Argentina: Facing a new big collapse?

Argentina is going through another crisis, there is no doubt about this. The point is that again is not "just" an economical one, we are facing a new social-economical-political problem.

On one hand, the government is imposing retentions (a way of calling taxes) over the production of soya (they switched from 11% to almost 44% from March to now). The President explained it was to have a better distribution of income from the people that had more economical power to the people with less. She explained this money was going to be used to increase the level of housing, hospital's maintenance, etc. Even though not a lot people trust on this argument.

On the other hand, we have farmers (small, medium and big size producers). The increase on retentions will affect all of them in the same percentage, but not in the same monetary proportion. For a big producer this might not be such a big difference, but for a small or medium size one is a huge change.

Another sector that appeared as directly involved is the one of the truck drivers and owners, if there is no production available to be moved, there is no work for them

Then, the whole society is affected due to the point that products became scarce, so their prices start to increase (but not salaries!)

A paradox, Argentina has always been an excellent producer of cattle and agriculture (probably its main source of income) so, why instead of improving the conditions for this sector that has an interesting percentage of the world market, governments (this is not a new condition, it was already done by previous governments in different ways - for example it was a good increase on export taxation back in the 80's when the country had a good chance to export soya to U.S.A. due to a lack of volume of local production in that country. Of course, this advantage disappear due to that increase on taxes and the opportunity was lost).

As you can see, this is a big puzzle that has to be solved.

My question is, how much will be total cost...

See you soon

Prof. Lic. Fernando Julio Silva, MSc.

June 2008