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Analysis

Critics Contend that Argentine Farmers' Grain and Meat Export Strike Wrongfully Blamed by President for Government's Irresponsible Mismanagement of Economic Policy

By Maggie Airriess, Research associate, Council on Hemispheric Affairs, June 13, 2008

Demonstrators hold a banner reading "Hunger" during a march in support of the farmers in downtown Buenos Aires, on May 29. (Photo: Daniel Garcia / AFP-Getty Images)

Argentina's president Christina Fernandez de Kirchner, wife of ex-president Nestor Kirchner and now the nation's leader, has drawn many comparisons to now former presidential candidate Hillary Clinton throughout her political career. As a result of her popularity as first lady and later as an influential senator, Fernandez even earned the nickname "the Latin Hillary."

Similarly, as Clinton's run for the nomination came to an end, Fernandez's popularity has also spiraled downward, falling from 51 percent to 21 percent in the last two months and after only six months in office. Although scoffed at by government enthusiasts, this sharp decline can be directly linked to a building inflation crisis. Most recently, some of these problems have surfaced in the ongoing farmers' strike that began with roadblocks to protest steep increases in export taxes and has since received substantial public support highlighted by nationwide demonstrations against the government.

On June 4, the farmers' were joined by grain-transporters, who have been without work since the farmers' strike began. The truckers' counter-strike eventually triggered protests between the two. The heightened tension eventually led the farmers to postpone their strike on June 9, deeming they had little choice. Although the majority of farmers have halted their protests against the government, some farmers remain on the picket lines as leaders warn that they will resume protests in a day or two if negotiations with the government show no development.

The farmers' strike began in early March in response to increases in export tariffs on grain and meat from 33 to 44.1 percent, the highest in Argentine history. Protestors like farmer Roberto Bunge argue, "Nowhere in the world are income taxes as high as they are in Argentina, and farmers are fed up" (The New York Times, "Farmers Cut off Exports," May 9). A week earlier the farmers temporarily halted the strikes when the president agreed to negotiations. She has since cancelled each scheduled meeting. Mario Llambias, head of the Argentine Rural Confederation, stated that the government's refusal to hold dialogue has continuously forced the confederation to resume protests to increase pressure on the government.

There's Only One President of Argentina

Fernandez repeatedly has declared that inflation has been exaggerated by outside observers and blamed "oligarch" farmers for this embellishment in order to pressure her policies and throw her out of office. As Fernandez proclaimed in a rally on May 25,"I'm not going to submit to extortion. I understand the industry's interests, but I want them to know that I'm the president of all Argentines" (The New York Times, "Farmers' Strike is Suspended for Negotiations," April 3).

Fernandez maintains that the increase in taxes is justifiable since the agricultural sector is presently Argentina's most affluent area. "It is the sector that exports almost everything. About 95 percent of soybeans are exported. They're not exported in Argentine pesos, but in euros, in dollars. But the costs are Argentine costs," she stated (CNN, "Shelves Grow Bare as Argentine Farmers Continue Strike," March 26). Fernandez adds that the tax increases will help redistribute wealth in a country where nearly a quarter of the people are poor.

Her critics argue that the government is stealing money from the agro-sector to remedy its imposition of production and export taxes in order to prevent high food prices at home. Llambias maintains that the tax revenues go directly to the central government and not to the provinces where the farmers are located. As a result of government demands, "practically half" of the final price of a given commodity can be attributed to taxes.

National Food Shortages

The farmers' boycott has left its mark on supermarkets throughout the country, resulting in deficits of both exported and imported goods. National food shortages have triggered some of the largest anti-government protests since 2001 when the country's economic meltdown occurred.

The export tax on soybeans, sunflower seeds, corn and beef, valued at $24 billion, has prompted road blockades against food trucks traveling on major roadways. Farmers have also threatened to delay the transportation of cattle to slaughterhouses if the government continues to ignore their demands.

With all major export sites blocked in rural areas, key markets for Argentina's agricultural commodities, such as China and Europe, have been cut off from their usual food chain, leading to increased inflation.

Economic Discrepancies and Public Controversies

The Kirchners are not used to facing opposition to their policies and many Argentines see the strike as a public reaction to Fernandez's efforts to minimize inflation, control economic data, and her failure to appear at scheduled negotiations.

Although global prices for important Argentine exports such as soy and beef have risen in recent months, many economists believe that the implementation of short-term revenue excess from import levies will only stir inflation. The government struggles with external debt, as it continues its reports of low "official" inflation figures because repayment of borrowed bonds is based on the level of inflation. The Latin America Economonitor, the International Monetary Fund, and C.F.A. Institute Financial News report stark differences between the "official" consumer inflation rate, now at 8.9 percent, and the "true, un-edited" inflation rate that is more than 25 percent and increasing.

The government has continued to mislead the public about inflation in order to resume repaying their bonds while at the same time hiding the possible slow default on debt bonds. Recent Argentine history has proven that this is an inefficient way to control debt because it distorts the perception of actual inflation levels and has led to severe economic crises, like that of 2001.

The business and agricultural sectors, as well as the media and general public, strongly believe inflation is related to the foreign loans contracted by the regime. The Argentine National Institute of Statistics and Censuses (INDEC), which once staffed reliable professional personnel independent from government manipulation, has now taken to publicizing inflation rates that were deemed unreliable after numerous inconsistencies emerged between the government's economic evaluations and those issued by the INEDC. Shortly after, a number of INEDC directors resigned, stating that the government was not publicizing true rates with political appointees now running the statistical agency rather than top professionals.

Further controversy emerged after Argentina's economic minister, Martin Lousteau, resigned in early April over the disputed agricultural export taxes. Lousteau stated that he did not agree with the Kirchners' policies regarding inflation. The former economic minister had proposed a program to stabilize the economy and slow inflation, including changes to a number of policy practices introduced by the Fernandez regime. The modifications included a rise in utilities tariffs for higher-income sectors, an end to outside intervention in the INEDC, an increase in interest rates, a reduction in export taxes on corn and other products, and an agreement on domestic market supplies with livestock producers that would allow for the free export of any excess products. With the resignation of Lousteau, the government decided against any new proposals.

The rejection of Lousteau's proposals highlights the government's reluctance to try new alternatives to her policies. Fernandez, for her part, repeatedly refuses to repeal the new taxes because they keep local food cheap for Argentine consumers by confining farm products within Argentina. Fernandez argues that her first concern as president is the wellbeing of the people, not the already well-off farmers union.

In addition to the numerous business advisors who continue to express the realities of the mistakes of the administration, resentment on the part of some Argentines still exists toward the regime ever since Christina took office after her husband's divisive reign. In particular, Kirchner's relationship with Venezuelan President Hugo Chavez and the infamous "suitcase money scandal" persists in the public image. In August 2007, a Venezuelan businessman, Guido Wilson, was caught trying to sneak nearly $800,000 from Caracas to Buenos Aires on a plane licensed by the Argentine government's national energy company. The plane was also carrying three Argentine government officials and four executives from the state-owned Venezuelan oil company.

Although both Chavez and the Kirchners denied having any ties to the money, news reports and the investigating judge said the money appears to have been destined for presidential candidate Fernandez de Kirchner. Others, however, maintain that the Kirchners needed no outside funds to run a race that Fernandez was sure to win. Also, President Nestor Kirchner stated that the amount of publicity surrounding the supposed scandal arose from President Bush's fear of two outside powers gaining more world control. He added that the only relations between Venezuela and Argentina deal with Chavez's agreement to "refinance billions of Argentina's debt through a series of bond purchases," as well as a future natural gas deal, neither of which are illegal transactions.

Where Are the Fat Cats?

Leading agricultural organizations, all members of the Argentine Agricultural Federation (F.A.A.), maintain that the extra taxes pushed for by the government, on top of the existing income taxes and unusually high transport and land costs, will bankrupt many farmers. According to Latin News, Interior Minister Florencio Randazzo, falsely depicted the farmers represented by the F.A.A. as greedy "fat cats" wealthy enough to maintain a 90-day strike. In reality, this declaration refers mostly to the wealthy corporate interests who are spoken for by the F.A.A. and ignores many smaller-scale farmers who are fighting for rural business.

As declared at a protest by Movimiento Campesino de Córdoba on May 25, "while many of these organizations have the security to reclaim enough money to continue renovation on their trucks year after year, and add more and more property estate, the real countryside and the marginalized cities fight for survival" (Radio Mundial, "La F.A.A. no Dice que sus Afiliados Desalojan Campesinos," March 27). Although the rural workers are cooperating with the four major agricultural federations who represent mainly upscale members of the movement, their situation is much more pressing because they are fighting for survival rather than for higher markups.

As the government continues to refuse to negotiate until the strike is called off, agricultural organizations have carried on with their efforts to keep both rural and urban Argentines on their side by portraying the president as a conflictive, authoritarian, un-cooperative leader who has mishandled the economy. Said Ricardo Gomez, a farmer from Cordoba, "Cristina projected the promise that she could continue to provide the economic bonanza while distancing herself from Kirchner's authoritarian streak, but she turned out to be even tougher than her husband" (Time Magazine, "A Meltdown for Argentine's Hillary," June 2).

Where Has All the Support Gone?

Many Argentines have opted in favor of the farmers because they find the type of support the Fernandez government has received to be somewhat debatable. Many of her supporters belong to the lowest classes of the inner districts of Buenos Aires, the poor neighborhoods that are also the most immediately and directly affected by the surge in food prices due to the farmer strike. It has been questioned if the government's most fervent supporters are actually in favor of its decisions, or if they are only blaming the farmers for the food shortages they are directly suffering.

Fernandez's strongest supporters have participated against the caceralazos, a form of protest in which a group makes noises by banging pots and pans in protest or in favor of government policies. In the capital, where government approval appears surprisingly weak, many of its supporters, including Luis D'Elia, have been accused of being sent by the authorities to violently counter the farmers' protests. D'Elia led such a violent reaction against a gathering of caceralazos in the Plaza de Mayo in early May. Thus, he has been dubbed el piquetero oficial—a protestor with the government's approval—by the local media and the public. Although D'Elia has denied that he was directly sent by the government to be an agitator at public protests, Fernandez did invite him to sit behind her during several televised speeches and rallies in support of her policies.

Check Your Ego at the Door

Although the conflict between strikers and the government appears to be due to a difference in class interests, the real question is the government's failure to effectively deal with Argentina's inflation problem. It is the government's obligation to deal with inflation both honestly and urgently. Instead, Fernandez appears to have stonewalled the issue and hidden the real statistics involved.

The president obviously doesn't take into account the fact that hundreds of thousands of Argentines are daily facing food shortages, which can be traced to her policies. While some of the blame can undeniably be placed at the hands of the powerful farmer lobby and their stringent protests that blocked food transport, they are the only ones calling for negotiations with no response from the government. As the strikes were worsened and food shortages deepened, Fernandez decided to take a weeklong trip to Rome for a United Nations conference on the world food crisis, instead of concerning herself with immediate food shortages in her own country.

At times like these, the president more than anyone needs to invoke negotiations to resolve outstanding disputes. Although the dilemma in Argentina may relate to a world problem, her detractors say that Fernandez's first priority should be negotiating the resolution of divisive issues in her own country, let alone paying attention to the numerous economic advisors surrounding her who are calling for financial reforms. Her failed actions mirror those of her predecessors in the 1980's, which should be a lesson about the terrible menace posed by inflation. With the remnants of the 2001 economic crisis still present in the atmosphere, the government could be making a serious mistake in not addressing inflation effectively and speaking to its people.

From the Council on Hemispheric Affairs.

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