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26/03/2008 | Argentina-President under Pressure as Export Tax Protests Spread to Argentine Capital

Global Insight Staff

President Cristina Fernández de Kirchner confirmed yesterday her refusal to roll back the next export-tax regime on grain, and her criticisms of the ongoing strike have prompted a radicalisation of the movement.

 

Global Insight Perspective

 

Significance

Farmers' protests intensified yesterday as President Cristina Fernández de Kirchner refused to ease the tax regime applied to key agricultural exports, with her criticism of the actual raison d'être of the strikes sparking anger in the sector.

Implications

Hundreds of disgruntled inhabitants of the capital, Buenos Aires, expressed support for the agricultural sector's cause yesterday, suggesting mounting discontent with the current situation in the short term as food shortages loom in the capital and beyond.

Outlook

The agricultural sector is presenting a major challenge to Fernández's authority and policy, and major sectoral organisations appear to have put aside past disagreements to present a united front to the government.

Risk Ratings

Operational and security risks are being monitored, as further disruption to land transportation is planned, while pro- and anti-government protesters could well clash.

Determined President Discounts Concessions

President Cristina Fernández de Kirchner yesterday hardened her stance on the large-scale agricultural protests led by the Rural Confederation of Argentina (CRA), the Argentine Rural Association (SRA), the Argentine Agrarian Federation (FAA), and the Confederation of Rural Associations of Buenos Aires and La Pampa (CARBAP). She declared herself to be unwilling to "submit to any extortion" and went on to criticise the movement for "picketing in times of abundance", insisting that the sector has been the most profitable since the 2001 crisis. She focused her speech on the need to redistribute wealth in a more efficient manner, highlighting that recent hikes in global prices and higher demand have translated into a major boost in agricultural earnings. Her harsh comments prompted the leaders of the mobilisation, to confirm that they will continue their strike action indefinitely. Further road blockades across the country are to be staged today, along with marches. The so-called "Mercosur road", the main delivery axis between Brazil, Argentina, Uruguay, and Paraguay, is set to be particularly affected. In the meantime the protests spread to the capital, Buenos Aires, where frustrated middle-class inhabitants expressed their support for the sector and lamented the confrontational approach adopted by their president. Banging on pots and pans, a tactic reminiscent of the 2001-2002 economic protests, hundreds of protesters invaded the central Plaza de Mayo, opposite the presidential palace, bringing attention to food-supply issues as well as discontent with the high-tax policy both on the agricultural sector and beyond. Other concerns such as inflation were also raised. Similar protests were held in other towns located in the agricultural heartland of the country. In the capital, pro-governmental protesters sought to disperse picketing in front of the presidential palace, presaging potential future clashes between backers and detractors of the administration—as augured by the truckers unions' opposition to the agricultural strike.

Broader—and apolitical—concerns are growing in Argentina, with both consumers and retailers experiencing increased supply disruptions of cereals, dairy products, and meat. Some sources point to looming shortages of rice and pasta in Mendoza, while Rosario is bracing itself for cooking oil shortages. According to eye witnesses, Buenos Aires's famous meat market, the Liniers market, has seen its activities severely restricted by the strike and road blockades, while the number of trucks arriving to deliver grain to Rosario's harbour are not even reaching 10% of the normal level, Bloomberg reported. Some ships have reportedly been diverted given the lack of any cargo to load.

Outlook and Implications

The agricultural sector has been in battle mode ever since Economy Minister Martín Lousteau unveiled a new export tax regime tied to variations in world price, bringing the tax in particular on Argentina's golden crop, soya, to new heights—above the 44% mark. Sunflower derivatives have also suffered almost a 10-percentage-point increase in relevant export tax. The amendments intensify the tax burden on the agricultural sector, given that income and other taxes still need to be paid, resulting in the evaporation of a big chunk of their earnings.

The situation seems to have reached an impasse. While authorities have recently hinted that the government will negotiate if the protests are lifted, the president's criticisms yesterday have unleashed a new wave of discontent, and this has fuelled, rather than contained, the momentum of the strike. Today marks its fourteenth day, and the whole episode has entered a new phase of confrontation where the two sides appear unwilling to make the first concession. Ultimately, brewing discontent from consumers, which is likely to intensify as food items disappear from the supermarkets' shelves, will shape a change in attitude in the short term. In any case, this strike has been the main challenge to President Fernández's recent administration, and undeniably the most important in a decade. The four organisations—CRA, SRA, FAA, and CARBAP—are maintaining an almost unprecedented common position on the matter and the government is struggling to exploit cracks in the united front they present in order to weaken their actions.

Global Insight (Reino Unido)

 


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