VZCZCXYZ0032
RR RUEHWEB

DE RUEHBU #0214/01 0611130
ZNR UUUUU ZZH
R 021130Z MAR 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 3118
INFO RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 000214 
 
USDA FOR FAS/OA/OCRA/ONA/OGA/OFSO 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958:  N/A 
TAGS: EAGR ECON EINV PGOV ELAB PHUM AR
SUBJECT: Argentina: Farmers Strike, then Talk; GOA Threatens to 
Nationalize Grain Trade 
 
Ref:  Buenos Aires 94 
 
¶1.  (SBU) Summary:  Two hours after the end of a four-day farm 
strike in which Argentine producers did not market grains and 
cattle, the government and the farm lobby groups met on February 24 
to begin a new round of discussions on farm policy.  The government 
announced after the meeting new measures to assist the farm sector, 
although these did not include a reduction in the controversial 
export tax for soybeans.  While admitting that significant 
differences remain, both sides described the meeting as a positive 
step towards resolving some outstanding issues.  The good feelings 
did not last, however, as both sides toughened their rhetoric by the 
end of the week.  Farm leaders had highly public meetings with 
opposition leaders, while some sectors of the government reportedly 
threatened to nationalize grain exports.  End Summary. 
 
-------------------- 
Four-Day Farm Strike 
-------------------- 
 
¶2. (U) Farm producers held a four-day strike from February 20 to 24 
to protest against government policies for the sector.  The 
grievances of the producers include export taxes for agricultural 
products; restrictions on exports of wheat, corn and beef; and a 
demand for more support to offset the impact of the drought. 
Producers stopped marketing grains, oilseeds, and livestock during 
the strike.  They did not, however, block major highways as had 
occurred in previous strikes.  In a further effort to pressure the 
government, local producers occupied a bank in Entre Rios to demand 
a plan to renegotiate farm loans with lower interest rates.  The 
strike and occupation of the bank took place despite the 
announcement by the GOA that it would be meeting with farm leaders 
on February 24, as producers held out little help for significant 
progress. 
 
----------------------------- 
Talks Between Farmers and GOA 
----------------------------- 
 
¶3.  (U) Farm leaders mt with Minister of Production Giorgi, 
Minister of Interior Randazzo, and Secretary of Agriculture Cheppi 
shortly after the end of the farm strike.  The farm groups were 
represented by presidents of the Rural Society of Argentina (SRA), 
Confederation Rural Argentina (CRA), Agricultural Federation of 
Argentina (FAA), and Coninagro.  Although export taxes for soybeans 
were not on the agenda, both sides described the meeting as 
productive.  One farm leader described the meeting as a "4" on a 
scale of 1 to 10, a significant improvement over previous meetings. 
(Comment: Initially, the GOA planned to have only Giorgi meet with 
the farm leaders, according to press reports.)  They agreed to meet 
again on March 3. 
 
¶4.  (SBU) In a meeting the following day with the Ambassador, Ag 
Secretary Cheppi commented that the meeting with farm leaders was 
positive and that the government was optimistic.  He noted that the 
farm groups are under pressure from their members to come up with 
solutions.  Recent rains have helped reduce some of the tension, but 
substantially more rain is needed to replenish depleted soil 
moisture. 
 
----------------------------- 
Government Supports Announced 
----------------------------- 
 
¶5.  (U) The government announced after the meeting on February 24 
measures to support producers which it estimated have a fiscal cost 
of US$400 million (roughly 0.1 percent of GDP).  The government 
repeated, however, that it would not lower the export tax on 
soybeans, currently at 35%.  The farm lobby groups expressed 
disappointment in the proposed measures, but highlighted the change 
of attitude of the government.  The main government measures are 
aimed at addressing the impact of the worst drought in more than 50 
years and problems caused by government restrictions on exports. 
 
¶6.  (U) Dairy:  Export taxes for dairy products will be reduced from 
5% to zero; small dairy producers will receive a price support of 
0.10 pesos per liter; and a compensation of 200 pesos per head to 
producers who feed their male calves up to 130 kilos. 
 
¶7.  (U) Wheat:  Mills will be compensated for the price of the bag 
of wheat; the official price for supplying the domestic market will 
increase from 370 pesos to 420 pesos; and the government will slowly 
open export registries for wheat (taking into account the security 
of local supplies and the level of the price of bread and flour). 
 
 
¶8.  (U) Beef: Tax benefits will be given for producers who feed 
steers over 400 kilos; support to cow calf operations negatively 
affected by the drought; and the promise to pass to Congress a new 
Federal Meat Law. 
 
¶9.  (U) Regional Economies: Reduction up to 50% of the export tax 
for tobacco, cotton, fruits and other local products from less 
wealthy regions. 
 
----------------- 
A Short Honeymoon 
----------------- 
 
¶10.  (U) The improvement in relations between the GOA and farm 
sector was short lived.  Farm leaders met with leading congressional 
opponents of the government on February 25 in a highly publicized 
forum, where they criticized the government for not taking 
sufficient measures to address the impact of the drought.  They also 
pressed for the complete elimination of export taxes on agricultural 
products (which currently represent about 10% of government 
revenue).  The GOA was quick to respond, accusing the farm leaders 
of superseding their sector's agenda to form a political alliance 
with a broader agenda of opposing the government. 
 
------------------------------- 
Nationalization of Grain Trade? 
------------------------------- 
 
¶11.  (U) The government was widely reported on February 27 to be 
considering nationalization of grain trade to force farmers to sell 
grain and soybeans currently held in storage.  According to these 
reports, the GOA is concerned that farmers continue to hold up to 9 
million tons of soybeans from last year's crop (private sources 
estimate between 5 and 6 million tons).  Sales of these soybeans 
could quickly generate US$ 1 billion in additional revenue from 
export taxes.  It appears that there is no official government 
decision on nationalizing grain and oilseed exports, with some 
sectors of the government (particularly in the Ministry of 
Production) denying any plans in this direction and dismissing the 
proposal as an effort to pressure producers.  Industry contacts and 
sources in the federal tax agency, headed by close Kirchner 
associate Ricardo Echegaray, are reporting, however, that the 
measure is under serious consideration.  Prominent farm leaders have 
already announced that nationalization of the grain trade would fuel 
a dispute even greater than the battle over the variable export tax 
that ignited the farm strike in 2008. 
 
------- 
COMMENT 
------- 
 
¶12.  (SBU) Relations between the government and the farm sector 
remain tense.  Both sides appear to be divided between factions 
anxious to reach an agreement and hardliners.  While the more 
conciliatory voices appeared to be in charge on February 24, 
confrontation is once again the order of the day.  Both sides are 
looking increasingly at the legislative elections in October, and 
settling the farm dispute continues to be a unifying issue within an 
opposition that is seeking to build alliances ahead of the midterms. 
 While it appears improbable that the GOA would nationalize grain 
trade, which would disrupt the grain market, there may well be 
sectors close to the President and her husband that are pressing in 
this direction.  END COMMENT 
 
 
WAYNE