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Argentine Dairy Industry Considers Uruguayan Milk Imports to Navigate Economic Hardships

Argentina 20.05.2024
Source: The DairyNews
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In light of recent economic challenges, Argentine dairy companies are contemplating importing milk from Uruguay following a government tax exemption on such imports, introduced by President Javier Milei's administration in March.
Argentine Dairy Industry Considers Uruguayan Milk Imports to Navigate Economic Hardships
This measure aims to counteract a decline in domestic consumption, which has rendered local production less profitable.

Argentina's dairy industry is currently navigating a severe economic downturn, characterized by recession, diminished purchasing power, and rising costs of essential goods. This economic backdrop has led to decreased sales of dairy products and escalated production costs due to higher prices for raw milk. The situation is further exacerbated by the lasting effects of last year's drought.

Given these conditions, major Argentine dairy players see an opportunity to import cheaper milk from Uruguay. This strategy would leverage Uruguay's cost-effective production and the tax breaks on imported basic foods to enhance the competitiveness of Argentine dairy offerings like cheese and yogurt, potentially revitalizing sales.

This potential move has been in consideration in Uruguay, particularly by major exporter Conaprole, since Argentina's import policy changes were announced. Although not yet official, this development could significantly benefit Uruguayan exporters if Argentina proceeds with imports.

Concerns Within the Argentine Dairy Sector

The Argentine dairy sector, particularly the Association of Small and Medium-sized Dairy Companies (APYMEL), expresses concern over the implications of milk imports. APYMEL President Pablo Villano highlights the sector's challenges, including weather-related production issues and an imbalance in domestic market demand. He argues for maintaining a competitive local industry that can sell at reasonable prices without the need for imports.

Villano also stresses the importance of a level playing field, calling for labor and tax reforms to precede any liberalization of imports to ensure fair competition. He points out the broader economic contributions of the dairy sector, including employment and tax revenues across the supply chain.

Government Initiatives to Boost the Dairy Sector

To support the dairy industry, the Argentine government has extended the suspension of export tariffs on all dairy products for an additional year, from July 1, 2024, to June 30, 2025. This policy is designed to enhance the competitiveness of the dairy chain, stimulate investment, and increase the production and processing of milk. It aims to strengthen the presence of Argentine dairy products in international markets, thereby boosting export revenues and supporting regional economies in key milk-producing provinces.