Argentina's government will open a loophole in strict capital controls to allow grains exporters to freely use a quarter of their foreign currency income to buy soybeans after a major drought hit local production, reported Reuters.

The South American country is a major soy producer and for years was the world's top exporter of processed soy oil and meal, crushed in huge plants along the Parana River. But it has been forced to import more beans due to the ravaged harvest.

In the official gazette, the government said exporters could this month use 25% of their foreign income to restock on soybeans rather than directly converting it into local pesos. This would encourage more exports to bring in much needed dollars.

Exporters have to convert their foreign currency to pesos at a currently unfavorable exchange rate, artificially held in place by capital controls. The government has previously offered the sector targeted preferential exchange rates to boost sales.

The decree formally confirms comments from the agriculture secretariat last week which had flagged the new measure, seen as key to shore up the depleted net dollar reserves of Argentina's central bank, which are deep in negative territory.

A Reuters calculation suggests the new measure equates to offering the export sector a preferential exchange rate of some 455 pesos per dollar, stronger than the official 350 peso rate. Dollars trade in popular parallel markets at close to 700 pesos.

Grains exporters could exchange 25% of their foreign currency in these markets, getting a large return in pesos.

Analysts estimated that the temporary measure for September should enable it to bring in $2.5 billion in foreign currency.

Argentina's 2022/23 soybean harvest was 25 million metric tons, down from 44 million harvested in the previous season. According to the Secretary of Agriculture Juan Jose Bahillo, current reserves of soybeanstotal around 8 million tons.