The story of the farmer who has returned to the area and can no longer produce

It was in 1968, I was twelve years and seven years before the death of my father – chacarero – and one behind my older brother, who was trying to personify my father as part of his activities and his support family.

My mother and sister could no longer continue and the family emigrated from this paradise created by the effort and the work of the man: the valley of the Black River. Thirty-eight years later, after developing a full-fledged professional activity, I convinced my wife, also an academic, and the children that we needed to create a productive pear and apple business in the Rio Negro Valley and return, in my case, to where I dreamed to return all my life.

We did that: we bought virgin farms, we dismantled, we chose species and varieties, we planted, and ten years later we can say that we became primary producers of pears and apples. . Our pbadion and our decision – we have invested our savings – have inspired other friends to participate and have also invested money and effort in this project.

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What happened during those ten years? As is known, this regional economy is geared towards export (75% of pear production and more than 50% of the apple), so that the competitiveness with the other producers of the world is d? great importance and strongly conditions the behavior of the external market, prices and quality for sale on the local market. Well, exports over the past ten years have been reduced by around 40% (up to 2017), a catastrophic figure that does not seem sufficient to alert political authorities. Similarly, important marketers (eg Expofrut, Salentein, Orsero), which accounted for more than 50% of external marketing a few years ago, withdrew from this activity … and no one leaves a company that is doing well.

When the sector, as it is, is doing so badly, it is usually structural factors that have much more to do with macro than with microeconomics. I will refer to those that I consider essential for this sector:

1) Stability of the exchange. Over these ten years, we have supported various types of arrears and devaluation changes greater than 100% in one year.

2) Tax burden or pressure. In an export-oriented business, it is transparent to the various producing countries and, therefore, it is impossible to face significantly higher tax burdens than those borne by direct competitors in other countries. (see: South Africa, Chile, Peru, New Zealand).

3) financing. Very rare and with very high rates and low deadlines to support the reconversion of the sector. Huge cost to finance working capital, which is essential for producers of annual properties (one crop).

I want to talk about what is the purpose of this writing: the source deductions provided by the national government for this 2019 campaign which, in my opinion, are in my opinion a question of survival for the primary producer.

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The percentage impact of $ 4 per export dollar originally defined when the exchange rate was $ 42 and less than $ 37 represents today about 10.5% of the FOB value, if consider that last year 's prices, they remained constant (they may be smaller) and we take a box of 18 kg apples at $ 15 each and one of pears at $ 12 each. Added to the drop in export refunds from 8.50% to 4.75%, the impact of the FOB value on the prices obtained in 2018 is of the order of 13.8% .

In recent years, the value of fruits sold to producers by exporters was in the order of 30 to 35% of the FOB value obtained (in the domestic market, it represents 20 to 25% of the wholesale value), which makes for 2018, $ 0.25 for the kilogram of apple and $ 0.20 for the kilogram of pear exported (average value of varieties and grades).

If we consider that exporters, as usual, will transfer directly to the producer the cost of the withholding and the loss of refund, the values ​​reported for 2019 would be USD 0.135 per kg of apples and 0.11 USD for the pear. This means that the final impact of source deductions and reduction of refunds would be 46% lower than the prices obtained in 2018 and only 35% of the deductions. income to be collected from the producer, which constitutes a clearly confiscatory tax.

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In any case, it is safe to say that with the expected income values, a very efficient primary producer will not cover the costs of production and many more will be included in the list of abandoned farms starting in the middle of the year. this year.

Of course, local costs in pesos have increased much less than the impact of the devaluation. However, the potential impact on the producer would be insignificant compared to the negative effect of withholding taxes and lower refunds.

Summary: If the national government does not immediately correct this brutal distortion generated by deductions and reduction of refunds, which I believe is confiscatory, 2019 will be remembered as the year of the death of primary pear producers and apples and the consolidation of the concentration of activity among large direct export integrated producers.

Personally, I imagine possible, as in 1968, to leave this paradise created and ultimately destroyed by the man: the valley of the Black River. Of course, with deep pain.