Tax relief to encourage Argentina’s demand for imported fertilizers

The Argentine government announced on Sept. 2 a reduction from 17.5% to 7.5% in the “tax for an inclusive and supportive Argentina” (PAIS), a package that targets international transactions, a move that is anticipated to boost demand for imported fertilizers.

The statement reverts the PAIS tax for imported goods to the previous level, which was in place until December 2023, with the aim of reducing prices, according to government officials.

The change is expected to impact on the entire agriculture sector, especially foreign goods that are competitively priced compared with domestically produced items. This is likely to quickly affect the local fertilizer industry, particularly with a new crop season approaching, and the domino effect would end up reaching the food consumers at the end of the chain.

The final price effect on imports is yet to be seen by traders and buyers, especially as distributors who had been paying the former 17.5% tax still need to adjust prices for their existing stock. However, the expectation is that farmers will face a lighter financial burden when planning for the upcoming crops.

“In the last 40 days, nitrogen prices in the local market have already dropped assuming that the tax would be cut," said Armando Allinghi, Executive Director of CIAFA, Argentine Chamber of Fertilizers and Agrochemicals Industry.

"In this period, international prices have remained unchanged or increased, while in the local market they have decreased. This is explained by the expectation of the lowering of the country tax. In phosphate fertilizers with lower supply, the impact will lead to new imports.”

The tax was first established by former President Alberto Fernández (2019-2023) at the beginning of his administration to control the outflow of foreign currency and address budgetary issues during a crisis in Argentina. His successor, Javier Milei, increased the rate from 7.5% to 17.5% last December, promising to reduce it when the economic situation improved.

Jeremías Battistoni, analyst at AZ-Group, estimates that the tax on urea purchases “should lower from $64 to $36 per ton, while in phosphates the tax would go from around $100 to about $57 per ton.” He said the tax cut “reduces the extra costs and barriers faced by the importing sector and the economy over the past few years.”

Beyond the theoretical impact, “in the real market, especially for urea over the last 30 days, prices in this highly distorted market have shifted towards parity (...) For phosphates, the impact is a bit greater, as the market has higher premiums,” he said.

While new prices lists are still to be made, a bigger purchasing action is expected among agricultural producers. “I believe we will see a revival,” Battistoni affirmed.

After the announcement, President Milei stated at the Argentine Industrial Union (UIA) that his administration will definitively eliminate the PAIS tax by the end of the year: “In December, the disastrous tax will come to an end”. The agriculture sector, as others depending on imported supplies, will surely be watching out for that.

Argentine fertilizer imports by the numbers

Most of Argentina’s fertilizer imports in 2024 so far came from Morocco at around 485,000 t, increasing 24.6% on the year. Algeria was the second-largest supplier of urea at around 179,000 t supplied, followed by Nigeria with a urea supply of around 141,000 t, according to S&P Global Commodity Insights Global Trade Analytics.

Urea made up most of Argentine’s imported fertilizer this year with 568,000 t imported from January until July of 2024, followed by monoammonium phosphate (MAP) volumes of approximately 444,000 t with a 3.17% of increase on the year. Diammonium phosphate (DAP) imported volumes were 196,000 t, a decrease of 2.16% year to year.