ARGENTINA: NO DIALOGUE, MORE ROADBLOCKS

C O N F I D E N T I A L BUENOS AIRES 000398 SIPDIS SIPDIS E.O. 12958: DECL: 03/31/2033 TAGS: EAGR ECON PGOV PHUM PREL AR SUBJECT: ARGENTINA: NO DIALOGUE, MORE ROADBLOCKS REF: BUENOS AIRES 386 AND PREVIOUS Classified By: Classified By: Ambassador E. Anthony Wayne for reasons 1.4(d) ¶1. (SBU) Summary: Argentina's farm sector decided late March 28 to continue its strike (now in its third week) following the failure of initial discussions with the GOA to make any headway on the sector's main demand of suspending increased agricultural export taxes for 90 days. The rural sector, however, has made clear its willingness to continue discussions. The GOA, for its part, has offered a number of measures aimed at benefiting small and medium producers, but has remained firm on the tax issue. President Cristina Fernandez de Kirchner (CFK) canceled an April 2 trip to London, but reportedly still hopes to visit Paris for an April 7 meeting with President Sarkozy. The GOA is expected to announce some compensatory measures late on March 31, and a large government-organized rally is scheduled for April 1. The GOA and four agricultural organizations are expected to restart their dialogue, but the confrontational approach taken by both sides could exacerbate the situation. The disruption of rural produce and trucking in general is causing acute shortages in stores and markets throughout Argentina. End Summary. No Change After First Round of Talks -------------- ¶2. (SBU) In initial discussions with four organizations representing the farm sector, which lasted for seven hours on March 28, the GOA rejected the farmers, request for a 90 day suspension of the increased taxes on soy and other exports. Instead, the GOA offered earlier proposals to provide some relief for small producers via tax rebates (but not a withdrawal of the overall export tax increases),trucking subsidies, and the creation of an Under Secretariat for small producers in the Economy Ministry's Agricultural Secretariat. Following the meeting, the rural sector representatives reiterated their willingness to enter into negotiations with the government, but resumed the road blocks because they felt they had not been offered enough. Strikers are reportedly allowing milk and some other perishable items through, but delivery of most rural produce is being blocked or disrupted. There are serious shortages of meat and other products throughout markets in Argentina, and local press is reporting that some small stores -- but not major chains -- are charging up to a 150 percent premium on scarce perishable foodstuffs. Domestic Trade Secretary Moreno on March 28 made a show of visiting supermarkets, and rudely ordering them to lower their prices. The supermarket chains agreed to roll back prices to those of March 1. Minister of Justice Anibal Fernandez on March 31 threatened to arrest anyone who attempts to block the passage of MERCOSUR trucks, which generated critical commentary about the government's previous inaction when allied protestors had blocked roads. ¶3. (SBU) The GOA delegation for the Casa Rosada talks was led by Cabinet Chief Alberto Fernandez, who was joined by Economy Minister Martin Lousteau, Agriculture Secretary Javier de Urquiza, Domestic Trade Secretary Guillermo Moreno, and Interior Minister Florencio Randazzo. President Cristina Fernandez de Kirchner (CFK) stopped in briefly to greet participants and encourage a fruitful dialogue but did not participate in the discussions. Fernandez reportedly was very courteous and conciliatory, but the rural reps said they were ultimately disappointed with the GOA's lack of concrete proposals. In a nod to the seriousness of the domestic crisis, CFK canceled an April 2 trip to London but reportedly still hopes to visit Paris for an April 7 meeting with President Sarkozy if the farmers' strike is ended. Pressure from Below -------------- ¶4. (SBU) Local economists privately told us that government pressure to dialogue during this crisis has come from the bottom up, a marked difference from the top-down model of governance employed by the Kirchners. They attributed the GOA,s decision to move towards negotiations to a chain of events starting with small rural mayors. The mayors expressed constituents, dissatisfaction with the government,s anti-farmer rhetoric to their governors, who, in turn, argued within the GOA for a compromise, putting pressure on the Casa Rosada to come to the table. ¶5. (C) Provincial governors who had been privately concerned about the situation began expressing some of the concerns more publicly, showing cracks and fissures in the GOA,s relationships with the provinces. Kirchner-allied governor of Chubut Mario Das Neves criticized the government,s handling of the crisis and appeared to blame Cabinet Chief Fernandez for the mistakes. Das Neves slammed CFK,s media-heavy approach by saying "We speak with the people face to face; we don,t send them messages on television...we appeal to dialogue." Rallying Support -------------- ¶6. (SBU) Local media are reporting that CFK will announce a series of unspecified measures late on March 31 to entice small and medium agricultural producers, making more formal the offers floated by the GOA in the discussions last Friday. She is also expected to speak at a pro-government rally planned for April 1 at the Plaza de Mayo, which reportedly could draw between 100,000 and 150,000 government supporters. The government is reaching out to its supporters to assemble a large number of Kirchner-aligned governors, mayors, and labor activists in a show of strength. ¶7. (C) Comment: Rural reps left last Friday's discussions very disappointed with what the GOA is offering and are expected to announce the continuation of the strike -- particularly in the face of an increasingly radicalized base. The Kirchner team appears to be equally intransigent, refusing to consider rescinding or suspending the export tax increases, reportedly fueled by the two Kirchners. The GOA strategy now seeks to divide the diverse rural sector, (numerically) dominated by small and medium producers. Ironically, it these smaller producers, to whom the government is trying to reach out to, who appear the most radicalized and have been the most firm in rejecting the Government's offer last Friday. Monday evenings' announcement of remedial measures -- unless the GOA has found some way to sweeten the pot -- will probably be unlikely to appease the rural sector. CFK has had two opportunities to defuse this situation -- her speeches of March 25 and 27 -- but has chosen to remain on the offensive, painting the issue in very divisive terms. Should the rural sector reject the GOA's measures tonight, another large, pro-government rally April 1 would not seem to be conducive to more conciliatory tones from CFK. WAYNE