Tax Burden Impact on Argentina's Dairy Industry Costs and Competitiveness

The Argentine dairy sector, represented by over 600 companies, is facing significant structural contradictions. During the TodoLáctea event in San Francisco, Córdoba, Ercole Felippa, the president of the Centro de la Industria Lechera (CIL) and head of the cooperative Manfrey, addressed these issues. He sought to dispel the myth of a general industry collapse, noting that severe financial problems are confined to a small group of firms with pre-existing structural mismatches. The primary challenge, according to Felippa, is not production efficiency but the 'Argentine cost.'

Tax Pressure and Its Consequences

Felippa revealed findings from a technical report prepared by the CIL for the Argentine Ministry of Economy. The report indicates that the high cost of dairy products is not due to extraordinary profits by processors or retailers but rather the cascading tax burden. For every 100 pesos spent by a consumer on dairy products, 40 pesos are taxes. Half of this tax revenue goes to the National Treasury, while the remaining half is absorbed by provincial and municipal taxes.

Felippa criticized the unsustainable tax system, stating, 'A company spends 100 pesos on a salary, but the worker receives only 60 pesos after social charges. With these 60 pesos, they face a 40% tax on food. A country with such a tax burden is unviable.'

Industry Structure and Market Dynamics

Felippa also addressed the competitive nature of the dairy processing industry, countering claims of monopolistic practices. The top 4 to 5 companies account for only 40% of total milk receipts, while the top 20 process 50% of the national milk flow. The domestic market absorbs 75% of national production, which faced a downturn in 2024. However, early 2026 showed signs of stabilization and slight recovery, although historical averages have not been reached.

This domestic contraction forced companies to focus on exports, especially given the 10% growth in primary production. To maintain competitiveness in international markets, the price of raw milk was adjusted from an unsustainable high of 47 cents to a more viable range of 36 to 37 cents per liter.

Challenges of Informality and Tax Reforms

Felippa highlighted the issue of informal economy as a major challenge, leading to unfair competition and price distortions due to tax evasion. The CIL proposed a tax reform to the national government, advocating for the simplification of tax bases and the reinstatement of reasonable export rebates. Felippa noted that after the elimination of dairy export duties, fiscal rebates were reduced to zero, meaning the Argentine industry continues to 'export taxes' in its shipments of powdered milk and cheese commodities.