Argentina extends soy dollar four until October 25 amid low reserves

3 Oct 2023 | Marcela Caetano

Argentina's government announced Monday an extension of its fourth soy dollar preferential exchange rate scheme until October 25, in an attempt to straighten government foreign exchange reserves and contain the dollar rise ahead of the presidential election on October 22, in which Economy Minister Sérgio Massa is running for office.

“The negative net reserves picture is complicated; I believe that this is what explains the extension and that is what moves those foreign currency markets,” Guido D’Angelo, an economist at Rosario Grain Exchange (BCR) told Agricensus.

The government had indicated to soybean crushers that it would not extend the program last week, but the CCL (contado con liquidacion) dollar skyrocketed on Friday, the last working day of the scheme, reaching 820 pesos per dollar.

On Monday, the CLL dollar ended the day at a record 829,67 pesos per dollar.

The extension decree says importers can use only the CCL dollar to liquidate 25% of the proceeds of soybean exports, as the government tries to limit its rise.

Until now, this percentage could be exchanged using the CCL or the Mercado eletrônico de pagos (MEP).

The remaining 75% continues to be exchanged at the official rate of 350 pesos per dollar, while operations can be made until October 20.

The measure also surprised market players due to the low volume of soybeans still available for trading, around 3.9 million mt, according to the Rosario Grain Exchange (BCR).

The decree broadens its application to other products under the Mercosur Common Nomenclature – used to identify products exported by countries that are part of the economic group – meaning other items, agricultural or not, could be added.

The fourth edition of the soy dollar scheme started on September 5 and was initially supposed to end on September 30.

In that period, producers traded 4.6 million mt of soybeans in the domestic market, according to data from BCR, slightly above the target of 4.5 million mt.

Soybean export license applications (DJVEs) amounted to 729,604 mt while soyoil export applications reached 7,744 mt and soymeal 133,754 mt, totaling 934,245 mt also according to BCR.

BCR also said the dollar inflow linked to soy dollar four is estimated at $ 1.7 billion, below the $2.5 billion income targeted by the government.

The extension could add another $1 billion to the government reserves, according to local news outlet La Nacion.

According to Argentina’s oil industry chamber Ciara-CEC, in Argentina's first three soy dollar schemes producers sold 28.3 million mt, equivalent to a $16.19 billion inflow.