Argentina in crisis: Biodiesel industry stops its production for the mandatory blend

The economic crisis in Argentina has a new victim: the biodiesel industry that supplies the biofuel to the oil companies for the mandatory blend. Around 54 medium-scale factories have decided to stop its production due to the lack of profitability.
Thursday, September 5, 2019

In the last two weeks, the dollar moved from AR$45 to AR$61, a brutal depreciation that automatically moved to the commodity prices. Thus, price of the soybean oil (the raw material to produce biodiesel) rocketed from AR$20,441 per tonne in July 31th to AR$28,226 yesterday. But the biodiesel price for the mandatory blend (10%) remained stable at AR$31,549. The gap between the raw material and the biofuel slumped from 65% during July to 24% in August.

Despite this sudden currency variation is able to be corrected in the following months, in this case, the Government is not willing to apply any correction. In the middle of a hard electoral process, where is highly probable that the opposition defeats the officialism next October 27th, the Cambiemos alliance is doing all the possible to stabilize the economy, and accepting an increase in the biofuels prices would mean more inflation.

According to the RIA Consultores’ weekly report, while the dollar went up 73% in a year and soybean oil 75%, biodiesel price only rose 43%. See the following chart.

CEPREB, the chamber that gathering the local biodiesel industries (that supply the mandatory blend) alerted that the Government decision poses at risk 60,000 job places. “It forces us to buy inputs at the current value of the dollar and sell them at the exchange rate prior to this measure (the freezing of fuels prices for 90 days). This implies the impossibility of standing as an industry and, as a result, the immediate stoppage of all activity with the consequent suspension of the labor force involved”, a press release for the chamber states.

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