FARM STRIKE RESUMES IN ARGENTINA

UNCLAS BUENOS AIRES 000615 STATE FOR ECON WHA/BSC USDA FOR FAS/OA/OSTA/OCRA/ONA/OGA/OTP/OCBD/OAO/OFSO MERCOSUR COLLECTIVE SIPDIS SENSITIVE E.O. 12958: N/A TAGS: EAGR ECON EINV PGOV ELAB PHUM AR SUBJECT: FARM STRIKE RESUMES IN ARGENTINA REF: Buenos Aires 0592 and previous -------------- Summary -------------- ¶1. (U) Farm groups announced late on May 7 that they will resume the farm strike due to the GoA's refusal to discuss making any changes to the variable export tax regime. The farm groups will continue protests for the next 8 days (through May 15),when they will meet again to discuss their next steps. The strikers say they will focus during this period on blocking export of grains and oilseeds, which prevents the GoA from collecting the associated tax, and on seeking the political support of provincial governors and mayors. Some local farm groups also announced "selective" road blocks around the country. Press reports indicate that Cabinet Chief Alberto Fernandez admitted to the error of export taxes increases, only to repudiate his statements at the command of former president Nestor Kirchner later the same day. The apparent "miscommunication" is further evidence of a widely rumored divide in the administration, and fuels rumors that Fernandez could be replaced on May 25. Fernandez's departure would pose serious challenges for future negotiations, as he is the GoA decision-maker with the greatest openness to dialogue. It would also have much wider implications as Fernendez is seen as the chief "moderate" voice in the government. End Summary ¶2. (U) Farm groups negotiating with the GOA announced on May 7 that they were resuming the farm strike that caused major disruptions in Argentina during March. They are, however, changing the form of protest to avoid disrupting food supplies to the major cities and other commerce, as occurred during the last strike. The farm leaders asked local producer groups to protest on the sides of the road and not block food shipments or other traffic. They are also asking producers to stop marketing grains and oilseeds for export during the protest so that the GOA cannot collect the export tax. ¶3. (SBU) The decision on any additional measures beyond refusing to sell grains and oilseeds during the strike was left to local protest groups. The most prominent protest group in Entre Rios province, led by charismatic strike leader Alfredo De Angeli, has already announced that they will block trucks carrying grains and oilseeds, as well as trucks moving international trade with Brazil and Uruguay. Elsewhere, local farmer farm groups have announced additional "selective" road blocks. The Gendarmeria and National Police are clearly concerned about being put in a position of having to confront striking producers, who have the widespread sympathy of the rural public and even in the security forces. ¶4. (SBU) Resumption of the farm strike came after meetings on May 7, in which the GoA continued its refusal to discuss any changes to the variable export tax. This variable tax at the heart of the dispute was introduced on March 11 and initially increased the export tax on soybeans to 44% (the tax varies as export prices go up or down) from a previous fixed rate of 35%. The GOA has consistently refused to discuss the variable export tax regime with farm groups, despite indications in recent days that the GOA was considering some modifications. (We understand confidential talks had identified possible modifications several weeks ago but that ex-president Nestor Kirchner had rejected them. ¶5. (SBU) The failure of the GOA to implement the few agreements reached during the truce in the strike was also a factor in its resumption. The GoA agreed in discussions during April to reopen exports of beef and wheat. Despite these agreements, the GoA continues to restrict exports to guarantee lower domestic prices. In the case of beef, the most recent measures implemented by the GoA actually increases its control over beef exports. ¶6. (SBU) Contacts in the grain industry indicate that they have port storage facilities filled to the maximum. The farm strike in March caught them off guard, and they were forced to suspend soybean processing and exports at the start of the harvest season. The decision to block marketing of grains and oilseeds for export was widely expected and they used the truce in the farm strike to fill their storage facilities to the maximum. The soybean production in storage should allow them to continue soybean processing (crushing) up to 30 days before having to shut down their export operations. Soybeans and soybean products are Argentina's largest export good. ¶7. (SBU) The farm groups reiterated on numerous occasions that they are not seeking a confrontation with the public and do not want to disrupt food supplies. They have also expressed a strong desire to reach a negotiated agreement with the GoA, despite its hard-line position. In an effort to gain allies, the farm groups will meet with provincial governors and mayors to seek their political support during the next week. -------------- Comment -------------- ¶8. (SBU) It appears that the hard-line position espoused by former president Nestor Kirchner (NK) has carried the day in the GoA's negotiations with the farm sector. If anything, the GoA's regulatory grip on the farm sector is now greater than at the start of the strike due to additional controls on the beef sector to prevent supply shortages during the dispute. The former president is widely quoted as expressing a desire to "bring the farm sector to its knees." Local press reports that rural representatives allege Cabinet Chief Alberto Fernandez admitted to the error of export taxes increases, but later the same day retracted the statement at NK's command after NK saw initial press stories about it. The apparent reversal is further evidence of the widely rumored divide in the administration, a battle the hard-liners seem to be winning and one that fuels rumors Fernandez will be replaced on May 25. Local commentators are writing that Nestor Kirchner wants to force the ag sector to strike and cause food shortages so they will lose public support and increase support for firm government actions. This strategy or the departure of Alberto Fernandez would pose serious challenges for future negotiations. Alberto Fernandez is widely seen the senior person in the GoA with the greatest openness to dialogue. In general, Fernandez has been seen the leading voice for moderation among senior official on a range of issues. Local contacts have expressed amazement that the GoA has managed to turn the bonanza of high world prices for Argentina's agricultural exports into a major political and economic crisis. END COMMENT WAYNE