Argentina levies export tax, shuts energy ministry

Gas-rich Argentina is levying duties across all of its exports and dismantling the energy ministry as part of a broad austerity package aimed at tackling a severe monetary crisis.

The peso has lost around 50pc of its value against the US dollar this year, a trend that accelerated last week after president Mauricio Macri said the country would seek a faster disbursement from the International Monetary Fund on a $50bn standby credit that it secured in June.

Macri told the nation this morning that austerity is the country´s only option to fend off insolvency. He defended the re-imposition of export taxes, which were a hallmark of the populist governments of his predecessors, late president Nestor Kirchner and his wife and successor Cristina Fernández who ruled from 2003 to 2015.

Argentinian authorities will travel to Washington tomorrow for IMF negotiations and present a plan that calls for a zero fiscal deficit next year, compared to an earlier 1.3pc deficit target. The government's plan forecasts a 1pc surplus in 2020.

The ambitious deficit goal relies largely on sweeping new export taxes amounting to four pesos per dollar on sales abroad of primary products and services, and three pesos per dollar on other exports, economy minister Nicolas Dujovne said.

The taxes represent an about-face for Macri's government, which came to power in December 2015 vowing to implement an era of market reforms following more than a decade of state intervention in the economy.

"We know it's a very bad tax that goes against everything we want to foster, which is more exports to create more quality jobs," Macri said this morning.

The new tax will affect all of the country's exports, including oil, biodiesel, soybeans and agricultural goods already hit by a prolonged drought. An earlier plan to resume pipeline gas exports to neighboring Chile has now been sidelined because of the structural price shift.

Some business groups decried the tax measure as punishing the private sector for government failings. The move also hurts part of Macri's electoral base and raises fresh doubts about the continuity of his government a year before presidential elections.

As part of the austerity push, the government will eliminate eight ministries, including energy, which will return to being a secretariat as it was before Macri took office.

Javier Iguacel will stay on as energy secretary, and will report to Dujovne at the economy ministry.

Argentina´s current crisis, which was accentuated by Turkey´s economic tailspin, underscores a wider lack of confidence among ordinary Argentinians and investors alike. The country´s annual inflation is now expected to exceed 40pc in 2018, and GDP is likely to shrink.

"We believed, with excessive optimism, that it was possible to go about fixing things slowly, but reality demonstrated that we should have gone faster," Macri said, alluding to a debate early in his presidency about the pace of the reforms.