Repeal and changes in regulations applicable to agribusinesses

On December 21, 2023, Decree of Necessity and Urgency No. 70/2023 (the “DNU No. 70/2023”) was published in the Official Gazette, which, among many other reforms, repealed laws related to the wine, sugar, cotton, olive, yerba mate and livestock feed industries, and made changes to the Law of Deposit Certificates and Warrants and the Law of the National Yerba Mate Institute. Unless further clarification is provided, DNU No. 70/2023 will enter into force on December 30, 2023.

 

Repeal of laws related to the wine industry

DNU No. 70/2023 repealed Law No. 18,600 relating to winemaking contracts, Law No. 18,905 which instituted the National Wine Policy, and Law No. 22,667 on Wine Industry Reconvention. Below is a summary of the main contents of these laws:

1. Winemaking contracts: Law No. 18,600, now repealed, imposed the obligation to register with the National Wine Institute (“Instituto Nacional de Vitivinicultura”) the winemaking contracts under the systems or modalities known as “contract of winemaking on behalf of third parties”, “a maquila” or “for the exclusive account of the winemaker”. The law also imposed a series of clauses that had to be included in such contracts, including provisions referring to the quantity, minimum alcohol content and qualities of the wine to be delivered under such contracts, the price, and other clauses applicable to the contractual relationship between the winemaker and the winemaker.
2. National Wine Policy: Law No. 18905, now repealed, instituted the so-called “National Wine Policy”, which established several objectives aimed at developing the wine industry. In order to meet these objectives, the law granted the Executive Branch several powers, among them, to fix and exempt the application of tariffs and additional import and export duties, the temporary suspension of imports, the preferential supply and/or promotion prices of energy, fuel and transportation, and the granting of subsidies. The enforcement authority of this law was the National Wine Institute.
3. Wine Industry Reconversion: Law No. 22667, now repealed, called “Wine Industry Reconversion”, had been enacted in the context of a severe crisis in the wine industry in the early 1980s, which manifested itself in a drastic drop in wine prices. The regulation established certain quotas for wine production to be determined on the basis of estimates of domestic consumption, exports, and projections for both markets, made by the National Wine Institute. These quotas, represented by certificates, could be divided and transferred. In addition, the repealed regulation established certain parameters for the production of wine, natural must and sulfited must.

 

Repeal of law related to the sugar industry

DNU No. 70/2023 repealed Law No. 18,770, which established a regime for the delivery of sugar for consumption in the domestic market. Such regulation indicated that in the cases of transfer of sugar production capacity between establishments belonging to the same sugar area, or of individuals or legal entities that assumed the operation of sugar mills authorized to operate, the applicable governmental authority could assign them quotas for the delivery of sugar to the domestic market until the month following the end of the respective harvest, when they lacked their own stock of previous sugar or when such stock was insufficient. In addition, the repealed law indicated how the allocation of such quotas was to be calculated.

 

Repeal of law related to the cotton industry

DNU No. 70/2023 repealed Law No. 19990, which regulated the cotton activity. Such law, among other things, empowered the Executive Branch to annually fix mandatory minimum prices for raw cotton, and prohibited any transaction, quotation or publication of prices in which cotton was classified by a name, description or designation other than those of the standards set by the applicable governmental authority.

In addition, the regulation had established the creation of the National Cotton Fund (“Fondo Algodonero Nacional”), which was financed by contributions (to be paid by the cotton ginners, who acted as withholding agents) of up to 6% of the index value established annually for the ton of raw cotton produced in the country. The purpose of the National Cotton Fund was to promote, through the export of surplus cotton fiber, the regulation of the domestic supply of such textile, to promote the development of production and ginning cooperatives in order to improve the marketing infrastructure in the cotton region, and to promote the improvement of textile production in the most suitable areas and encourage the diversification of crops in cotton-growing areas, where this was advisable.

 

Repeal of law related to the olive industry

DNU No. 70/2023 repealed Law No. 12916, which had created the National Olive Corporation (“Corporación Nacional de Olivicultura”). According to such law, the functions of the National Olive Corporation were to promote the cultivation and industrialization of the olive tree and the marketing of its products, to carry out technical and economic planning for the production and industrialization of the olive tree and its products, to carry out studies and research, to set up experimental industrialization plants and to promote the industrialization of the olive tree and its products, to produce on great scale grafted olive plants with selected varieties particularly adapted to the different ecological regions of the country, and to foment and to propagate the knowledge of appropriate methods for the cultivation of the olive tree and the industrial exploitation of its products.

 

Repeal of, and changes in, laws applicable to the yerba mate industry

DNU No. 70/2023 repealed Law No. 27114, which established limitations to the fractionation of yerba mate, and also made changes to Law No. 25,564 in order to modernize the National Yerba Mate Institute, created by the aforementioned law. Below is a summary of the main contents of the repealed law and the most relevant changes of the amended law:

1. Regime of Packaging at Origin of Yerba Mate: Law No. 27114, now repealed, provided that the provincial states of the producing region could authorize the marketing in bulk when the Yerba Mate or Ilex Paraguariensis milled or “canchada” was destined for export, but that it could not be subject to further fractioning or packaging outside the producing region until it reached its final destination abroad. Exceptionally, the regulation allowed the commercialization in bulk and its fractionation or packaging outside the producing region, when the Yerba Mate or Ilex Paraguariensis was intended to be mixed with other herbs, fruits, essences or flavorings originated in plantations located outside the producing region, as long as such herbs, fruits, essences or flavorings represented at least 30% of the final product, intended for consumption or export. The enforcement authority under this law was the National Yerba Mate Institute (Instituto Nacional de la yerba Mate), in conjunction with the National Ministry of Economy and Public Finances.
2. National Yerba Mate Institute: Law No. 25564 created the National Yerba Mate Institute. DNU No. 70/2023 made amendments to the above-mentioned law, in order to, among other things:

• set as one of the objectives of the National Yerba Mate Institute the protection of the competitive nature of the industry, and to eliminate as an objective of the Institute to seek the sustainability of the different sectors involved in the activity, as established in the previous text of the referred law;
• eliminate the registries for the identification of the production, processing, industrialization and commercialization of yerba mate and its derivatives, and consequently, the obligation to register in them;
• eliminate certain functions of the National Institute of Yerba Mate, such as agreeing on the price of raw material every six months and implementing measures to facilitate the balance of supply with demand and, if necessary, to limit production, constitute funds for specific purposes, and implement and manage a consignee market of yerba mate raw material of national order; and
• eliminate the qualification as “fraudulent” to the sale of articles without the official stamps referred to in the aforementioned law, although maintaining the applicability of the penalties contemplated in such law.

 

Repeal of law related to the livestock feed packaging industry

DNU No. 70/2023 repealed Law No. 18859 relating to containers for livestock feed products. Such regulation, now repealed, required that the transportation and/or commercialization of products intended for livestock feed be made in new and single-use containers, and that, in bulk operations, the means of transportation and other elements be disinfected before being used again, using products approved for such purpose by the Secretariat of State of Agriculture and Livestock.

 

Changes to the Law of Deposit Certificates and Warrants

DNU No. 70/2023 made changes to Law No. 9643 which regulates deposit certificates and warrants. Below is a summary of the main changes made:

1. The prohibition applicable to warehouse companies to carry out purchase and sale transactions of fruits or products of the same nature of those referred to in the deposit certificates or warrants they issue, and the requirement applicable to companies issuing warrants of having to request authorization from the Executive Branch to discount or trade warrants, were eliminated.
2. The provision indicating that, notwithstanding its total or partial renewal, the warrant only produced effects for trading purposes during the six months following the date of its issuance was eliminated.
3. The exoneration of the patent tax to the warehouses authorized to issue warrants established in the country was eliminated.
4. The issuance of deposit certificates and warrants on non-domestic manufactures was authorized. The language prior to DNU No. 70/2023 required, with respect to manufactures, that they be domestic, in order to qualify for these securities credit operations.
5. The requirement applicable to warehouses to have the prior authorization of the Executive Branch to issue deposit certificates and warrants was eliminated, establishing as optional the registration in a registry in charge of the Executive Branch. The power of the Executive Power to inspect such companies was limited to those that have been registered in the aforementioned registry.
6. The issuance and negotiation of deposit certificates and warrants in electronic format is allowed, and using electronic signature, which may also be used for endorsements, if applicable.
7. In the case of transfers of warrants, it is permitted that the deposit be consigned by separate bundles or lots, and that new certificates be issued with the respective warrants for each lot, in substitution of the previous certificate and warrant.
8. The possibility of not having to transfer to third party warehouses for the issuance of certificates of deposit and warrants, which according to the text prior to DNU No. 70/2023 only applied to wine products, is extended to all fruits and products susceptible of being subject to certificates of deposit and warrants.

 

Validity of Decree No. 70/2023

Article 5 of the Civil and Commercial Code establishes that laws become effective after the eighth day of their official publication; therefore, considering that Decree No. 70/2023 was published on December 21, 2023, it will become effective on December 30, 2023. On the other hand, the treatment of Decrees of Necessity and Urgency (“Decree”) is regulated by Law No. 26,122. The law establishes that the Chief of Staff must submit the Decree to the consideration of the Permanent Bicameral Commission within ten days of its issuance. The Permanent Bicameral Commission has ten business days to issue an opinion on the validity of the Decree and send it to the plenary of both legislative chambers for its treatment. The Decree will only become ineffective if both chambers reject it. The Senate and the House of Representatives may only accept or reject the Decree, but may not introduce amendments, modifications, or additions. The decision is made by absolute majority of those present.