Paraguayan farmers protest proposed grains export tax

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SAN RAFAEL, Paraguay (Reuters) - Thousands of farmers in Paraguay protested on Wednesday against a proposed 15 percent tax on soy, corn and wheat exports that will likely come to a vote in the Senate this week.

Farmers in the world’s No. 4 soy exporter gathered in Itapua, one of the main agricultural areas of the landlocked South American country, complaining the tax would put an end to corn and wheat planting and shrink soy output.

“This tax has to be rejected because it is going to kill Paraguayan agriculture,” Colonias Unidas cooperative President Agustin Konrad told Reuters.

The proposal, which could come to a vote on Thursday, came from a leftist coalition in Congress, Guasu Front. But President Horacio Cartes’s party agreed to support it as part of a political pact formed last week that allowed the party to take back control of Congress.

Even so, Cartes’s finance minister warned the tax could have a negative impact on the fast-growing economy and proposed an alternative to raise the value-added tax on agricultural products.

“In recent years there has been a substantial improvement of the tax contribution from the farm sector, but it can still contribute more,” said Finance Minister Lea Gimenez.

Protesting farmers displayed signs reading “we do not want to be used as a bargaining chip” and “we want Senators to come and plant seeds” as they lined up tractors and other machinery along a road.

Supporters of the project argue that the agricultural sector contributes very little in taxes, and agricultural exports totaled $3 billion last year.

Cartes has promoted low taxes as a way of attracting foreign investment in agriculture and manufacturing since he was elected in 2013. [nL8N1FZ8DM]

Additional reporting by Daniela Desantis; Writing by Caroline Stauffer; Editing by Cynthia Osterman