VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0094/01 0291230
ZNR UUUUU ZZH
R 291230Z JAN 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 2939
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 000094 
 
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: President Declares Drought Emergency; Farmers 
Want More 
 
Ref:  Buenos Aires 14 
 
¶1.  (U) Summary:  The GOA declared an agricultural emergency on 
January 26 due to the severe drought affecting most Argentine 
provinces.  Under the decree, the GOA will allow producers in 
affected regions to delay payment of income taxes and personal 
property taxes for one year.  The GOA will also eliminate payment 
for grain transport documents.  The decree does not affect export 
duties for agricultural products (the main tax paid by producers). 
The drought is the most severe seen here in decades, and has had a 
major impact on Argentina's main agricultural regions (with losses 
estimated in excess of US$5 billion).  Farm leaders have declared 
the new measures insufficient, noting the substantial contribution 
of the sector to government finances during the agricultural boom of 
the last five years through high export taxes, and threatened to 
resume national protests in February or March.  End Summary. 
 
--------------------------------------------- ----- 
President Kirchner Declares Agricultural Emergency 
--------------------------------------------- ----- 
 
¶2.  (U) On January 26, President Cristina Kirchner declared an 
Agricultural Emergency for the provinces most affected by 
Argentina's worst drought in almost 50 years. Decree 33/2009, 
published on January 27, establishes that farmers qualifying for 
benefits will be allowed to delay the payment of income taxes and 
personal property taxes for one year.  Law 22,913, under which 
Decree 33/2009 will be applied, establishes that an Agricultural 
Emergency can be declared only when producers have at least 50 
percent of their production capacity damaged.  That same law states 
that an Agricultural Disaster can be declared when at least 80 
percent of productive capacity is damaged.  The benefits offered by 
the Kirchner administration through Decree 33/2009 will only be 
eligible to farmers in provinces and counties in which their 
governmental authorities officially declare a state of emergency or 
disaster for those areas, as outlined in Law 22,913.  The GOA 
declined to use the provisions of the law which provide for 
subsidized credit for affected producers. 
 
¶3.  (U) Representatives of the farming sector requested that the 
government also eliminate agricultural export duties (currently 35 
percent for soybeans, the largest crop), which has been a 
longstanding, high-profile controversy here.  The Minister of 
Production and Secretary of Agriculture both responded that the GOA 
does not envision the elimination of export taxes.  Secretary of 
Agriculture Cheppi emphasized that current higher prices for 
soybeans removed any need for a reduction in export taxes. 
(International prices have increased in large part due to concerns 
about the Argentine drought's impact on world supplies of soybeans.) 
 
 
¶4. (U) President Kirchner also announced that the grain transport 
document (called "carta de porte" in Argentina) will be provided at 
no cost.  Since 1992, issuing the transport document was a major 
source of income for one of the four farmer lobby groups in direct 
conflict with the government - the Argentine Agricultural Federation 
(FAA) - since the farm strike of last year.  The FAA collected an 
estimated US$1.15 million annually from issuing the documents, while 
other agricultural entities divided a similar amount among them. 
FAA President Eduardo Buzzi has strongly criticized the measure as a 
benefit for unions representing truck drivers, which support the 
government, rather than a real benefit for producers.  Buzzi has 
been one of the most outspoken farm group leaders against the 
Kirchner administration's agricultural policy since the government's 
variable export tax plan launched in March 2008.  Buzzi argued that 
the measure was an "economic sanction against his entity" and that 
"it is an insult to farmers to talk about a savings of AR$10 million 
[slightly less than US$3 million] when losses [due to drought] are 
between US$4 to 5 billion."  Government officials are claiming that 
this measure will save farmers an estimated AR$200 million (or US$57 
million). 
 
----------------- 
Impact of Drought 
----------------- 
 
¶5.  (U) Official and private sources estimate that for the 2008/09 
crop, Argentina's production of wheat by volume will fall by 44 
percent, while corn will drop an estimated 30 percent due to the 
drought and lower planted area.  Although soybean yields could 
rebound if the major growing areas receive consistent and adequate 
rains throughout February, the 2008/09 soybean crop will undoubtedly 
produce substantially less than initially forecast due to a 
reduction in planted area and lower yields.  Many farmers delayed or 
suspended planting soybeans due to lack of moisture.  Post contacts 
estimate that losses to farmers will total over US$5 billion, while 
tax revenue losses to the GOA could exceed US$2 billion. 
 
¶6.  (U) The livestock sector is also suffering from one of the worst 
droughts in decades.  In some areas, it is the worst in the past 100 
years.  Pastures were heavily damaged in a large part of the 
cattle-producing region due to dry weather that started in March of 
last year.  Cattle losses have been substantial (some private 
estimates report as much as 500,000 head of cattle lost) due to the 
lack of feed and, in many cases, water as the water tables in many 
areas have fallen drastically.  Many producers are sending their 
breeding cows to slaughter.  The lower number of cows, plus the bad 
condition of the ones in production, will negatively affect 2009 
calf crop significantly.  Some contacts estimate that around 1.5 to 
2.0 million fewer calves will be produced. 
 
--------------------------- 
The Devil is in the Details 
--------------------------- 
 
¶7. (U)  The actual amount of support that the government will 
provide under these newly announced measures will be subject to the 
implementing regulations, which have not yet been issued.  The 
Secretary of Agriculture has already announced that it will strictly 
enforce the requirement that producers show losses of at least 50 
percent in order to benefit from the delay in payment of taxes. 
Under current regulations, producers delaying payment of taxes will 
also be required to pay an interest rate equivalent to 25 percent 
annually, although the GOA has promised to review this issue. 
 
----------------------- 
Reaction from the Campo 
----------------------- 
 
¶8. (U) Farm groups expressed anger at the limited nature of the 
emergency measures in a press conference after meeting with the 
Secretary of Agriculture on January 27.  The producers' lobby groups 
indicated that the current measures were insufficient and demanded 
the elimination of export taxes on agricultural products and that 
the government stop limiting exports of beef, dairy products and 
grains.  They also asked for low-rate credits to be able to face the 
next crop season, after losing a substantial part of the wheat, 
sunflower and corn crops this year.  One of the farm leaders noted 
that the current measures were insignificant in light of the losses 
and contribution of the agricultural sector to government finances 
in recent years, estimating that in the last four or five years the 
agricultural sector provided an additional 90 billion pesos 
(pproximately US$26 billion) in tax revenues to the government due 
to increased export taxes, while only getting back a bit more than 
US$200 million in emergency assistance. 
 
¶9. (U) Producers are currently threatening a reprise of the rural 
conflict with the GOA that dominated most of the first half of 2008 
and cost the government dearly in terms of its political standing. 
The producers' groups are staging numerous assemblies across the 
country to determine what actions to take.  They have warned that if 
there are no fundamental policy changes, producers will call a new 
national protest against the government.  The main disagreement 
appears to be over when to start these protests (in February or 
March). 
 
------- 
Comment 
------- 
 
¶10.  (SBU) The severe drought has added fuel to ongoing conflict 
between the rural sector and the GOA, which have been on a low 
simmer until recently.  It appears that the latest GOA measures were 
taken to demonstrate to the public a measure of responsiveness, 
rather than to turn over a new, collaborative leaf with the rural 
sector.  It appears likely that the conflict may be on the verge of 
erupting again.  If it does, it could last for a long time, thereby 
becoming a factor in the legislative elections to be held this 
October.  End Comment. 
 
WAYNE