In this way, the Executive Branch took another step towards the total repeal of this tax, which will become effective on December 23. One of the primary objectives of this measure is contribute to the process of slowing inflationfrom a reduction in the price of imported products. The flip side is that could bring forward the drop in collection.
Regarding the impact on the dollar, Delphos Investment warned that “it could imply lower demand for the MEP/CCL dollar since it would alter the arbitration between access to the official exchange market (which no longer implies the payment of the 7.5% PAIS tax for “new” imports) and financial dollars (gap less than 10%), resulting in a additional downward pressure for the exchange rate gap in the medium term.”
This would happen, the financial consulting firm stated, while the “blend” dollar allows up to 20% of exports to be settled to the CCL/MEPwhich keeps the supply of currency on the stock market high. “We believe that the Government is in an unbeatable situation to also eliminate the “blend” and thus completely concentrate foreign trade operations in the official exchange market without additional taxes,” said Delphos.
For its part, Piedad Ortiz, Chief Economist of Wise Capital, maintained that “financial dollars for foreign trade users will cease to be more attractive to the extent that they can normally access the official market, that is, implicitly we see a homogenization of exchange rates towards the official one and this, in turn, converge to values close to the financial ones. (gap tending to zero)”.
“Here the level of inflation plays a crucial role, since to the extent that the deceleration continues, if there is a variation in exchange rates (something unlikely) It will be difficult to validate prices adjusted to the increase due to the complementary offer of international products with low prices“he added.
Impact on CER and Lecaps bonds
Martin MazzaDirector of MM Investments, highlighted that, in parallel to the official measure, a “notable compression” between the yields of the CER bonds and the Lecaps, due to the increase in the former due to lower inflation expectations (also influenced by the non-negotiable monthly “crawling peg” of 2% for the official dollar, which could even approach the 1% zone in the coming months).
Regarding fixed rates, Mazza asserted that there was no significant impactsince “the market seems to be more attentive to the possibility of a new supply in the primary market, something that has not been observed in more than a month and a half.” “This expectation could influence the dynamics of rates in the short term, depending on the conditions and amounts of the emissions that are presented,” he deepened.
Relief for importers, harm for SMEs?
According to specialist estimates, Importers could save US$400 million with the elimination of the advance of the PAIS Tax, a reduction in costs that is added to some reductions in tariffs and tariff barriers that had already been previously implemented.
“The recent elimination of the payment on account of 95% of the PAIS Tax for imports, made official through General Resolution 5604/2024, represents a significant advance in Argentine fiscal policy. This measure, which anticipates the total repeal of the tax on December 23, seeks to alleviate the financial burden on importers. Given that the minimum period in force from when the goods are entered until the Single and Free Exchange Market can be accessed is 30 days, prior withholding loses meaning, since at the time of payment the tax will no longer be valid,” he assured. Mazza.
Nevertheless, from SMEs warn that the relief for importers can put local production in some sectors at risk, and consequently employment.
Source: Ambito
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