Paraguay Congress moves to slap tax on soy exports
* Supporters of bill say will bolster crushing industry * Paraguay is the world's No. 4 soybean exporter * Government expects record crop of 8.4 mln tonnes By Daniela Desantis ASUNCION, Dec 4 (Reuters) - Paraguay's Senate approved a bill on Tuesday that would impose a 10 percent tax on soybean exports despite objections from farmers in the world's No. 4 supplier of the oilseed. The levy, which still needs lower house approval, would also be applied to Paraguayan corn and wheat exports. Growers say the tax would make them less competitive against neighboring agricultural powerhouses Brazil and Argentina. The bill seeks to support the country's nascent soy-crushing industry by encouraging the export of value-added byproducts such as soymeal and soyoil rather than raw beans, Senator Marcelo Duarte said. "It's more of a protectionist measure than one aimed at generating revenue," said Duarte, who voted for the bill. Advocates of the proposed tax hope to see it passed by the lower house before the chamber goes into recess on Dec. 21, some four months before a presidential election. Paraguay, which currently exports most of its soy as raw beans, could crush up to 4 million tonnes in 2013, after Archer Daniels Midland, Bunge and Louis Dreyfus open factories. The country is expected to harvest a record soybean crop this season, with the government projecting 8.4 million tonnes compared with last year's drought-hit 4.3 million tonnes. Farm leaders and industry analysts said growers would end up indirectly subsidizing the crushing industry if the tax becomes law because exporters will deduct it from what they pay. "Everywhere else in the world, taxes are paid on income and here they're going to tax exports. This will hit the people at the bottom of the ladder - the farmers," said Regis Mereles, head of the APS association of soy producers. In Argentina, where the government of Cristina Fernandez has long feuded with the farm sector, soy exports are taxed at a rate of 35 percent. Growers say the tax is regressive and drives off investment at a time of growing world demand for food. Paraguayan President Federico Franco, who has close ties with the soy-farming sector, could potentially veto the bill. There was no immediate reaction from his government. Franco will not run in April's presidential election, but critics of the tax have suggested the government may be tempted to sign it into law to help close the country's budget gap while scoring points with environmental groups opposed to industrial soy farming.