The Minister of Livestock, Agriculture and Fisheries, Fernando Mattos, He slipped this Wednesday at a lunch of the Association of Marketing Managers (ADM) his “concern” about the current trajectory of the dollar in Uruguay because the agricultural sector is a business that depends a lot on that variable.
“This year is going to see US$ 15,000 million of exports; This is a historical record and agriculture is going to contribute a little more than 70% of that amount, exceeding US$10,000 million”, he highlighted. He also indicated that the country is receiving a level of “important” investments, which not only has to do with the second UPM plant in Paso de los Toros.
“That is foreign direct investment capital income that also puts pressure on the supply of dollars. We are not going to hide that this implies a concern. I did not come to do the harakiri but we are a bit against the grain of the world because it is an important factor of competitiveness, not the only one”, warned the Minister of Livestock.
On the other hand, Mattos admitted that the dollar in Brazil has also been moved by political factors, which has “a great influence”, while Argentina “has I don’t know how many exchange rates anymore. At least we have an exchange rate, we know how much the currency is worth and we don’t have that uncertainty factor”, he assessed.
“Obviously, having a dollar below $40, when in reality we have 8%-9% inflation, is a factor that affects competitiveness. We discussed it with the economic team and with the president himself (Luis Lacalle Pou). I think we have to look for the lines of competitiveness in another way. The sums of exports and investments are determining this value (of the dollar), which is market. And also, the verification that there is no speculation due to the rise in interest rates of a contractive policy of the Central Bank, which seeks to contain the existing inflationary pressures, ”he indicated.
Mattos reiterated that it is an issue that “worries the government.” In his presentation, he showed how the exchange rate is today 21% below its historical average, in a scenario where the opposite occurred in most of the country’s competitors in recent months.
The dollar closed November with a price of $39.39, down 3% compared to the last operation in October and 3.2% in the average for the month ($39.74). In the accumulated year, the US currency weakened 11.8% against the Uruguayan peso.
About the due diligence agreement (audit) that was announced a couple of weeks ago by the Brazilian multinational Minerva Foods to acquire the BPU plant of NH Foods in Durazno, Mattos indicated that “the issue was taken note of.” He added that although Uruguay is a country that supports and encourages investment with clear rules, “It does worry” the potential effect of concentration of the purchase of property at the hands of two refrigerators (Minerva and Marfrig) that could reach 60% under the investment plans planned by these companies. The minister indicated that it will be the Commission for the Promotion and Defense of Competition of the MEF that defines if this operation generates a “distortion of prices” of fat cattle.
Secondly, The minister claimed Uruguay’s right to initiate trade negotiations bilaterally as it did with China or with the request for accession to the Trans-Pacific Agreement (CPTPP). because Mercosur has proven not to work and its weight as a trade destination is less and less and with a “downward trend”, with many “asymmetries”, and a lack of coordination in the main macroeconomic policies.
“The best option for Uruguay is to look for third markets because in many of the areas, we are also competitors,” he recalled. “Nobody can deny that the process of Mercosur’s international insertion has left really meager results while the world is moving forward decisively,” he stated.
The tax review
Consulted about the possibility of introducing tax modifications to the way in which agriculture pays taxesMinister Mattos recalled that this is a “commitment” assumed in the coalition government program to reduce the incidence of “blind taxes that are not related to income.”
The hierarch pointed out that for a business that is exposed to climatic fluctuations, the level of uncertainty is important, so It is important that the tax pressure is more linked to the productive performance obtained by the producers.
Ines Guimaraens
Mattos defended Uruguay’s right to negotiate bilateral agreements.
“If the producer does badly and has to pay a lot of blind taxes, the level of reinvestment will decrease. And this process, instead of helping to recover from the productive loss, leads to resorting to debt or government aid, ”he explained. Mattos anticipated that the agricultural sector will contribute “much more” resources to the State in 2022 and that they will be made public in the coming weeks. “Most of those will be based on what the producer did well,” he said.
optimism about the future
Mattos said that he had an “optimistic” view of the growth potential of the agricultural sector with “quality” and “safe” products. In this regard, he indicated that in less than 20 years the country will be able to significantly increase its agricultural exports from US$5.4 billion to US$9.65 billion at current prices. In the case of meat, it would rise to US$3.5 billion, pulp to US$2.5 billion, grains to US$2.5 billion, and dairy products to US$1.1 billion. “Today they look at us with very positive eyes because we are a trustworthy country, with transparency, credibility and low levels of corruption,” he said.
