ARGENTINE GOVERNMENT SEEKS TO SPLIT AGRICULTURAL SECTOR AND

UNCLAS BUENOS AIRES 000408 SIPDIS SIPDIS SENSITIVE TREASURY FOR LTRAN AND MMALLOY E FOR THOMAS PIERCE PASS USTR FOR DUCKWORTH USDOC FOR 4322/ITA/MAC/OLAC/PEACHER US SOUTHCOM FOR POLAD E.O. 12958: N/A TAGS: EAGR ECON ENRG EPET AR SUBJECT: ARGENTINE GOVERNMENT SEEKS TO SPLIT AGRICULTURAL SECTOR AND RALLY SUPPORTERS Ref: (A) Buenos Aires 00328; (B) Buenos Aires 00368; (C) Buenos Aires 00379; (D)Buenos Aires 00386; (C) Buenos Aires 0398 -------------- Summary -------------- ¶1. (SBU) President Cristina Fernandez de Kirchner (CFK) and her Economy Minister Martin Lousteau announced on March 31 a basket of agricultural concessions targeting small producers. New measures include export tariff rebates, transportation subsidies, a re-opening of currently blocked wheat exports, subsidies for small dairy producers, and subsidized credit for small and medium producers. These were clearly designed to erode solidarity within the sector by delinking the interests of large and small producers, but failed to address demands by the four major agricultural groups leading the sector strike against the GoA, who seek a wholesale roll-back of the sliding export taxes recently adopted. The four agricultural entities announced that they will continue the strike until Wednesday, April 2, but will seek to limit current blockades, allowing dairy and other perishable products like fruits and vegetables to pass while blocking transit of grains, oilseeds, and meat. On April 1, CFK gave a fiery address to 100,000-plus followers to rally political support. Attention will now focus on the agricultural sector's response. This sector is comprised by some 300,000 producers, of whom approximately 96% are small to medium-sized producers. Although the four agrarian entities supporting the strike have historically represented disparate interests, they have found a common purpose in the current strike. It remains to be seen whether the GoA's efforts to divorce the interests of small producers from those of larger farming enterprises will succeed. END SUMMARY. CFK'S CONCILIATORY SPEECH... -------------- ¶2. (U) President Kirchner and Minister of Economy Lousteau announced new measures March 31 in an attempt to appease the agricultural sector and bring an end to its 20-day strike. The package did not alter the GOA's floating export tax scheme, whose elimination remains the principal demand of the four major Agrarian associations negotiating with the GoA. GoA measures included tax compensations to medium and small producers that will leave them in the same financial situation as before the March 11 export tariff increase, transportation subsidies for the more remote provinces, a re-opening of currently blocked wheat exports, a subsidy for small dairy producers, subsidized credit for small and medium producers, and the creation of a new Sub-Secretariat for the development of small and medium producers in the Secretariat of Agriculture. ¶3. (U) CFK struck a more conciliatory tone in her March 31 speech than she had the previous week. CFK said that, as president, it was her job to look at the big picture and arbitrate among competing interests to decide what was best for the nation as a whole. In measured, moderate tones, she refuted press claims that the soy tax had jumped to 44%, noting that rate was the ceiling of a sliding scale tied to soy prices (which are now declining sharply on international markets). Even with the increased taxes, she claimed, soy farmers would earn 18% more than a year ago. (Soy farmers contend the GOA calculation only contemplates revenues without accounting for rapidly increasing production costs.) CFK did not justify the tax increases as revenue-generating measures, but rather as measures to hold down the price of food, to encourage crop diversification (the March 11 decree had increased taxes on soy & sunflowers but had lowered them on corn and wheat),and to foster income redistribution. CFK noted that ten years ago, soy accounted for 30% of land under cultivation. It now accounts for 45%. She claimed soy was much less labor intensive than other crops. ¶4. (U) The four agricultural organizations leading the campaign against the government responded by announcing that they will continue the strike until Wednesday, April 2, at which time they will again meet to decide whether to prolong the protest. They did decide, however that the strike should not affect dairy and other perishable products like fruits and vegetables, the supply of which has begun to falter in Argentine cities as a result of the lockout. In the face of the strike's continuation, the GoA has reportedly suspended exports of beef, raising the ante on this dispute. ...AND HER TROOP-RALLYING ONE -------------- ¶5. (SBU) CFK spoke again about the strike on the evening of April 1 to a huge (150,000, according to TV commentators) banner-waving crowd in historic Plaza de Mayo. This speech was much more defiant and strident than her March 31 remarks. She made no new announcements or promises, nor did she reiterate any of the arguments she made on March 31. She opened by claiming her opponents were hounding her because she was (1) "guilty" of winning a majority of the votes in a free, democratic election, and (2) because she is a woman (later in her speech she returned to the gender issue). "But I am proud of being both," she declared. ¶6. (U) CFK said Argentina over the last four and a half years had been enjoying unbroken economic growth, "unprecedented in the last hundred years."" She asserted she had a mandate from the people to pursue a more just and equitable society, and that her tax policies were about "social inclusion" and income distribution. She could not take on this task alone, and needed the people behind her. She noted that the March 24, 1976 coup had been preceded a month earlier by a similar lockout (implying, once again, that the objective of the current farm strike is to destabilize her government). She appealed several times to farmers to clear the roads. The massive crowd dispersed immediately afterwards, as a heavy rainstorm bore down on Buenos Aires. -------------- ARGENTINA'S DICHOTOMOUS PRODUCTION -------------- ¶7. (U) Argentina's agricultural sector is a highly diverse and efficient group of roughly 300,000 producers, ranging from small-holders to large producers in various segments of agricultural production (including beef cattle, dairy, grains and oilseeds, fruits and vegetables, sub-tropical crops, and many other minor crops). Each segment has disparate interests, depending on its size and type of production. ¶8. (SBU) The most recent official data showing a break out of the sector is from the Secretariat of Agriculture's Census of Agricultural in 2002. Undoubtedly, there have been changes since then, and there is little consensus on current figures due to the difficulty in determining exactly what constitutes small producers vs. medium producers, etc. This difficulty exists because scales of production efficiency vary widely across Argentina's agricultural regions. Nevertheless, it is estimated that in Buenos Aires, Santa Fe, La Pampa, Entre Rios, and Cordoba -- which are the most important agricultural provinces with respect to grain and oilseeds production -- there are approximately 129,000 small- to medium-sized producers (producing on less than 2,500 hectares),which represent 96 percent of farmers in those provinces. Despite the government's rhetoric about "oligarchs" calling the shots in the Argentine countryside, it is estimated that there are only 15 producers in those provinces who farm more than 50,000 hectares. Post estimates that approximately 10-15 percent of total grains and oilseeds production is produced by extremely large producers with more than 50,000 hectares. Although official government figures estimate that roughly 2,000 agricultural entities produce about 80 percent of the soybean crop, that figure is contested by local experts. Post contacts at the Argentine Soybean Growers Association believe that there is much less concentration of production than what is stated by the government. Approximately 70 percent of crop production in Argentina is carried out on rented lands. -------------- FOUR AGRICULTURAL ENTITIES -------------- ¶9. (U) The following four entities are the most important local rural organizations which have been organizing support for the agricultural strike: -- Sociedad Rural Argentina (SRA): Founded in 1866 by large cattle producers. A large portion of its current 10,000 members include medium- to large-scale milk and crop producers. Its president, Luciano Miguens, has generally been considered to be the most "flexible" of the four presidents in trying to reach agreements with the government. However, during this crisis, he has continued to support demands that the GoA suspend the recent increase in export taxes. -- Confederaciones Rurales Argentinas (CRA): Founded in 1943, it currently has 110,000 members of all sizes involved in the gamut of agricultural activities. They are distributed in 310 groups which form 13 confederations. Mario Llambias, the current president, is considered one of the most "combative" of the presidents of the four agrarian groups. CRA also demands suspension of the recent export tariff increases. -- Confederacion Intercooperativa Agropecuaria (Coninagro): Founded in 1953, it includes more than 100,000 members and 500 local agricultural cooperatives which market approximately 20 percent of the country's total crop production. Coninagro also includes producers of secondary agricultural products, including rice, cotton, tobacco, and tea. Fernando Gioino, its current president, is considered a moderate negotiator. Coninagro is interested in expediting a resolution favorable to small- and medium-sized producers of crops, beef and dairy products. -- Federacion Agraria Argentina (FAA): Founded in 1912, it has over 100,000 members and represents small and medium producers throughout the country. Eduardo Buzzi, its current president, is considered aggressively combative. Until 2006, he maintained a close relationship with the GoA, but since that time, FAA has been one of the most outspoken of the four agrarian groups. FAA demands the suspension of recent export tariff increases (at least for small and medium producers) and wants to expand dialogue with the GoA to resolve pending issues concerning dairy, beef, wheat, and other agricultural activities. ¶10. (U) Historically, these four entities have had disparate interests and have seldom come together as a single political voice for the agricultural sector as a whole. Despite growing discontent by the entire agricultural sector in recent years, there has been no single event that persuaded different segments of producers to overlook their particular group's short-term interests in favor of making a united front against government intervention in the sector - until now. ¶11. (U) As a result of the recent crisis, these four groups have formed the "Comision de Enlace de Entidades Agropecuarias" (Rural Organizations Liaison Commission) which is demanding: cancellation of the recent sliding export tax regime; a long-term GoA commitment to increase domestic cattle production; a freeing of the export controls for high value beef cuts that are not of high domestic demand; a reduction of export taxes on dairy; normalization of the wheat market with full prices (before deduction of export taxes) paid to producers; and to more clearly differentiate and define small and medium producers from the large pools of production. ¶12. (U) In addition to the four groups above, a new agricultural voice has emerged out of this crisis which is being referred to as "Self-Convoked Participants" (autoconvocados). They are not members of the traditional organizations mentioned above, but rather are mainly producers, families, traders, students, and others who are directly impacted by lower rural profitability. Most of them are protesting on the highways and in towns of the most important crop producing provinces (Buenos Aires, Santa Fe, Cordoba, Entre Rios, Chaco and Santiago del Estero),but have also been represented in large cities like Buenos Aires, Rosario and Cordoba. "Self-Convoked Participants" make decisions based on their own judgment and situation, but do listen to what the Rural Organizations Commission has to say. -------------- COMMENTS -------------- ¶13. (SBU) The agricultural sector was instrumental in helping Argentina emerge from its 2001/02 financial crisis. Initially, the sector accepted the GoA's "redistribution" of its rural income via export taxes resurrected "temporarily" in 2002 as necessary to help the country regain its economic footing. However, after five years of strong GDP growth, the agricultural sector feels disproportionately burdened by a combination of restrictions and outright bans on beef, dairy, and some grains (to keep domestic consumer prices in check) and by successive increases in export taxes. The Kirchners' roots are in the Peronist movement, historically considered to be hostile to the agricultural sector and obsessed with Argentina's industrialization. The simmering antagonism of the agricultural sector occasionally flares up, as it did in August when Agriculture Secretary Urquiza stormed out of the opening session of the country's biggest agricultural fair after SRA President Migens publicly criticized GoA agricultural policy and spectators unveiled critical posters. The recent change in tax policy announced on March 12 was the "last straw" for the sector, generating the first sector-wide front against the Kirchner government's intervention. ¶14. (SBU) The Argentine agricultural community has evolved considerably over the past fifteen years, and technology has played a major role in that change. While producers have historically been autonomously scattered across the country, facilitating their exploitation by the central government, satellite TV, cellular telephones, and the Internet have brought producers together as never before. New communications technology have allowed agrarian producers to better coordinate their actions and respond in real time to the recent policy decision in a way that has to date frustrated GoA attempts to undermine the strike. The Kirchner administration's current efforts to break solidarity between the various segments in the agricultural sector (namely, small vs. large producers) has met a new-found solidarity never before encountered. Despite the ongoing strike and uncertain outcome, the agricultural sector as a whole has gained a political voice that marks the limit of the Kirchner administration's ability to extract resources from the sector to finance its agenda. END COMMENT. WAYNE