Identifier
Created
Classification
Origin
08BUENOSAIRES834
2008-06-18 18:12:00
CONFIDENTIAL
Embassy Buenos Aires
Cable title:  

ARGENTINA: FARM DEBATE(?) MOVES TO CONGRESS

Tags:  PGOV EAGR ECON EFIN INVI AR 
pdf how-to read a cable
VZCZCXYZ0000
OO RUEHWEB

DE RUEHBU #0834/01 1701812
ZNY CCCCC ZZH
O 181812Z JUN 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1363
INFO RUCNMER/MERCOSUR COLLECTIVE IMMEDIATE
RUEAIIA/CIA WASHINGTON DC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RHEFDIA/DIA WASHINGTON DC IMMEDIATE
RHMFISS/HQ USSOUTHCOM MIAMI FL IMMEDIATE
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC IMMEDIATE
C O N F I D E N T I A L BUENOS AIRES 000834 

SIPDIS

E.O. 12958: DECL: 06/18/2028
TAGS: PGOV EAGR ECON EFIN INVI AR
SUBJECT: ARGENTINA: FARM DEBATE(?) MOVES TO CONGRESS

REF: A. BUENOS AIRES 803

B. BUENOS AIRES 797 AND PREVIOUS

Classified By: E. Anthony Wayne for reasons 1.4(b)and(d)

C O N F I D E N T I A L BUENOS AIRES 000834

SIPDIS

E.O. 12958: DECL: 06/18/2028
TAGS: PGOV EAGR ECON EFIN INVI AR
SUBJECT: ARGENTINA: FARM DEBATE(?) MOVES TO CONGRESS

REF: A. BUENOS AIRES 803

B. BUENOS AIRES 797 AND PREVIOUS

Classified By: E. Anthony Wayne for reasons 1.4(b)and(d)


1. (C) Summary: President Fernandez de Kirchner (CFK) took a
step back from the precipice on June 17 and bought herself
some breathing room in the 100-day old farm crisis by
announcing she was sending the question of the sliding scale
of export taxes ("retenciones") as a bill to congress for
debate and vote. The Casa Rosada is counting on its
comfortable majority in both houses of congress, and party
discipline, to assure the bill is passed with no changes or
amendments. The government has not backed down on the
question (or amount) of the sliding export taxes and,
therefore, not likely to satisfy the farm groups,
particularly if the bill is seen to be pushed through the
Congress with little or no debate and no chance for
modification. Farm representatives and opposition
politicians received the news as generally positive but are
leery of the government's intentions. Much pressure now
falls squarely on the shoulders of the Peronist party and
allied legislators -- many of whom have large rural
constituencies. Early analysis assumes that the government's
numbers and discipline will hold and the bill will pass, but
the force of public opinion is hard to gauge and anticipate.
The lower house's Agriculture, Budget, and Finance and
Commerce Commissions will begin studying the bill next week.
Farm groups are meeting June 18 to decide whether to end or
extend their strike, currently scheduled to end at midnight.
The pro-government rally, also scheduled for June 18 in the
Plaza de Mayo, will go forward as planned but is now being
billed by the government and former president Nestor Kirchner
as a rally for all Argentines in support of democracy. Some
important Peronist leaders are likely to be absent as an
indication of their open displeasure with the Kirchners'
(mis)management of the farm crisis. In making her
announcement, it is clear that CFK was very aware of the
growing dissension in Peronist ranks and popular outcry. The
decision to submit the issue to the legislature for a

decision is also a sign that the more moderates in the Casa
Rosada, e.g. CFK herself, Cabinet Chief Alberto Fernandez and
Legal Advisor Carlos Zannini have, at least temporarily, held
sway. An end to the conflict, however, is not yet in sight.
End Summary.

--------------
A STEP BACK FROM THE PRECIPICE
--------------


2. (C) In what could prove an important step in diffusing the
100-day old farm crisis, President Fernandez de Kirchner
(CFK) announced on June 17 that she would send a bill on the
question of the increased agricultural export taxes
("retenciones") for debate and vote that same evening to the
legislature. This move, she stated, is in direct response to
a request by the farm sector in its meetings with the GoA.
The draft legislation, however, does nothing to rollback or
reduce the increased export fees implemented on March 11,
which are at the root of the crisis. It nevertheless does
address the demands of many that the issue be decided by the
congress and has served to relieve, at least temporarily, the
building tension between the Casa Rosada and the farm groups
and truckers blocking highways, to quell some of the growing
dissension in the Peronist party on the other, and apparently
to diffuse some of the popular discontent that sent many
thousands into city streets last Sunday and Monday nights.
Some road blockages are likely to continue in the short term
as they are not controlled by any one group, and, even if the
roads clear, it will take some time for deliveries to return
to normal since producers are likely to delay grain sales as
long as possible.

--------------
REACTIONS
--------------


3. (SBU) Reaction from the farmers and opposition politicians
has been guardedly positive, although all
express skepticism over the government's intentions.
Minister of Justice and Security Anibal Fernandez stated on
June 17, that the legislature cannot amend or change the
draft legislation and must either vote it up or down, for
example. Opposition legislators generally welcomed the
government's measure as a victory of constitutional
governance but were critical that the GoA had delayed so long
in sending the matter to congress. They are also calling for
a full debate (implying the ability to amend or modify the
bill) but they do not have the numbers to overrule the Casa
Rosada's majority, if party discipline holds. They are also
calling for the legislature to convoke the farm sector for
consultations and input. Some Peronist legislators are also
calling for a full debate. Salta Senator Romero, a Senate VP
and no fan of the Kirchners, is arguing the legislature can
invite many experts to share views on the export taxes, for
example.

--------------
THE PROCESS
--------------


4. (SBU) The bill, submitted to the lower house on June 17 by
Vice President and President of the Senate Julio Cobos, will
follow normal, if expedited, procedures. Next week, the
Agriculture, Budget, and Finance and Commerce Commissions
will begin studying the bill. The house leadership could
call for a joint commission meeting to accelerate the process
through the issuance of a joint recommendation. The
government has been careful to call the export "retenciones"
"fees" rather than taxes. This is key to the government's
strategy. By considering the increased levies on agriculture
exports as fees, the government maintains control of their
collection and disposition. If they are considered taxes,
then they become the purview of the congress to legislate,
and are therefore subject to "co-participation" with the
provinces, which uses an established formula to distribute
the raised revenues to the provinces. In articles 3, 4 and 5
of the draft legislation, the government anticipates the
creation of a Social Redistribution Fund to distribute
collected fees: 60 percent for the construction of hospitals
and clinics; 20 percent for public housing; and 20 percent
for rural roads. With favorable votes in those commissions,
the bill will move to the floor for debate, where the
government's majority can approve it with a simple majority.

--------------
FISSURES IN THE RANKS
--------------


5. (SBU) The GoA's measure follows on a long holiday weekend
that witnessed a marked escalation in
confrontations, tension and anxiety in Argentina. The
temporary arrest on June 14 of vocal farm leader Alfredo De
Angeli and other farm protestors -- covered widely on TV and
radio -- resulted in large, spontaneous demonstrations
throughout Argentina's major urban centers -- including in
the Plaza de Mayo and in front of the suburban official
residence in Olivos. Protestors voiced as much their
disapproval of the GoA's hardline tactics and refusal to
negotiate as support for the farm cause. Once again,
administration shock troops (friendly piquetero and union
groups) mobilized to "retake" the streets, this time joined
by Nestor Kirchner and senior GoA ministers in a raucous and
off-putting show of support for the government. During the
demonstration, vocal piquetero leader Luis D'Elia called for
a pro-government rally on June 18, with Nestor Kirchner
exhorting the faithful to "flood" the Plaza de
Mayo. D'Elia told Argentines to "arm themselves" in support
of the constitution. (D'Elia later walked back from the
latter comment.) On June 16, D'Elia added fuel to the fire by
claiming that former president and BA governor Eduardo
Duhalde and other PJ dissidents were trying to organize a
coup d'etat. Subsequently, even larger spontaneous
demonstrations broke out on the evening of June 16 (a
national holiday commemorating Flag Day). Unlike earlier
public protests in Buenos Aires, where largely middle and
upper-middle class Argentines took their pots and pans to the
streets, this time the protests included some of the lower
middle class sections of the greater Buenos Aires area. This
was a clear signal of growing popular discontent with the
Kirchner's handling of the conflict.


6. (C) The Kirchners' continued hardline approach to the
100-day farm crisis, while appealing to one core constituency
and alienating another, has increasingly brought to the fore
fissures among Peronists and in the GoA's governing
coalition. A number of Senior PJ figures, legislators and
governors, including Senator Carlos Reutemann and governors
Juan Schiaretti, Mario Das Neves and former governors Felipe
Sola and Eduardo Duhalde were openly calling for dialogue.
There is a general anxiety among Argentines and some analysts
that the dynamics of the situation were spiraling out of
control and shortages of some foodstuff and other consumer
goods, particularly fuel, were beginning to be felt in
specific areas. Some PJ luminaries, PJ mayors in the greater
Buenos Aires area, and even the pro-government union
confederation CGT, alarmed by the ex-president's combative
tone, had quietly called for the Casa Rosada to cancel the
rally. Vice President Cobos issued a call for dialogue on
Saturday and Radical party politicians who had followed him
into the pro-government coalition quickly rallied to his
words. We are told that in the Casa Rosada, President
Christina Fernandez De Kirchner and advisors Alberto
Fernandez and Carlos Zannini met Sunday and on the Monday
holiday to consider the plan to send the issue to congress
and to take a more moderate tone. We are also told that
Nestor Kirchner was pressured into giving his press
conference on June 17 in which he took a somewhat more
moderate line and sought to distance himself from D'Elia's
incendiary statements over the holiday weekend.


7. (C) Comment: The decision to send the measure to congress
has helped to alleviate the building tension and appears to
be a positive move by the government, if perhaps 90 days
late. Although the decision will not likely satisfy the
farmers on the issue of the increased export fees, it does
shift the debate (and responsibility) to the congress, where
it probably properly belonged. With the Kirchners'
majorities in both houses, however, the field is still tilted
in the government's favor. The government will,
nevertheless, have to work to ensure that members of its
majority do not break ranks, since legislators from rural
areas will come under heavy pressure from their neighbors,
and may have to choose between the government and being able
to return home during the next few months. It also helps
take some of the air out of the opposition's and farmers'
complaints of the Kirchners' authoritarian style. If the
government also decides to move some of the other pending
farm legislation in congress, such as the bill to
re-establish a government-controlled grains export board, the
farmers ire will again be inflamed.


8. (C) The upcoming debate and vote in the Congress will be
the first real test of the Kirchner's ability to maintain
party discipline on a domestically controversial issue. In
the First Couple's unwillingness to yield, some believe the
Kirchners' may have expended too much political capital
losing the public, party, and coalition support that they
have built up by careful use of government funds and have
commanded for the last several years. Some analysts argue
that the Kirchners may not be able to paper over all of the
differences this issue has caused within the party and
coalition. However, the government calculates that it is
risking little, and is assuming its numbers in congress will
hold. This issue, however, is not likely over. If the
legislation supporting the increased export fees passes as
is, it makes sense that the farmers and opposition will
challenge the constitutionality of the measures on a number
of grounds. Already the Supreme Court has decided to hear a
case brought by San Luis Governor Rodriguez Saa, who argues
the fees are, in fact, taxes and therefore subject to
co-participation, and the Farm groups have vowed to file more
cases. For its part, the government continues to issue new
farm regulations and undertake regulatory investigations
aimed at complicating farmers lives. The spirit of peace is
not yet in the air.
WAYNE