Argentina temporarily suspends export tariffs on soybeans and grains, as well as on their derivatives, to stabilize the exchange rate and increase foreign reserves.
The policy sets two restrictions: one is a time limit until the end of October, and the other is a maximum tax exemption of $7 billion. Once the export tax exemption reaches this scale, the tax exemption measure will end. The government aims to incentivize exporters to quickly convert foreign currency, increasing foreign exchange supply to alleviate market unease caused by the peso's depreciation.
Due to the rapid depletion of Argentina's foreign exchange reserves and the downward pressure on the peso, the Argentine government is striving to increase dollar inflows to ease financial tensions. In the week before the announcement, the Argentine Central Bank used over $1.1 billion in foreign reserves to intervene in the market over three days to defend the peso exchange rate, highlighting the significant pressure on the Central Bank to support the peso.
Manuel Adorni, spokesperson for President Milei, stated in a declaration that to increase the supply of dollars, the government has decided to reduce tariffs to zero, continuing until October 31, just five days before Argentina's nationwide midterm elections. These elections will select half of the seats in the House of Representatives and one-third of the seats in the Senate, and are seen as a significant test for Milei's administration.
Earlier this year, the Milei government briefly reduced export tariffs, which were restored at the end of June, but in July announced a "permanent" reduction, and now they are completely exempt, highlighting the Milei government's repeated balancing act between stabilizing the exchange rate and maintaining fiscal revenue. Analysts point out that export tariffs are an important source of fiscal revenue for Argentina, and this concession means the government is forgoing short-term tax revenue in exchange for dollar inflows and market stability. However, according to the 2026 budget draft submitted by the Milei government to Congress last week, export tariff revenue is expected to grow by 23%, indicating that the government has no plans to completely eliminate this tax in the medium to long term.
As the world's largest exporter of soybean oil and meal and the third-largest exporter of corn, Argentina's policy adjustments have a significant impact on the international market. This temporary tax exemption is expected to stimulate farmers and exporters to accelerate sales, thereby increasing dollar inflows and easing foreign exchange market tensions. However, this move also brings a fiscal deficit, and whether the Milei government can stabilize the exchange rate while maintaining budget balance remains a challenge.