The oil industry said the increase in withholding is illegal and did not rule out prosecution

Following the official publication in the Official Gazette of the increase in withholdings on exports of soybean oil and flour, with the aim that the additional collected will be allocated to a fund to subsidize the price of flour for bakeries, the Chamber of Oil Industry (CIARA) rejected the measure and assured that it “has no legality and infringes industrialization”.

In order to “mitigate the impact of the situation” in Ukraine and prevent the invasion of that country from affecting local food prices, the Government confirmed the increase in withholding for soybean flour and oil and created a Wheat Stabilization Fund, to control “the cost of a ton” of that product.

Both measures were reported through Decrees 131/2022 and 132/2022, respectively, published this Saturday in the Official Gazette. The first of these documents was signed by President Alberto Fernández, the Chief of Staff, Juan Manzur, and the Ministers of Agriculture, Livestock and Fisheries, Julián Domínguez, Economy, Martín Guzmán, and Productive Development Ministers, Matías Kulfas.

In a statement, the members of the entity recalled that the by-products achieved by the increase in withholdings represent one third of Argentina's total exports and are in the first and second place in the country's annual ranking of total sales to the world. “This measure is a clear indication that the government discourages exports, and punishes industrial employment, particularly in the provinces of Córdoba, Santa Fe and Buenos Aires”,

Illegal

In addition, they pointed out that the decision taken by the Government “is not lawful” given that the powers that the Executive Branch had delegated by Congress to modify the withholding scheme, expired on December 31, and now the Decree must be endorsed by the Bicameral Commission. In this regard, the agro-export companies are carrying out an analysis of the judicial measures to be followed, with the aim of questioning the measure. “Addressing the international price crisis that impacts the Argentine population is an obligation of the State and companies, but attacking the domestic industry outside this situation is the worst way,” they said, they warned.

At the same time, they commented that the national administration had different options of implementing measures rather than encouraging an increase in withholdings. In this regard, they specified that between February 15 and March 17, the Argentine State increased its tax revenues from withholding at the grain-oil complex by more than $1.33 billion, according to data from the Buenos Aires Grain Exchange. The oil industry assured that with these funds “direct compensation mechanisms could be activated to vulnerable sectors, apply temporary VAT reductions or assist farinaceous products and oils that are the most impacted by international increases”.

Another proposal included in the oilers' document is the opening of new export quotas to record future sales in 2022 and 2023 of corn and wheat. They estimated that they could report no less than US$700 million not foreseen, due to the advance payment of withholdings made by the export; given that the national supply is guaranteed all year round by the export volume regime of the Ministry of Agriculture, Livestock and Fisheries.”

“However, the government decided to raise rates in processed products that do not affect the inflation rate, but deteriorate the production, labor and export conditions of the first national export complex,” they added. To all this, they said that the entire soy chain will be severely affected, as they considered that the official measure is a punishment for the ability to pay of the country's main soy buyer. In this regard, it was warned that each ship of soybean oil exported, the State owns 46% of its value and now with this measure, which was announced today in the Official Gazette, it is left with more revenue.

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