President Milei reiterates pledge to abolish export taxes as Argentina’s powerful farmers grow impatient

Argentine President Javier Milei (center) and Rural Society President Nicolas Pino drink “mate” during the official opening ceremony for the Rural Society’s annual exhibition in Buenos Aires, Argentina, Sunday, July 28, 2024. (AP Photo/Gustavo Garello)

BUENOS AIRES, Argentina (AP) — President Javier Milei addressed a crowd of struggling farmers dressed in flat caps and hand-knit sweaters on Sunday. They helped him to power but have grown increasingly impatient with his progress. He has promised to scrap export taxes and save Argentina’s key agricultural sector.

The country’s powerful agricultural producers say they want to give the libertarian more time to make good on his free-market promises. But many farmers are disappointed that, seven months into Milei’s presidency, they are still hobbled by labyrinthine currency controls, crushing export taxes and an uncompetitive exchange rate.

“We said we would lift the restrictions and every day we do,” Milei said at the annual La Rural convention in Argentina, where Buenos Aires’ vast expo grounds become a farm full of sleeping cows and neighing horses for a week. “Nobody is as eager as we are, and I am in particular, to get out of this disastrous model where the state, through withholdings and restrictions, expropriates 70% of the produce of the countryside.”

The crowd cheered and cheered. As the peasants tell it, that model of budget-busting populism confiscated their wealth for redistribution among the unproductive masses and destroyed the lush grain belt that made Argentina one of the world’s richest economies a century ago.

Today, Argentina remains one of the world’s largest livestock and grain producers, but its more questionable features include the country’s one of the highest debt burdens in the world and its highest annual inflation rates.

Successive left-wing Peronist governments have siphoned off an estimated $200 billion from the agricultural sector into state coffers over the past decades. They have banned meat exports to curb inflation and levied sky-high export taxes on agricultural products to support bloated budgets.

So far, Argentina’s agricultural sector, which accounts for about 20% of the country’s gross domestic product, has been “hopeful but realistic” under Milei, said Nicolás Pino, head of the Argentine Rural Association, the country’s agribusiness lobby.

“There are enough reasons to complain, but at this point we prefer to appeal to the patience of the men and women of the countryside,” Pino said. “We find it useful to give the government some space for trust.”

But there are already signs that patience is running out in Argentina’s fertile pampas.

Earlier this week, Argentina’s Rural Confederation, one of the country’s main producer groups, stepped up the pressure on Milei with a harsh statement lamenting the government’s failure to eliminate “unfair, arbitrary and distorting taxes” on agricultural exports, which it said “suffocate our producers.”

President Milei has made balancing government finances and curbing inflation a priority, key campaign promises he hopes will prevent public opinion from turning against him as his austerity plans hit Argentines hard.

But farm leaders say those goals have come at the expense of other campaign promises to unleash free markets and end government overreach.

“We need clarification on some of these recent economic measures,” said Elbio Laucirica, the head of another agro-industrial group.

In recent weeks, Milei has raised taxes and tightened his grip on the exchange rate, contradicting his libertarian orthodoxy and fueling frustration among farmers.

Because Milei’s plans to prop up the peso have reduced export competitiveness, Argentine farmers, whose revenues are pegged to the U.S. dollar, are holding on to their crops and stockpiling billions of dollars’ worth of exportable grain and soybeans, so they don’t have to part with their dollars for less than they’re worth.

At the rural exhibition on Sunday, the grumbling among the gauchos, Argentine cowboys, was clearly audible.

“Every decision like this affects us so much, and an overvalued exchange rate is not what we need from a government that promises us otherwise,” said Maurro Berrra, a 34-year-old farmer wearing a trademark poncho and bombachas (trousers) who had hoped Milei’s policies would spark a surge in exports to his Chinese buyers. “We have more stability than last year, that’s something, but we still face huge obstacles.”

A drop in local demand has also hurt Argentine producers. With poor and middle-class Argentines reeling from the government’s extreme austerity measures and annual inflation of 270 percent, beef consumption has fallen to its lowest level on record, according to the Rosario Board of Trade.

“The economy has never been good for us, but this drop in consumption has really hit us hard,” said 67-year-old rancher Jorge De Marcos. “It’s tragic because steak here is not just steak, it’s a way of life.”