President Miley, whose libertarian coalition is only the third-largest bloc in Congress, will be able to enact the reforms needed to reduce the budget deficit but avoid chaos in the country. The Fitch Ratings report notes that "the adjustment will be painful, and the way forward is fraught with economic, political and social risks."
On the Chicago Stock Exchange, January futures for soybean oil fell by 2.3% to $1,098/t over the last two sessions (-4.4% for the month), and soybeans fell by 1.8% to $480/t (-6.1% for the month).
