RISING TAXES, INFLATION CONTRIBUTE TO ARGENTINA'S LIMP FARM ECONOMY

RISING TAXES, INFLATION CONTRIBUTE TO ARGENTINA'S LIMP FARM ECONOMY

Argentina's economy is slowly recovering from a four-year recession, but times are still tough down on the farm for many oilseed producers.

Rising local and federal taxes, rebounding inflation, high interest rates and the nation's deteriorating transport infrastructure, have combined to increase producers' operating and borrowing costs.Export prices for the oilseeds complex remain lackluster because of a sluggish world economy and subsidized competition from the European Community and United States.

And the government's ambitious program to sell or shutter hundreds of deficit-ridden and inefficient state companies has bogged down under pressure

from vested interests, leaving farmers and industry to struggle with Argentina's structural problems.

As a result, profits from oilseeds production will decline for a second consecutive year, according to rural groups. If their balance sheets further deteriorate, farmers may cut back machinery purchases again this year, and this will make needed productivity increases harder to achieve, they said.

According to the government, the economy will grow at least 6 percent this year, compared with 4 percent in 1991. Consumer demand is up. So are food sales. This has been a positive development for livestock ranchers, given beef's central role in Argentine diets, rather than for oilseeds farmers who export most production.

Tax burden is perhaps the biggest gripe of oilseed farmers. They claim in some provinces that taxes are equivalent to 60 percent of the value of their crops.

After paying all taxes, farmers claim they must struggle to marshal

financial resources to harvest and market their crops, pay employees, invest in plant and equipment and purchase inputs to plant again.

"Taxes keep going up but oilseeds prices don't keep pace," said a farmer in Cordoba province. "Lower net earnings mean less money to sow. Yet, the government wants us to raise oilseeds production. What with?"

Economy Ministry data show revenue from all taxes is now equivalent to 28 percent of Argentina's $100 billion gross domestic product, up from 20 percent when Argentine President Carlos Menem took office in July 1989.

Ministry officials said most increases in taxes cited by farmers have been levied at the local, not federal level. "Thanks to improved tax collection the federal government has eliminated its budget deficit," said one ministry official.

"As a result, inflation is down. Farmers and all other sectors have directly benefited from this because their costs have dropped." Farmers have responded to this argument by saying they welcomed lower inflation - 84 percent in 1991 compared with 1,343 percent in 1990 - but contend the rural community is paying a disproportionate share of all taxes to achieve price stability.