Paraguay Congress moves to slap tax on soy exports

Tue Dec 4, 2012 3:44pm EST

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* 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.
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