Argentina breaks trend with biodiesel tax hike

OREANDA-NEWS. February 18, 2016. Argentina's government has more than doubled export taxes for biodiesel, an unexpected blow to an industry already reeling from low oil prices and closed markets.

The export taxes valid for February, which were published this week, increase the effective duty on biodiesel to 3.89pc from 1.62pc in January. The January levels had been the lowest since the government implemented a sliding-scale system of export duties for the biofuel in 2012.

For the industry, the increase exemplifies the downside of the sliding-scale system that is often seen as opaque.

"We do not really understand the parameters," Victor Castro, head of the Argentinian biodiesel chamber Carbio, told Argus.

The sector has long complained that the variable export taxes make commercial planning impossible. "It?s like playing the lottery," says Castro.

The increase flies in the face of a general trend toward lower taxes and market-oriented policies implemented by Argentina?s new government since taking office in December.

New policies have included eliminating export taxes on most agricultural exports, except for soybeans that saw duties decline by five points to 30pc.

The biodiesel industry has been lobbying for a fixed export duty. "We are optimistic that this issue will be resolved soon," says Castro.

The energy ministry was not immediately available to comment on why the duty went up.

Exports of the soybean-based biofuel plunged by 51pc last year to 788,226t, according to the latest figures from the energy ministry.

The main exporters of biodiesel last year were Louis Dreyfus Commodities, Aceitera General Deheza, Cargill, Bunge and Vicentin SAIC, according to the Rosario Grain Exchange.

Sales of biodiesel abroad are likely to continue declining after Peru's decision last month to impose anti-dumping tariffs on the biofuel originating from Argentina. Carbio has appealed the measure, which it describes as "purely political."

Argentina?s biodiesel sector has largely relied on two countries—the US and Peru—for all its sales abroad after the European Union imposed tariffs on the biofuel from Argentina in November 2013, effectively closing off what had been the largest and most reliable market for the sector.

When the EU first closed off its market, the local industry was able to rely on temporary spikes in conventional diesel prices to sell biodiesel to traders. But those windows closed after oil prices started tumbling in 2014.

The World Trade Organization (WTO) is analyzing an Argentinian complaint against the EU regarding its anti-dumping tariffs on biodiesel imports.

A resolution is expected this month but whatever the finding an appeal is seen as inevitable from either side, meaning a final decision on the issue is far from imminent.