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Argentine Farmers Win Political Support for Repeal of New Tax
Bloomberg
May 13, 2008

By Matthew Craze and Eliana Raszewski

May 13 (Bloomberg) -- Striking farmers in Argentina secured the support of political leaders and expanded export blockades, turning up the pressure on President Cristina Fernandez de Kirchner to repeal new taxes on overseas grain shipments.

Juan Schiaretti, the governor of Argentina's biggest soybean-growing province, Cordoba, yesterday urged Fernandez to lower a variable export tax introduced on March 11. Opposition party lawmakers backed the farmers and said they will meet today in Buenos Aries to oppose the government's agriculture policies.

``We call on the government to reverse the new tax system,'' said Christian Gribaudo, a member of the opposition PRO party and vice president of the lower house's agriculture committee. ``We should have never arrived at this level of confrontation,'' Gribaudo said yesterday in an interview.

Farmers began an eight-day strike May 7, the second in as many months, after the government refused to repeal the new tax, which Fernandez said was necessary to help curb inflation. The protests have disrupted exports and are threatening to slow the economy. Argentina is the world's second-largest corn exporter and the third-largest in soybeans.

The protests, which began in March, may shave 1 percentage point off economic growth in Argentina, said Alfredo Coutino, a Latin America economist at Moody's Economy.com. Farmers have blocked exports and many are withholding newly harvested corn and soybean crops until the tax dispute is resolved.

Former economy minister Martin Lousteau introduced a variable export tax that levies soybeans and sunflower seeds at more than 40 percent, depending on prices, compared with a previous fixed tax rate of 35 percent.

Challenge to Fernandez

Lousteau resigned April 24 after the first strike, which ended in a truce April 2, caused food shortages, halted grain exports and provoked the biggest challenge to Fernandez's five- month-old government. Farmers resumed their selective blockades May 7 after talks with the government collapsed.

``The best the country can do is go back to March 11 and let farmers have again some certainty to invest and produce,'' Oscar Aguad, a deputy from Radical Civic Union, an opposition party, said in a telephone interview.

Consumer prices rose 8.9 percent in April from a year earlier, according to the government. Some economists, opposition leaders and the International Monetary Fund dispute the data. Moody's Investors Service said in a May 9 statement that annual inflation is ``closer to 25 percent.''

Farm Revenue

Export-tax revenue, including duties on agricultural goods and fuels, more than doubled to 1.5 billion pesos ($472 million) in April from a year earlier, the government reported on May 5.

Opposition party leaders say they are seeking 1 million signatures of support from citizens to pressure the government, as the prolonged dispute with farmers erodes Fernandez's popularity.

``The signatures will give opposition congressmen the support to be stronger in their goal to abolish the new tax system,'' Aguad said.

The new tax regime, enacted by executive powers created after the financial crisis of 2001, should have been approved by congress, said Gribaudo, the opposition party member.

A poll by Buenos Aires-based Felipe Noguera Consultores found that 78 percent of Argentines want the government to change the export tax, the La Nacion newspaper said May 10. People in Buenos Aires gathered last night for a second night of banging pots and pans in a show of support for farmers.

Advocating Talks

Schiaretti, the Cordoba governor, urged farmers to end their strike as planned on May 15 and to resume talks with the government. Argentina's Vice President Julio Cobos also called for more talks.

``We need a dialogue to find solutions,'' Cobos told reporters in Buenos Aires yesterday. ``We want a solution for farmers and for the entire country.''

Eduardo Buzzi, head of the Argentine Agrarian Federation, which represents smaller farmers, said there is ``no reason'' to resume talks unless the government says it will lower the tax. Farmers only want talks ``where we can discuss the taxes,'' Buzzi told reporters after meeting with Schiaretti in the city of Cordoba.

A group of farmers led by Alfredo De Angeli in Entre Rios province blocked a highway linking Buenos Aires with Brazil yesterday. Farmers also drove their tractors into cities and towns in the rural parts of the country as a form of protest.

Farmers in the Buenos Aires province, the country's largest, met with regional government officials to discuss measures to end the conflict.

``We should advance and work at the provincial level,'' Alberto Perez, cabinet chief for the Buenos Aires provincial government, told reporters yesterday. ``We invite those who think the solution is to block highways to resume talks.''

To contact the reporters on this story: Eliana Raszewski in Buenos Aires eraszewski@bloomberg.netMatthew Craze in Buenos Aires at mcraze@bloomberg.net.