July 20, 2009

Newly invigorated after the election setback suffered by Argentine President Cristina Fernandez, farm groups are leading a charge in the Congress for a major overhaul of agricultural policy.

 

The sector chafes at the high tax burden imposed on this key sector in the economy and farmers resent policies that keep domestic food prices low at their expense. With international commodity prices at historically high levels, the government has zeroed in on the windfall.

 

Those tensions culminated in a series of crippling strikes in 2008 to protest yet another tax plan. Farmers eventually prevailed that time, after the Senate narrowly voted down the plan thanks to the support of Vice President Julio Cobos.

 

The administration was weakened by results of the June 28 midterm Congressional vote, losing majorities in both houses of Congress. It has since tentatively sought to rebuild bridges with political rivals, including the important farm lobby.

 

Farmers claim to have secured the support of some 110 Lower House legislators, just shy of the 129 votes required to achieve the quorum needed to vote on legislation, but enough to turn them into a potent force. They may be able to lure in other opposition groups or discontented government supporters.

 

To capitalize on those gains, the farmers, known in Spanish as the countryside, or "Campo," are pushing for a quick vote to revoke special presidential powers which were used to impose the taxes. They also want to end government meddling in agricultural markets.

 

"Our hopes for relief for farmers are being born in the Congress again," Argentine Agrarian Federation President Eduardo Buzzi said Thursday after meeting with 20 opposition legislators to discuss tactics.

 

Even though the new congressmen and women will not take their seats until December, shifting alliances in the current House and Senate have provided an opportunity for opposition legislators to push for reform.

 

The first test will likely come later this month over the issue of the special executive powers, which were used unilaterally by President Fernandez and her predecessor, husband and former President Nestor Kirchner, to impose a variety of tax and customs duties.

 

They expire Aug. 24, and if they aren't renewed, Congress will take back its role of setting customs policy and taxes. That could lead to quick changes to the export tax schemes.

 

Nevertheless, with about US$11 billion in tax revenue at stake, a wholesale elimination of the export duties is unlikely. Instead, opposition politicians have talked about a gradual phase-out.

 

Representative-elect and former Agriculture Secretary Felipe Sola this week said the priority is to limit the powers of the agricultural trade office, or ONCCA, which acts as the government's controller for the sector and shuts down exports periodically to ensure domestic supply.

 

Export taxes also need to be lowered on wheat and corn to stimulate those crops and stop the wholesale shift to soybean production, Sola said. Because soy are irrelevant within Argentina's domestic food market, their production is subject to the least government interference, although it faces the highest taxes.

 

Export limits on beef, corn and wheat, as well as intervention to keep prices down for Argentines, will lead to well over half of all cultivated land going to soy this season, according to analysts.