BUENOS AIRES, April 6 (Reuters) - Argentina's protectionist policies toward the sugar business are preventing it from reaching its full potential as a producer of the sweetener, the head of the Luxembourg-based agricultural conglomerate Adecoagro told Reuters in an interview on Thursday.
The company, founded by Argentine businessmen, has invested $1.2 billion in sugar and ethanol production in neighboring Brazil, the world's top sugar producer.
"Argentina has natural competitiveness, but it needs to change many things. The system is very antiquated compared with Brazil," said Mariano Bosch, co-founder and executive director at Adecoagro, in an interview during the World Economic Forum on Latin America in Buenos Aires.
"There are a ton of regulations that don't allow sugar to be competitive, since it's been protected for 20 years."
Argentina is expected to produce 2.1 million tonnes of sugar in the 2016/17 crop year, three-quarters of it destined for the domestic market, according to the U.S. Department of Agriculture.
Brazil is looking to include sugar on the list of tariff-free goods within regional trade bloc Mercosur, which also includes Argentina, Paraguay and Uruguay. But the Argentine government, despite its support for free-trade measures more broadly, has resisted amid sugar producers' opposition.
President Mauricio Macri's administration has said it could double the minimum percentage of ethanol, made with corn or sugar cane, required in fuels within three years. The minimum level is currently set at 12 percent.
"That of course would be a positive sign for the business by putting it at the same level as Brazil," Bosch said.
Brazil, the world's second-largest ethanol producer after the United States, currently requires biofuels to make up 27 percent of gasoline sold in the country.
Adecoagro plans to increase its level of sugar processing in Brazil to 14 million tonnes within five years, up from 11 million tonnes annually at the moment.
Bosch said Adecoagro could begin manufacturing ethanol from sugar cane in Argentina as well, once the country's future policies for the industry were clearer.
"It's something we have in mind," he said. (Reporting by Maximiliano Rizzi; Writing by Luc Cohen; Editing by James Dalgleish)