Milei 2.0: A new society of the powerful is born

Argentina's most significant economic sector has experienced a "sweet defeat." For the first time, crude oil has surpassed soybean meal as the country's top individual export product in the first half of the year, driven by the boom in Vaca Muerta. This marks a significant shift from the historical pattern where agriculture was the sole sector relied upon to compensate for dollar shortages.

In recent decades, whenever a government faced a restriction in accessing dollars, it turned to the agricultural sector to balance the books. Analysts could calculate the sector's daily dollar inflows to forecast the future price of the dollar and the Central Bank's ability to defend the peso. Companies like Cargill, Bunge, Dreyfus, and AGD were often targets of currency-related scrutiny during times of uncertainty, attracting the attention of Economy Ministers seeking to regulate them for foreign currency. This appetite for agricultural dollars manifested in various forms, from increased export taxes to differential exchange rates like the "soy dollar."

However, the expansion of the energy sector and the takeoff of mining under President Javier Milei's government have altered this logic. The agricultural sector now shares its historic role as a primary generator of foreign currency with two other dynamic sectors: energy and mining. This diversification opens new avenues for policymakers facing dollar crises. Instead of solely approaching the agricultural sector, governments now have the option to engage with multiple genuine sources of foreign currency.

Economy Minister Luis Caputo tested this new logic during a critical period last September. Amidst a run on the peso and following a Peronist electoral victory in Buenos Aires province, he temporarily eliminated export taxes on soybeans and other products to quickly secure approximately US$7 billion. Simultaneously, Caputo engaged with oil companies, which at the time lacked the immediate liquidity to fully comply with the official request. While the energy sector's response differs from agriculture's, it is expected to assert its own interests during more extensive crises.

The evolving relationship among these powerful sectors extends beyond currency urgencies. Cereal producers and oil companies previously clashed over biofuels, with agricultural firms seeking greater participation in gasoline and diesel, while oil companies resisted any reduction in their business. These old tensions are now easing, fueled by the prospect of a lucrative commercial agreement with Europe, where both sectors anticipate exporting fuels with increased participation.