Argentina May Use Taxes To Prevent Export of Food

 

(Note: This article is touching only the tip of the iceberg, showing a Band-Aid for a crack in the dike.)

 

January 3, 2003 

 

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Reuters 

 

Buenos Aires, Argentina - The Argentine government is studying measures to stem price rises in basic foodstuffs, including possible increases in controversial export taxes.

The plan could include new taxes or changes to export taxes introduced in March 2002 and would involve products such as bread, milk, meat, edible oils, fruits, vegetables, sugar, cheeses and rice, the Economy Ministry said.

Higher export taxes, the reasoning goes, would discourage farmers from shipping their products abroad and would increase supplies at home.

Farmers have protested, but the government and many analysts have argued that the farm sector is doing better than ever, thanks to a 70% fall in the peso against the dollar in the last year.

"We are considering increasing export taxes for products of mass consumption that are exported at a high rate and that have seen above-average price increases over the last year," the statement said, without providing further detail.

The government also said it aims to reach agreements with the private sector to reduce prices of key goods while avoiding extreme measures such as price controls.

Products that are widely used by Argentines as well as exported include vegetable oils like sunflowerseed oil and soybean oil.

Inflation has run at 40% over the past year, prices for many foods have more than doubled on supermarket shelves, and half of all Argentines now live in poverty.

Tens of thousands of Argentines marched through the capital on Dec. 20 to demand food and jobs on the first anniversary of deadly protests and looting that ousted the elected government.

A deepening recession forced Argentina -- a major exporter of grains, oilseeds and vegetable oils -- to devalue the peso in January 2002, a move that made the country's exports more competitive.

Since then, the peso has fallen about 70% against the dollar and domestic prices for exportable goods have soared. Prices for corn oil and flour have risen 210% and 170%, respectively.

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