Argentina is the world’s third-largest food exporter, with the agricultural farmland sector accounting for 15.7% of gross domestic product (GDP) and 10.6% of tax revenues in 2021. However, in recent years, the country has been losing market share in international markets, which raises concerns about the sector’s competitiveness. With more sensible incentives, it could quickly become number two globally. A recent change of government and policies puts it on the way to achieving this.
Developing a stable regulatory framework for the sector
The context: A recent analysis of the World Bank finds that the country’s poor performance in agri-food production and exports relative to its potential can be attributed to policies that have heavily taxed and constrained the sector.
In 2021, Argentina ranked second among countries with the highest rate of tax collection from export duties (2.1 percent of GDP).
Public investment is a smaller portion of the income the sector contributes through taxes. For example, between 2019 and 2021, the sector contributed US$8,700 million more than the investments it received, representing 2.12% of GDP.
Realigning incentives: The report says that realigning agricultural incentives and allowing producers to have greater predictability in their business development can help reduce economic vulnerability in the long term.
While reducing taxes is critical for sustainable development, restoring broad-based fiscal sustainability is urgently needed to achieve sustained growth for all economies.
The report recommends moving forward with the phase-out of export taxes and a subnational substitution of the turnover tax on primary activities with less distortion taxes at the subnational level, among other measures, to encourage producers to invest in more advanced, environmentally sustainable technologies.
Enhancing resilience and accelerating technological innovation
The context: Argentina’s competitiveness in food production and exports is underpinned by its enormous natural resource wealth and investment in innovation.
The innovation ecosystem has supported technology-driven productivity growth, which has increased resource efficiency.
Since 1990, Argentina has reduced GHG emissions per product unit by one-third, thanks to adopting sustainable intensification practices, especially in cereals and oilseed production. A key feature has been the widespread incorporation of no-tillage practices, with direct sowing currently covering 90 percent of areas cultivated with grains.
However, more frequent droughts and floods make improving the sector’s resilience to climate change essential. Today, dwindling public funding threatens innovations for the common good that are central to competitiveness.
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