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Argentine Farm Conflict Calmed But Not Over

Tensions between

Argentina’s president and farmers who oppose her policies have been defused through deals on wheat prices and some exports, but the threat of market-disrupting strikes could easily reignite.

Farm groups in agricultural powerhouse Argentina had threatened protests and aligned with opposition politicians against President Cristina Fernandez as they pushed for lower export levies on the country’s top crop, soy.

The president herself surprisingly joined talks with farm leaders March 3 in a sign of her eagerness to end a conflict that threatens her control of Congress as mid-term elections approach and could further weaken Argentina’s slowing economy.

In deals signed March 2, her administration did not touch soy levies but did allow more beef for export, set a minimum price wheat millers must pay producers and eliminated export levies on dairy products.

“It is certainly not a definitive (agreement), not even close, but at a critical time for the government it does decompress a conflict that was threatening to escalate dangerously,” wrote political analysts Vicente Massot and Agustin Monteverde.

Fernandez’s ministers down-played threats to intervene in grain trading to control prices, which some analysts described as a distraction from the farmers’ central demand for lower soy export levies.

Prices for soy have plummeted but the government says it needs the tax income as it faces a budget squeeze this year amid the global economic crisis which affords little financial leeway.

LITTLE TRUST

Farm groups and Fernandez have reached deals before, only to have differences erupt anew. The two sides have little trust in each other, and farmers gathered along highways March 3 to renew protests if the talks failed.

In the past, Fernandez likened protesting farmers to coup-mongers trying to topple her government, while they accused her of unfairly taxing farmers while benefiting the industrial sectors.

The fertile Pampas plains and investment in soy processing have made Argentina the biggest world supplier of soyoil and soymeal, and the government takes in billions of dollars a year from the soy export tax. The South American country is also the No. 2 corn exporter and a leading beef and wheat supplier.

Centre-left leader Fernandez has been in an on-and-off battle with farmers since she tried to raise export levies on soy last March, sparking a prolonged political crisis that saw her popularity sink.

Farmers, hit this year by a drought and lower prices due to the global economic crisis, had threatened to renew protests that last year caused food shortages.

The government floated the idea of nationalizing grains trade, which alarmed farmers already upset over years of restrictions on exports of beef, wheat and other products.

Analysts said that Fernandez moved to reach some agreement with farmers since protests could threaten her party’s control of Congress in October mid-term elections and because the conflict has caused defections of political allies.

“We believe that political expediency has pushed the government to offer some concessions to the farmers in order to minimize the political cost of another protracted dispute with the sector,” wrote Alberto Ramos, senior economist with Goldman Sachs in New York.

Fernandez told the farmers that the export tax on soybeans of 35 per cent would not be touched precisely because her budget depends on it.

But the farmers said they would continue to push for a lower soy levy and would take a bill to Congress.

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