ARGENTINE AGRICULTURE PRODUCERS STRIKE TO PROTEST

UNCLAS BUENOS AIRES 001656 SIPDIS SIPDIS FOR WHA/BSC AND EB/ABT USDA FOR FAS/CMP HOWARD WETZEL E.O. 12958: N/A TAGS: EAGR ETRD ECON AR SUBJECT: ARGENTINE AGRICULTURE PRODUCERS STRIKE TO PROTEST GOA INTERFERENCE IN SECTOR REF: A. 05 BUENOS AIRES 2303 ¶B. BUENOS AIRES 560 ¶C. 05 BUENOS AIRES 2408 ¶1. (U) This message is sensitive but unclassified, and not for Internet distribution. ¶2. (SBU) Summary: Argentina's agricultural producers mounted a four-day strike to protest the GOA's policies toward the sector, which include export taxes and market manipulation. Strikers described their action as an attempt to get the government's attention, and downplayed the likelihood that it would lead to policy changes. While it is probably true that the strike will not prompt the GOA to ease up on agriculture, the action was noteworthy as one of only a few private sector challenges the government of President Nestor Kirchner has faced. End Summary. ¶3. (U) Members of Argentina's largest farmer's association are concluding a four-day strike (July 22-25),during which they refused to sell or purchase cattle, grain, or other agricultural inputs and products. The approximately 100,000 members of Confederaciones Rurales Argentinas (CRA) were protesting GOA policies that they believe harm agriculture in Argentina. Strikers showed remarkable unity during the country-wide strike, which spokespersons called an attention-getting measure that did not seek as an end higher prices for agricultural products. Still, cattle prices are up by 13 percent over the past several days. ¶4. (U) Agriculture has long been a sector that Argentine governments could take for granted -- a steady income producer with far less political clout than would be expected (Reftel A). GOA actions over the past year, however, have pushed producers to protest. Specifically, the GOA increased export taxes on beef and dairy products (before banning beef exports altogether for a time -- Reftel B); it has openly manipulated the wheat/flour market; and it eliminated export rebates that reimbursed a portion of the VAT tax paid by producers, somewhat offsetting the export taxes they had to pay. Those measures have increased GOA revenues and kept prices relatively stable, both stated GOA goals, but at the price of producers' margins. ¶5. (U) The GOA has acted to minimize any public relations or pricing effects of the strike. For example, the number of cattle sold at the Liniers market, which sets the daily beef reference price, was considered by many as a bellwether for the strike's success: the fewer cattle available for sale, the more successful the action. The GOA skewed that equation by encouraging producers to send extra cattle to the market on July 21, the day before the strike began, while at the same time using its coercive power to warn supermarkets and slaughterhouses from purchasing cattle that day. As a result, only 15 percent of the 13,000 head entering the market sold on July 21. On most market days that figure is closer to 100 percent. That meant that thousands of animals were available for sale when the market reopened July 24, which allowed the GOA to downplay the strike's effects. ¶6. (SBU) In another public relations move that producers derided as a largely empty gesture, the GOA announced that it would begin to implement its three-year old and heretofore moribund Cattle Development Plan. The plan's details are unclear, but the GOA has said it will make available USD 280 million to provide low interest rate loans and improve the genetic, sanitary, and nutritional resources available to small and medium-sized cattle operations. Producers contacted by the Embassy did not believe any such plan will incentivize further investment in an increasingly regulated sector. ¶7. (SBU) Comment: The significance of this strike lies not in any immediate effect it might have on the prices of agricultural products, but in the fact that it is one of only a few private sector challenges this government has faced. Other such challenges, for example from supermarkets and downstream petroleum companies, have been quickly slapped down (Reftel C). The CRA leadership seems unlikely to buckle so easily, and indeed will be meeting over the next few days to decide whether to extend the strike. Any such extension would anger a GOA that has shown a clear and increasing desire to regulate the marketplace, and could set the stage for an interesting showdown. End Comment. MATERA