Pretty dang important.
It is no longer an issue of popularity. It is an issue of political and economic clout. The repeal of the tariff initiative was a powerful blow to the government’s purse. With soybean prices on the decline, the outlook is even worse. Although tax revenues soared 40.3 percent y/y in July, approximately 81 percent of the primary surplus was generated by soybean tariffs. Now the surplus is shrinking.
The Kirchners increased spending during the crisis in order to buy friends and influence, but a reduction in government revenues will soon leave them stranded. The government froze provincial transfers last week, as well as some public spending programs. It is only a matter of time until the labor unions turns their backs on the presidential duo. The loss of economic clout translates to less political power. The Peronists are split in two, with more than half of the party under the command of former President Duhalde. This is the reason why people are doubting that the Kirchners will make it to the end of the year. [More]
Imagine if the US funded itself with taxes on agriculture! The downside is the Argentine economy will likely spasm for several months in reaction to the political fallout. Given the rise in ag input prices, this uncertainty will likely make real headaches for growers there.
A day's drive south of Buenos Aires in a town called Coronel Suarez, Facundo Gallardo grows corn and soybeans on land his family has tilled for half a century. With the high prices of global commodities, this should be the best of times in the world's biggest supplier of soy oil, second-largest producer of corn, and third-biggest shipper of soybeans. "Business would be great if I was anywhere but Argentina," Gallardo, 47, fumes. "Margins are shrinking all the time."
Fertilizer prices have more than doubled over the past year and the price of diesel, while relatively cheap at 97% a gallon, has zoomed up by 30% to 50%. Worse, the President and her husband "hate us," Gallardo laments. President Cristina Fernndez de Kirchner, whose husband Nestor Kirchner ran the nation between 2003 and 2007, in March jacked up crop export taxes to raise government revenue and keep food prices down at home. The tax burden on farmers today exceeds 55%. [More]
So regardless what the crop report does to prices today, remember: it could be worse.