APLA ’07: Argentine tax hike deters investments

18 November 2007 20:11  [Source: ICIS news]

By Anna Jagger

BUENOS AIRES (ICIS news)--The Argentine government’s decision to raise export taxes on oil and fuels will deter investment in petrochemicals in the country, delegates at an industry conference warned here on Sunday.

“If you reduce the return of your energy projects, you reduce the source of raw materials for petrochemicals,” said one producer at the Latin American Petrochemical Association (APLA) conference, who preferred not to be named. “It is critical to have clear rules for oil companies to invest, providing more raw materials for petrochemicals production.”

The decision to hike oil and fuel export taxes, announced on Thursday [15 November], will generate additional revenues in the short-term but impact much-needed investment in the energy sector, industry observers said.

The announcement follows the election in October of Cristina Fernandez de Kirchner as president. She takes over from her husband, President Nestor Kirchner, next month.

Cutting the availability of petrochemicals raw materials will encourage multinational petrochemicals producers to invest elsewhere, said Jorge Buhler of US-based Polyolefins Consulting.

“It was bad enough already, and now it’s worse,” he said.

The announcement could jeopardise plans by Dow Chemical to expand its ethylene and polyethylene (PE) production at Argentina’s Bahia Blanca complex, Buhler says. The investment strategy of Solvay and Profertil, which also have production at Bahia Blanca, could also be affected.

“If you shrink the business margins of the people providing the feedstock, it jeopardises your future,” said the unnamed producer.

One solution to the problem, Buhler suggested, would be for petrochemicals producers at the Bahia Blanca complex to invest jointly in a LNG import facility.

By: Anna Jagger
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