VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0246/01 0652115
ZNR UUUUU ZZH
R 062115Z MAR 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 3172
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 000246 
 
USDA FOR FAS/OA/OCRA/ONA/OGA/OFSO 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958:  N/A 
TAGS: EAGR ECON EINV PGOV PHUM AR
SUBJECT: Argentina: Farmers Reach Agreement with GOA 
(More or Less) 
 
Ref:  Buenos Aires 214 
 
------- 
Summary 
------- 
 
¶1. (SBU) The GOA and the local farm groups signed a memorandum of 
understanding (MOU) on March 3 that included measures agreed upon 
the previous week -- support measures for the wheat, dairy, and beef 
sectors, and regional products -- with some additional concessions 
by the GOA.  Several farm leaders, as well as local farm groups, 
expressed their disappointment with the result, as their key goal is 
to have lower export taxes on soybeans. President Fernandez de 
Kirchner, who participated in much of the March 3 meeting, 
emphasized that export taxes on soybeans and sunflower were not 
going to be lowered due to social equity and fiscal reasons.  In the 
days prior to the meeting on March 3, there were strong rumors that 
the GOA would create a national grain marketing agency, with the 
purported purpose of protecting small- and medium-sized farmers from 
large grain exporters.  Creation of this agency was not discussed 
formally during the meeting, but the government promised that it is 
on standby and that, if created, legislation to that effect will be 
sent to Congress.  End Summary. 
 
---------------------------- 
A Settlement or First Steps? 
---------------------------- 
 
¶2. (U) The government and the local farm groups met on March 3 in a 
continuation of the previous week's meeting (Reftel) in which the 
government offered support measures for the wheat, dairy, and beef 
sectors, as well as special provisions for poorer producing areas. 
Participants were the same as in previous meetings (Minister of 
Production Giorgi, Minister of Interior Randazzo, Secretary of 
Agriculture Cheppi, and presidents of the Rural Society of Argentina 
(SRA), Confederation Rural Argentina (CRA), Agriculture Federation 
of Argentina (FAA), and Coninagro), with the surprising mid-meeting 
addition of President Cristina Fernandez de Kirchner.  At the end of 
the day, both sides signed a memorandum of understanding (MOU) with 
the measures agreed the previous week, with some additional 
concessions by the GOA. 
 
¶3. (U) Both the government and farm leaders described the meeting as 
positive.  They highlighted the importance of the agreement and that 
they would meet again the week of March 9 to continue with 
conversations, especially addressing measures to offset the severe 
damage caused by the country's worst drought in 50 years.  The 
government was more positive, describing the agreements on dairy, 
beef and regional products as a possible solution to the conflict, 
while farm leaders characterized the agreements as positive first 
steps to resolve some of the issues (while major issues, such as 
export taxes for soybeans remain unresolved). 
 
¶4. (U) In public remarks following the five-hour meeting, President 
Fernandez de Kirchner requested that the rural sector tone down its 
rhetoric against the government, and emphasized that export taxes on 
soybean and sunflower were not going to be lowered due to social 
equity and fiscal reasons.  The farm representatives responded that 
they would go to Congress to seek lower export taxes. 
 
¶5. (U) Press reports indicated that farmers were not pleased with 
this clarification and publicly stated that, despite the agreement, 
the conflict is not over.  Several farm leaders, as well as local 
farm groups, expressed their disappointment with the results, as 
their key goal is to lower export taxes on soybeans (which was at 
the heart of the four-month showdown in 2008 between the GOA and the 
agricultural sector).  The farm leaders also noted in their 
follow-up press conference that they have little confidence in the 
government and want to see that these measures are put into practice 
immediately and that they are effective.  The measures in the 
agreement focus mostly on the enhancement of producers' prices. 
 
----------------- 
Agreed Provisions 
----------------- 
 
¶6. (U) Dairy:  Export taxes for all dairy products will be reduced 
from 5% to zero and the price cap on dry milk exports is eliminated; 
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 a 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 price of bread and flour). 
 
¶8. (U) Beef: Tax benefits will be given for producers who feed 
steers over 400 kilos; support will be provided to cow-calf 
operations negatively affected by the drought.  An additional annual 
export quota of 60,000 tons of beef from old cows will be provided; 
the GOA will facilitate and speed up export permits for high quality 
beef cuts, reduce to 65 percent the level of stocks which export 
plants must maintain in order to be eligible to export the volume 
above such level, and promised to pass to Congress a new Federal 
Meat Law which will make beef marketing more efficient. 
 
¶9. (U) Regional Economies: The GOA will reduce up to 50 percent of 
the export taxes for products from less wealthy regions, provided 
that the benefit improves producers' prices. 
 
--------------------------------------- 
No Nationalization (Yet) of Grain Trade 
--------------------------------------- 
 
¶10. (U) In the days prior to the meeting on March 3, there were 
extensive reports in the media and among private sector contacts 
that the government was mulling the creation of a national grain 
marketing agency, with the purported purpose of protecting small and 
medium farmers from large grain exporters.  Some important farm 
entities (including the FAA and CRA, two of the four main rural 
groups) stated that they were, in general, not opposed to the idea, 
but were reluctant to have the government administer such an agency. 
 They also raised concerns that the GOA would use the agency to 
collect additional funds from the agricultural sector.  The GOA 
alleges that farmers continue to hold up to nine million tons of 
soybeans from last year's crop (private sources estimate between 
five and six million tons) and sales of these soybeans could quickly 
generate over US$ 1 billion in additional revenue from export taxes. 
 (Some also believe that the reports of a possible GOA decision were 
created by the government itself in the hope that it could bluff the 
farmers sitting on the soy into selling their crop.) 
 
¶11. (U) Creation of this agency was not discussed formally during 
the meeting, but government sources told the press that it is on 
standby and that, if created, it will be sent to Congress. 
 
¶12. (U) On March 6, ExpoAgro, the largest rural show in Argentina, 
began 250 kilometers north of Buenos Aires.  The government will 
closely monitor what farm representatives say and do.  If 
declarations are highly critical of the government, some sources 
claim that the government could move forward in nationalizing the 
grain trade and even repudiate the signed agreements. 
 
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COMMENT 
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¶13. (SBU) With mid-term elections approaching in October, the 
Kirchner administration appears to be making a more concerted effort 
to manage this year's farm dispute than it did during the one last 
year.  However, GOA reluctance to budge on the key soybean export 
tax issue places farm leaders in a difficult position.  While 
anxious to achieve real deliverables for their sector, they are 
facing criticism from within for signing an agreement that, farmers 
believe, falls far short of resolving this long- lasting conflict. 
The internal bickering is likely to encourage the GOA to press on 
with its strategy of divide-and-conquer. 
 
WAYNE