Fuel Tax Reduced at Uruguayan Border Service Stations to Compensate for Exchange Gap with Argentina

The mayor of the department of Paysandú, on the Uruguayan coast that borders Argentina, Nicolás Olivera, posted on his Twitter account that the reduction of the tax called Imesi (Internal Specific Tax) will be extended by up to 30% on fuels on the border with Argentina.

The decision was communicated by President Luis Lacalle Pou to department heads in a context where the exchange rate difference between Argentina and Uruguay is detrimental to local producers.

The departments bordering the neighboring country face the biggest price difference with Argentines in twenty years. On the Argentine side, fuel costs 27 Uruguayan pesos per liter (0.7 US dollars). For Uruguayan, on the other hand, the cost per liter is 59 Uruguayan pesos (1.4 US dollars).

For that reason, the mayors of that area of the country, together with local traders and producers, asked the government for a resolution to help them with the exchange rate difference.

The Imesi is a tax that applies specifically to gasoline and the discount will be passed to service stations that are located within a 20-kilometer radius of the border crossings with Argentina.

According to article 1 of the decree shared by Olivera, “the amount of the Specific Internal Tax (Imesi) corresponding to the alienation of naphtha is reduced by up to 30% of the sale price”. With this reduction, a liter of Super naphtha would be worth 54.4 Uruguayan pesos (1.3 US dollars), which means 23.3 Uruguayan pesos (0.6 dollars) less than in the rest of Uruguay.

Since February 1, 2021, there is a 24% reduction in Imesi in Uruguay for the sale of bordering naphthas, both on the border with Brazil and Argentina. Now, the intention is to increase that reduction in order to continue to combat the difference of change.

“The President of the Republic took a panorama. We try to share the same air that we breathe in Paysandú. He was sensitive. Obviously to equate prices is very difficult because of the abysmal difference,” Olivera said about his meeting with the president and indicated that the government is “looking to take other things,” reported the newspaper El País.

“This is good news for the serious problem we have at the border,” he said. In this regard, Mayor Lafluf said that “it is an excellent measure, that it does not solve the whole problem because it is impossible” and that “we deeply appreciate the gesture of the national government in giving the border peoples this benefit”.

Olivera had said, a few months ago, that the “gesture of removing VAT on products from the basket does not solve because there are price differences of three or four times”, and he was in favor of achieving a greater reduction of Imesi for fuel.

In Uruguay, the other place where a reduction of Imesi is in effect is at stations bordering Brazil, which in number are much smaller than those in the area bordering Argentina. At the moment, in this area, the initial 24% discount of the Imesi is maintained, with a liter of naphtha on that side having a cost of 59.1 Uruguayan pesos, equivalent to 1.4 dollars. Government sources reported that it is under analysis what will happen with this discount from May, La Diaria reported.

Prior to the last fuel increase in Uruguay, in February 2022, several heads of the Lacalle Pou government reported that many Brazilians were crossing the border to load gasoline due to the tax reduction, since in Brazil there is no tariff price and, near the border, it sells more expensive.

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