The Kirchners v the farmers
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Expat Village is edited and published by
Iain Williams in Caracas and Porlamar, Margarita Island, Venezuela.
An Economist article at http://www.economist.com
CLANK, clunk, clank, clunk. The sound of a cacerolazo—Argentina's signature style of protest, in which people pour into the streets banging pots and pans—had not been heard in Buenos Aires since the depths of the country's economic collapse in 2002.
Yet on March 25th, after five years of breakneck economic growth that has left the slump a distant memory, the steady clanging of kitchenware returned to Argentina's main cities.
The target was the country's president, Cristina Fernández de Kirchner. Barely three months after taking office, she has provoked a conflict with Argentina's farmers which has blossomed into her government's first real domestic political test. Ms Fernández was elected last year only after her husband, Néstor Kirchner, chose not to stand for a second term.
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| The countryside's beef about export taxes becomes the new government's first political test |
To support her campaign, Mr Kirchner ramped up spending on pensions and public works. The new government is seeking to restore the fiscal surplus to rein in the resulting inflation. So it has raised the already steep export taxes it levies on most agricultural commodities. The rate on soyabeans, to take the most extreme example, has been hoisted to 40%, up from 27% last year.
Argentina's farmers have hit back with a campaign of strikes and roadblocks across the country. They launched similar protests under Mr Kirchner. But this time they seem more determined. They have vowed to continue until the taxes are cut. Some foodstuffs are running short: the meat racks in one supermarket in Palermo, a fashionable neighbourhood of Buenos Aires, are all but bare.
The government has refused to negotiate while the strike continues. “I won't give in to extortion,” Ms Fernández said in a speech this week. Comparing the farmers' protest to those during the economic collapse, she added: “In 2001, there were roadblocks of misery.
This last weekend we saw the other side, roadblocks of plenty.” That prompted some 10,000 pot-banging protestors to descend on the Plaza de Mayo, the square in front of the presidential palace, with smaller demonstrations popping up across the country.
Resolving the dispute will not be easy. Farmers' leaders say they cannot afford to back down. Because the government charges income tax on top of the export levies, around 44% of the revenues from soyabean sales will now wind up in the state's coffers. Planting, harvest, transport and the cost of land eat up another 50%, leaving just six cents on the dollar in profits, farmers say. For the many smaller-scale farmers the tax rise means a big drop in their income; if crops fail, some would go out of business.
Moreover, because of high soyabean prices, vast tracts of land in the country's north-east that were traditionally unused have been brought into cultivation in recent years. The tax rise would lead to some 2m hectares (5m acres) being left idle next year, reckons Pablo Adreani, an agricultural consultant.
Some producers are already cutting back: Alexis de Noailles, who runs Rincón de Chillar, a large farming company, says the new policy caused him to stop work on a new milk factory, costing ten families their jobs.
But it is hard for Ms Fernández to climb down. Her Peronist movement has long demonised the farming industry as a relic of Argentina's oligarchical past. She is relying on fiscal policy to restrain inflation: her central banker, Martín Redrado, says that monetary policy has little impact in Argentina, since bank credit has yet to rebound much since disappearing in 2001.
That points to stalemate. Ms Fernández has unleashed a more formidable opposition than her husband ever faced: an impromptu alliance between the farmers and the urban middle class. Some previously loyal provincial officials are rebelling: the governor of Córdoba province urged the president to start talks. Yet the Kirchners' political grip on the populous poorer suburbs of Buenos Aires remains as strong as ever. Sympathy for the farmers could quickly fray if the conflict drags on. Argentines lead the world in beef consumption, and they would not appreciate a long interruption of their traditional asado barbecues.
Farmers insist that the government has left them with no choice. Mr de Noailles predicts that the farmers are capable of leaving the cities without meat for up to two months. “It's tough to say how people will react,” he says. “Will they say it's our fault or the government's? But you can't ruin people's lives like this. If they don't back down, Buenos Aires will starve.”
Expat Village is edited and published by
Iain Williams in Caracas and Porlamar, Margarita Island, Venezuela.
Copyright 2003 by Expat-Village.com
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