![Stratfor reported “Argentina: The Latest Nationalization Threat.”
The Argentine government is analyzing the possibility of nationalizing grain commerce, La Nacion reported Feb. 27, citing sources in the Federal Administration of Public Income (AFIP). The nationalization would be carried out by way of presidential decree and would create a single state entity to buy all the country’s grain, flour and oil production.
The announcement comes at a time when the Argentine government is negotiating with the agricultural sector over export taxes and domestic price caps. Commodity export taxes are an important source of revenue for the fiscally overextended Argentine government (total export taxes were about 13 percent of government income in 2008). For the farmers, however, the taxes impede revenue generation. With the domestic market price-regulated, the international market offers the only real profit-making option.
At the same time, Argentina also faces its worst drought in 50 years. (And their airline industry is no fun either.)
Even before the drought, however, plantings in Argentina were down 25 percent due to the poor investment climate. With nationalization, the government would also pocket the export profits that the farmers used to get.
If Fernandez follows through on the threat to nationalize Argentine grain distribution, the net effect will be of establishing complete control over Argentina’s exports. Depending on where the purchase price is set, it could have the same effect as raising the export tax across the board. In that event, the farmers would lose all incentive to produce. Farmers were already operating at or below their costs, and this could very well put them out of business — which not only ensures more civic protest from the farmers, but also makes the possibility of food shortages increasingly real.
Terrible decisions by state governments around the world endanger us all. States do not create wealth. Private interests do. States can only take wealth through confiscation. Such heists are getting seriously out of hand. Expect them to get even worse as states grapple with their deepening moral and financial bankruptcy.
Look out.
[photo source]](http://26.media.tumblr.com/Anhohk1sakhkf1v3BdLLvNwso1_r1_500.jpg)
Stratfor reported “Argentina: The Latest Nationalization Threat.”
The Argentine government is analyzing the possibility of nationalizing grain commerce, La Nacion reported Feb. 27, citing sources in the Federal Administration of Public Income (AFIP). The nationalization would be carried out by way of presidential decree and would create a single state entity to buy all the country’s grain, flour and oil production.
The announcement comes at a time when the Argentine government is negotiating with the agricultural sector over export taxes and domestic price caps. Commodity export taxes are an important source of revenue for the fiscally overextended Argentine government (total export taxes were about 13 percent of government income in 2008). For the farmers, however, the taxes impede revenue generation. With the domestic market price-regulated, the international market offers the only real profit-making option.
At the same time, Argentina also faces its worst drought in 50 years. (And their airline industry is no fun either.)
Even before the drought, however, plantings in Argentina were down 25 percent due to the poor investment climate. With nationalization, the government would also pocket the export profits that the farmers used to get.
If Fernandez follows through on the threat to nationalize Argentine grain distribution, the net effect will be of establishing complete control over Argentina’s exports. Depending on where the purchase price is set, it could have the same effect as raising the export tax across the board. In that event, the farmers would lose all incentive to produce. Farmers were already operating at or below their costs, and this could very well put them out of business — which not only ensures more civic protest from the farmers, but also makes the possibility of food shortages increasingly real.
Terrible decisions by state governments around the world endanger us all. States do not create wealth. Private interests do. States can only take wealth through confiscation. Such heists are getting seriously out of hand. Expect them to get even worse as states grapple with their deepening moral and financial bankruptcy.
Look out.
[photo source]
