Argentine farmers object to linking sovereign bonds to food exports
By Hugh Bronstein and Maximilian Heath
BUENOS AIRES, June 18 (Reuters). Argentinian farmers have objected to the government's proposal to tie the interest rate on bonds issued during the country's debt restructuring to the country's agricultural exports.
The proposal has been included in the government's recent offer of around $ 65 billion in government bond holders as a sweetener to close a deal.
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However, the warrants that would trigger payments if agricultural exports hit a certain threshold were not enough to win over bondholders. The government called for a break on Wednesday to regroup in the final section of the restructuring talks.
"Creditors saw the warrants as an advantage, but not as a negotiating tool strong enough to fill the gap," said a source familiar with the discussions who asked not to be named.
For their part, producers fear that the arrest warrants would incentivize the government to keep export taxes on soybeans and soy-based products unchanged at 33% and corn and wheat at 12%. Argentina is a major international supplier to all three cultures.
"The use of export tax commands by a government that regulates exports and export taxes sounds lazy," said David Hughes, a producer in the Buenos Aires bread basket province.
Argentina's major farm groups sent a letter to the government saying their members were "alarmed" at the idea of tying bond interest rates to exports.
"Such a financial instrument would create negative incentives for agricultural production," the letter said.
"It would mean that export taxes will not be reduced until the bonds mature ... which affects our ability to create jobs, invest and reactivate economically," it said.
Argentina's economy, which was blocked on March 20 to curb the spread of the new corona virus, is expected to shrink by approximately 9.5% this year from economists.
(Reporting by Hugh Bronstein and Maximilian Heath; editing by Bernadette Baum)
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