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South American Neighbours Slam Argentina Over River Tax on Paraguay

Argentina’s neighbours have sharply criticised its tax against commercial boats travelling through the key Paraná River, a rare rebuke from the country’s allies amid worsening relations with Paraguay. Brazil, Uruguay and Bolivia joined Paraguay in decrying a “unilateral and arbitrary” tax that Argentina started charging this year as a violation of international law, according to a joint statement Sunday. It’s an unusual criticism in particular from Brazil and Bolivia, governments that tend to side with Argentina’s left-wing Peronist government on foreign policy. 

Argentina’s Foreign Ministry noted that Energy Secretary Flavia Royón met with Paraguay Foreign Minister Ruben Ramírez Monday in the country’s capital, Asunciön, but declined to comment further. The Argentine government has justified the tax in the past to fund waterway dredging and maintenance. 

Paraguay’s President Santiago Peña faces his first major foreign policy test less than a month after taking office amid an escalating dispute with Argentina. Shipments through the Parana River, which leads to the Atlantic Ocean, account for about 80% of Paraguay’s foreign trade, making affordable access an economic lifeline.

Peña said his government will fight the river tolls in court and cease backing Argentina at multilateral lenders due to about US$150 million in arrears with the Yacyreta hydroelectric dam jointly owned by both countries. “We aren’t going to provide our support at any multilateral organisations, and we are going to inform about these debts Argentina owes Paraguay,” Peña said at a press conference September 8.

Argentina’s deepening economic crisis is spilling over into neighbouring countries. Uruguay and Paraguay are losing consumer spending to Argentina as their citizens flood across the border to buy cheap consumer staples. Hard currency shortages have led the cash-strapped Alberto Fernández administration to restrict imports from its regional trade partners.

The transit fee of US$1.47 per metric ton is especially sensitive for landlocked Paraguay, which operates one of the world’s largest fleets of river barges. Argentina has started to aggressively collect, detaining a vessel carrying 30 million litres of fuel to Paraguay earlier this month. ”The seizure of Paraguayan barges with Paraguayan products is a tremendous problem,” Peña said.