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C O N F I D E N T I A L BUENOS AIRES 000834 
 
SIPDIS 
 
E.O. 12958: DECL: 06/18/2028 
TAGS: PGOV EAGR ECON EFIN INVI AR
SUBJECT: ARGENTINA:  FARM DEBATE(?) MOVES TO CONGRESS 
 
REF: A. BUENOS AIRES 803 
     ¶B. BUENOS AIRES 797 AND PREVIOUS 
 
Classified By: E. Anthony Wayne for reasons 1.4(b)and(d) 
 
¶1. (C) Summary: President Fernandez de Kirchner (CFK) took a 
step back from the precipice on June 17 and bought herself 
some breathing room in the 100-day old farm crisis by 
announcing she was sending the question of the sliding scale 
of export taxes ("retenciones") as a bill to congress for 
debate and vote.  The Casa Rosada is counting on its 
comfortable majority in both houses of congress, and party 
discipline, to assure the bill is passed with no changes or 
amendments.  The government has not backed down on the 
question (or amount) of the sliding export taxes and, 
therefore, not likely to satisfy the farm groups, 
particularly if the bill is seen to be pushed through the 
Congress with little or no debate and no chance for 
modification.  Farm representatives and opposition 
politicians received the news as generally positive but are 
leery of the government's intentions.  Much pressure now 
falls squarely on the shoulders of the Peronist party and 
allied legislators -- many of whom have large rural 
constituencies.  Early analysis assumes that the government's 
numbers and discipline will hold and the bill will pass, but 
the force of public opinion is hard to gauge and anticipate. 
The lower house's Agriculture, Budget, and Finance and 
Commerce Commissions will begin studying the bill next week. 
Farm groups are meeting June 18 to decide whether to end or 
extend their strike, currently scheduled to end at midnight. 
The pro-government rally, also scheduled for June 18 in the 
Plaza de Mayo, will go forward as planned but is now being 
billed by the government and former president Nestor Kirchner 
as a rally for all Argentines in support of democracy.  Some 
important Peronist leaders are likely to be absent as an 
indication of their open displeasure with the Kirchners' 
(mis)management of the farm crisis.  In making her 
announcement, it is clear that CFK was very aware of the 
growing dissension in Peronist ranks and popular outcry.  The 
decision to submit the issue to the legislature for a 
decision is also a sign that the more moderates in the Casa 
Rosada, e.g. CFK herself, Cabinet Chief Alberto Fernandez and 
Legal Advisor Carlos Zannini have, at least temporarily, held 
sway.  An end to the conflict, however, is not yet in sight. 
End Summary. 
 
------------------------------ 
A STEP BACK FROM THE PRECIPICE 
------------------------------ 
 
¶2. (C) In what could prove an important step in diffusing the 
100-day old farm crisis, President Fernandez de Kirchner 
(CFK) announced on June 17 that she would send a bill on the 
question of the increased agricultural export taxes 
("retenciones") for debate and vote that same evening to the 
legislature.  This move, she stated, is in direct response to 
a request by the farm sector in its meetings with the GoA. 
The draft legislation, however, does nothing to rollback or 
reduce the increased export fees implemented on March 11, 
which are at the root of the crisis.  It nevertheless does 
address the demands of many that the issue be decided by the 
congress and has served to relieve, at least temporarily, the 
building tension between the Casa Rosada and the farm groups 
and truckers blocking highways, to quell some of the growing 
dissension in the Peronist party on the other, and apparently 
to diffuse some of the popular discontent that sent many 
thousands into city streets last Sunday and Monday nights. 
Some road blockages are likely to continue in the short term 
as they are not controlled by any one group, and, even if the 
roads clear, it will take some time for deliveries to return 
to normal since producers are likely to delay grain sales as 
long as possible. 
 
--------- 
REACTIONS 
--------- 
 
¶3. (SBU) Reaction from the farmers and opposition politicians 
has been guardedly positive, although all 
express skepticism over the government's intentions. 
Minister of Justice and Security Anibal Fernandez stated on 
June 17, that the legislature cannot amend or change the 
draft legislation and must either vote it up or down, for 
example.  Opposition legislators generally welcomed the 
government's measure as a victory of constitutional 
governance but were critical that the GoA had delayed so long 
in sending the matter to congress.  They are also calling for 
a full debate (implying the ability to amend or modify the 
bill) but they do not have the numbers to overrule the Casa 
Rosada's majority, if party discipline holds. They are also 
calling for the legislature to convoke the farm sector for 
consultations and input.  Some Peronist legislators are also 
calling for a full debate.  Salta Senator Romero, a Senate VP 
and no fan of the Kirchners, is arguing the legislature can 
invite many experts to share views on the export taxes, for 
example. 
 
----------- 
THE PROCESS 
----------- 
 
¶4. (SBU) The bill, submitted to the lower house on June 17 by 
Vice President and President of the Senate Julio Cobos,  will 
follow normal, if expedited, procedures.  Next week, the 
Agriculture, Budget, and Finance and Commerce Commissions 
will begin studying the bill.  The house leadership could 
call for a joint commission meeting to accelerate the process 
through the issuance of a joint recommendation.  The 
government has been careful to call the export "retenciones" 
"fees" rather than taxes.  This is key to the government's 
strategy.  By considering the increased levies on agriculture 
exports as fees, the government maintains control of their 
collection and disposition.  If they are considered taxes, 
then they become the purview of the congress to legislate, 
and are therefore subject to "co-participation" with the 
provinces, which uses an established formula to distribute 
the raised revenues to the provinces.  In articles 3, 4 and 5 
of the draft legislation, the government anticipates the 
creation of a Social Redistribution Fund to distribute 
collected fees: 60 percent for the construction of hospitals 
and clinics; 20 percent for public housing; and 20 percent 
for rural roads.  With favorable votes in those commissions, 
the bill will move to the floor for debate, where the 
government's majority can approve it with a simple majority. 
 
--------------------- 
FISSURES IN THE RANKS 
--------------------- 
 
¶5. (SBU) The GoA's measure follows on a long holiday weekend 
that witnessed a marked escalation in 
confrontations, tension and anxiety in Argentina.  The 
temporary arrest on June 14 of vocal farm leader Alfredo De 
Angeli and other farm protestors -- covered widely on TV and 
radio -- resulted in large, spontaneous demonstrations 
throughout Argentina's major urban centers -- including in 
the Plaza de Mayo and in front of the suburban official 
residence in Olivos.  Protestors voiced as much their 
disapproval of the GoA's hardline tactics and refusal to 
negotiate as support for the farm cause.  Once again, 
administration shock troops (friendly piquetero and union 
groups) mobilized to "retake" the streets, this time joined 
by Nestor Kirchner and senior GoA ministers in a raucous and 
off-putting show of support for the government.  During the 
demonstration,  vocal piquetero leader Luis D'Elia called for 
a pro-government rally on June 18, with Nestor Kirchner 
exhorting the faithful to "flood" the Plaza de 
Mayo.  D'Elia told Argentines to "arm themselves" in support 
of the constitution.  (D'Elia later walked back from the 
latter comment.) On June 16, D'Elia added fuel to the fire by 
claiming that former president and BA governor Eduardo 
Duhalde and other PJ dissidents were trying to organize a 
coup d'etat.  Subsequently, even larger spontaneous 
demonstrations broke out on the evening of June 16 (a 
national holiday commemorating Flag Day).  Unlike earlier 
public protests in Buenos Aires, where largely middle and 
upper-middle class Argentines took their pots and pans to the 
streets, this time the protests included some of the lower 
middle class sections of the greater Buenos Aires area.  This 
was a clear signal of growing popular discontent with the 
Kirchner's handling of the conflict. 
 
¶6. (C) The Kirchners' continued hardline approach to the 
100-day farm crisis, while appealing to one core constituency 
and alienating another, has increasingly brought to the fore 
fissures among Peronists and in the GoA's governing 
coalition.  A number of Senior PJ figures, legislators and 
governors, including Senator Carlos Reutemann and governors 
Juan Schiaretti, Mario Das Neves and former governors Felipe 
Sola and Eduardo Duhalde were openly calling for dialogue. 
There is a general anxiety among Argentines and some analysts 
that the dynamics of the situation were spiraling out of 
control and shortages of some foodstuff and other consumer 
goods, particularly fuel, were beginning to be felt in 
specific areas.  Some PJ luminaries, PJ mayors in the greater 
Buenos Aires area, and even the pro-government union 
confederation CGT, alarmed by the ex-president's combative 
tone, had quietly called for the Casa Rosada to cancel the 
rally.  Vice President Cobos issued a call for dialogue on 
Saturday and Radical party politicians who had followed him 
into the pro-government coalition quickly rallied to his 
words.  We are told that in the Casa Rosada, President 
Christina Fernandez De Kirchner and advisors Alberto 
Fernandez and Carlos Zannini met Sunday and on the Monday 
holiday to consider the plan to send the issue to congress 
and to take a more moderate tone.  We are also told that 
Nestor Kirchner was pressured into giving his press 
conference on June 17 in which he took a somewhat more 
moderate line and sought to distance himself from D'Elia's 
incendiary statements over the holiday weekend. 
 
¶7. (C) Comment:  The decision to send the measure to congress 
has helped to alleviate the building tension and appears to 
be a positive move by the government, if perhaps 90 days 
late.  Although the decision will not likely satisfy the 
farmers on the issue of the increased export fees, it does 
shift the debate (and responsibility) to the congress, where 
it probably properly belonged.  With the Kirchners' 
majorities in both houses, however, the field is still tilted 
in the government's favor.   The government will, 
nevertheless, have to work to ensure that members of its 
majority do not break ranks, since legislators from rural 
areas will come under heavy pressure from their neighbors, 
and may have to choose between the government and being able 
to return home during the next few months.  It also helps 
take some of the air out of the opposition's and farmers' 
complaints of the Kirchners' authoritarian style.  If the 
government also decides to move some of the other pending 
farm legislation in congress, such as the bill to 
re-establish a government-controlled grains export board, the 
farmers ire will again be inflamed. 
 
¶8.  (C)  The upcoming debate and vote in the Congress will be 
the first real test of the Kirchner's ability to maintain 
party discipline on a domestically controversial issue.  In 
the First Couple's unwillingness to yield, some believe the 
Kirchners' may have expended too much political capital 
losing the public, party, and coalition support that they 
have built up by careful use of government funds and have 
commanded for the last several years.  Some analysts argue 
that the Kirchners may not be able to paper over all of the 
differences this issue has caused within the party and 
coalition.  However, the government calculates that it is 
risking little,  and is assuming its numbers in congress will 
hold.  This issue, however, is not likely over.  If the 
legislation supporting the increased export fees passes as 
is, it makes sense that the farmers and opposition will 
challenge the constitutionality of the measures on a number 
of grounds.  Already the Supreme Court has decided to hear a 
case brought by San Luis Governor Rodriguez Saa, who argues 
the fees are, in fact, taxes and therefore subject to 
co-participation, and the Farm groups have vowed to file more 
cases.  For its part, the government continues to issue new 
farm regulations and undertake regulatory investigations 
aimed at complicating farmers lives.  The spirit of peace is 
not yet in the air. 
WAYNE