Agribusiness Investing: Should The IRS Take Note of Argentina?

Monday was tax day (NYSE:HRB) in the United States.  Stories and headlines of tax related topics have swept internet media recently.  Last month, it was reported that although General Electric (NYSE:GE) made $10.3 billion in pretax income, the company reported zero tax liability in the US.  Infact, GE reported a tax benefit of $1.1 billion.

President Obama has called for tax reforms in several speeches.  Any tax reform in the US will be a slow process.  However, other countries are taking a more proactive approach to collecting taxes from companies.  For example, Argentina is putting pressure on big global food companies such as Archer Daniels Midland (NYSE:ADM), Bunge (NYSE:BG), and Cargill (NYSE:MOS) for avoiding taxes.

The national tax agency, called AFIP, is accusing the global food companies on using tax havens in order to reduce tax bills in Argentina.  The tax cases could take months to be decided, but in the meantime, the companies have been kicked of a registry that gives them tax breaks.  Not being on the registry will also make it harder to obtain permits to transport farm products to plants and ports.  Glencore International, who is considering a whopping $9-$11 billion IPO, is also involved in the AFIP accusations.

Argentina appears ready to yet again protect the interests of local businesses.  Back in 2007, a NY Hedge Fund was not allowed to buy a 50% stake in an Argentina electric company.  Later, two local businesses in Argentina bought the stake with the blessings of the Argentina government.  Currently, there are reports that the government is drafting a bill to grant two local businesses at least a 30% stake in all soy exports.  This would be a huge deal for local businesses as Argentina is the world’s largest exporter of soy oil and soy meal.  Furthermore, big global companies may also pursue local businesses in order to gain sales.

It’s unclear if the US will take note of Argentina and follow suit, but local businesses in Argentina stand to gain the most from the tax crackdown on global food companies.

Do you want to profit from commodities and agribusiness? Get a free copy of our highly acclaimed Commodities Premium Investment Newsletter by Chicago Mercantile Exchange commentator Jordan Roy-Byrne CMT.

Disclosure: No positions.