Argentina’s new government is proposing higher export levies and a tax on the purchase of foreign currency as part of a plan to boost social spending and fix its debt problem.

President Alberto Fernandez on Tuesday sent a so-called emergency bill to Congress, where his coalition will face its first test. The bill aims to obtain broad, sweeping powers to renegotiate debt, raise salaries and taxes, while controlling prices of politically-sensitive items such as utilities and medication.

President Alberto Fernandez
Argentina President Alberto Fernandez

Among the measures proposed are higher taxes on the wealthy, higher tariffs on Argentina’s exports, as well as a surcharge on purchases abroad. It follows recent government decrees for temporarily doubling severance pay and lowering medication prices.

“This bill is the first step to resolving Argentina’s economic crisis,” Economy Minister Martin Guzman told reporters in Buenos Aires. “We have to discourage savings in a currency that we don’t make, which is dollars.”

Argentina is suffering with double-digit unemployment, inflation above 50%, and more than a third of citizens living below the poverty line. Additionally, the government is running low on foreign reserves and must renegotiate its debts with private creditors and the International Monetary Fund, which gave the previous government a record $56 billion bailout. Investors see a very high chance of a sovereign default.

Balancing Act

The bill is Fernandez’s first attempt to strike a balance between his voters’ demands for higher social spending and the country’s dire financial situation. Guzman has said the government can’t freely print money to cover costs, nor can it continue the previous government’s austerity cuts, which he argues have worsened the recession.

Here are the main proposals sent to Congress:

  • Debt negotiation
    • Authorize the executive government to carry out measures necessary to ensure the sustainability of public debt
  • Salaries
    • Boost salaries, attending to the most vulnerable sectors and creating mechanisms to facilitate salary agreements
  • Energy
    • Utility prices will remain unchanged for 180 days
    • Maintain electricity and natural gas subsidies under federal jurisdiction and authorize the executive government to start the renegotiation process
    • Authorize the executive branch to “administratively intervene” in national energy regulators
  • Export Tariffs
    • Soybean export taxes may rise to 33% from 30%
    • Wheat and corn export taxes may rise to 15% from 12%
  • U.S. Dollar Purchases
    • Argentina to apply 30% tax on dollar purchases during five fiscal periods
      • Government to use 70% of those proceeds for social security
    • Tax will also apply to foreign transactions
  • Taxes on the wealthy
    • Tax of 0.75% on assets between $3 million and $6.5 million
    • Tax of 1% on assets valued between $6.5 million to $18 million
    • Tax of 1.25% on assets $18 million and higher