August 7, 2008

 

Argentina government puts higher crop export taxes on hold

   

Argentina's government has suspended plans to raise grain export taxes, a move aimed at rebuilding relations with farmers after a 130-day rebellion, observers said Wednesday (August 6).

  

Agriculture Secretary Carlos Cheppi met with leaders of the four main agriculture groups late Tuesday, the first meeting since the Senate on July 17 voted against the government's increase in taxes to nearly 50 percent on crop exports.

  

"It is too hasty to talk about export taxes," Cheppi said, according to Buenos Aires newspaper La Nacion.

  

The remark came only three days after President Cristina Fernandez de Kirchner on Saturday said her administration will again seek to impose higher taxes on crop exports, which is what sparked the worst farm protest in the country's history and slashed her popularity ratings to 20 percent from the 56 percent at the time she took power last December.

  

Speculation had been swirling that the Agriculture Secretariat was considering a new system of grain export taxes that would raise the duty on soy to 40 percent from 35 percent and lower it on wheat and corn by five percentage points to 20 percent and 23 percent, respectively.

   

The proposed system appeared designed as a latest effort to reduce the planting of soy, which have been steadily displacing the production of other crops over the past years.

  

The government has said it wants farmers, which sell most of the soy production for export, to increase production of corn, wheat and other crops to help boost domestic food supplies.

  

Farmers planted a record 16.6 million hectares with soy last season, using about half of all cropland to grow the legume, according to the Agriculture Secretariat.

  

There are signs that farmers are again planning on greatly increasing soy planting, which will begin within two months along with corn. This would come at the expense of corn due to continued tensions with the government and a recent rollback of the higher export tax on soy.

  

Local brokerage Panagricola estimates soy area will rise 5 percent from last season and Agripac Consultores sees an increase of 6 percent.

  

On Wednesday, Interior Minister Florencio Randazzo said agriculture is a "very important sector" for the development of the country even though the government has differences with it.

  

"The government should always harmonize the interests of sectors in the search of the defence of common interests," he said, adding that the administration will discuss policies for beef, milk, grains and oilseeds in an effort to boost production.

  

"We are going to work so that in this world where there are so many opportunities, Argentina doesn't miss out," he said.

  

Farmers have been asking the government for longer-term policies to help expand production so they can take advantage of rising demand for food in the world.

  

Cheppi and Randazzo's comments have heightened expectations of a more peaceful relationship between farmers and the government, which has been marked by combative positions on both fronts. Nestor Kirchner, the president's husband and head of the ruling Peronist party, has called farmers "coup mongers" and blamed them for rampant brush fires.

  

"The government is opening the door for dialog and this is what is happening," said Carlos Germano, a political analyst in Buenos Aires. "There is movement to travel down the same road and look for points of consensus."

  

The defeat of the higher taxes has left the government without an additional $1.2 billion in revenue, forcing it to cut subsidies and raise other taxes to keep the budget in surplus, a cornerstone of the president's economic policy.

  

"The government is trying to renew itself without admitting errors and a way to do this is to start up dialog again with farmers," said Federico Mac Dougall, an economist at the University of Belgrano in Buenos Aires. "It may need their support over the next three years" of its term.