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Cablegate: Argentine Government Seeks to Split Agricultural Sector And

VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0408/01 0922156
ZNR UUUUU ZZH
R 012156Z APR 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0618
INFO RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 000408

SIPDIS

SIPDIS
SENSITIVE

TREASURY FOR LTRAN AND MMALLOY
E FOR THOMAS PIERCE
PASS USTR FOR DUCKWORTH
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER
US SOUTHCOM FOR POLAD

E.O. 12958: N/A
TAGS: EAGR ECON ENRG EPET AR
SUBJECT: ARGENTINE GOVERNMENT SEEKS TO SPLIT AGRICULTURAL SECTOR AND
RALLY SUPPORTERS

Ref: (A) Buenos Aires 00328; (B) Buenos Aires 00368; (C) Buenos

Aires 00379; (D)Buenos Aires 00386; (C) Buenos Aires 0398

-------
Summary
-------

1. (SBU) President Cristina Fernandez de Kirchner (CFK) and her
Economy Minister Martin Lousteau announced on March 31 a basket of
agricultural concessions targeting small producers. New measures
include export tariff rebates, transportation subsidies, a
re-opening of currently blocked wheat exports, subsidies for small
dairy producers, and subsidized credit for small and medium
producers. These were clearly designed to erode solidarity within
the sector by delinking the interests of large and small producers,
but failed to address demands by the four major agricultural groups
leading the sector strike against the GoA, who seek a wholesale
roll-back of the sliding export taxes recently adopted. The four
agricultural entities announced that they will continue the strike
until Wednesday, April 2, but will seek to limit current blockades,
allowing dairy and other perishable products like fruits and
vegetables to pass while blocking transit of grains, oilseeds, and
meat. On April 1, CFK gave a fiery address to 100,000-plus
followers to rally political support. Attention will now focus on
the agricultural sector's response. This sector is comprised by
some 300,000 producers, of whom approximately 96% are small to
medium-sized producers. Although the four agrarian entities
supporting the strike have historically represented disparate
interests, they have found a common purpose in the current strike.
It remains to be seen whether the GoA's efforts to divorce the
interests of small producers from those of larger farming
enterprises will succeed. END SUMMARY.

CFK'S CONCILIATORY SPEECH...
----------------------------

2. (U) President Kirchner and Minister of Economy Lousteau announced
new measures March 31 in an attempt to appease the agricultural
sector and bring an end to its 20-day strike. The package did not
alter the GOA's floating export tax scheme, whose elimination
remains the principal demand of the four major Agrarian associations
negotiating with the GoA. GoA measures included tax compensations
to medium and small producers that will leave them in the same
financial situation as before the March 11 export tariff increase,
transportation subsidies for the more remote provinces, a re-opening
of currently blocked wheat exports, a subsidy for small dairy
producers, subsidized credit for small and medium producers, and the
creation of a new Sub-Secretariat for the development of small and
medium producers in the Secretariat of Agriculture.

3. (U) CFK struck a more conciliatory tone in her March 31 speech
than she had the previous week. CFK said that, as president, it was
her job to look at the big picture and arbitrate among competing
interests to decide what was best for the nation as a whole. In
measured, moderate tones, she refuted press claims that the soy tax
had jumped to 44%, noting that rate was the ceiling of a sliding
scale tied to soy prices (which are now declining sharply on
international markets). Even with the increased taxes, she claimed,
soy farmers would earn 18% more than a year ago. (Soy farmers
contend the GOA calculation only contemplates revenues without
accounting for rapidly increasing production costs.) CFK did not
justify the tax increases as revenue-generating measures, but rather
as measures to hold down the price of food, to encourage crop
diversification (the March 11 decree had increased taxes on soy &
sunflowers but had lowered them on corn and wheat), and to foster
income redistribution. CFK noted that ten years ago, soy accounted
for 30% of land under cultivation. It now accounts for 45%. She
claimed soy was much less labor intensive than other crops.

4. (U) The four agricultural organizations leading the campaign
against the government responded by announcing that they will
continue the strike until Wednesday, April 2, at which time they
will again meet to decide whether to prolong the protest. They did
decide, however that the strike should not affect dairy and other
perishable products like fruits and vegetables, the supply of which
has begun to falter in Argentine cities as a result of the lockout.
In the face of the strike's continuation, the GoA has reportedly
suspended exports of beef, raising the ante on this dispute.

...AND HER TROOP-RALLYING ONE
-----------------------------

5. (SBU) CFK spoke again about the strike on the evening of April 1
to a huge (150,000, according to TV commentators) banner-waving
crowd in historic Plaza de Mayo. This speech was much more defiant
and strident than her March 31 remarks. She made no new
announcements or promises, nor did she reiterate any of the
arguments she made on March 31. She opened by claiming her
opponents were hounding her because she was (1) "guilty" of winning
a majority of the votes in a free, democratic election, and (2)
because she is a woman (later in her speech she returned to the
gender issue). "But I am proud of being both," she declared.

6. (U) CFK said Argentina over the last four and a half years had
been enjoying unbroken economic growth, "unprecedented in the last
hundred years."" She asserted she had a mandate from the people to
pursue a more just and equitable society, and that her tax policies
were about "social inclusion" and income distribution. She could
not take on this task alone, and needed the people behind her. She
noted that the March 24, 1976 coup had been preceded a month earlier
by a similar lockout (implying, once again, that the objective of
the current farm strike is to destabilize her government). She
appealed several times to farmers to clear the roads. The massive
crowd dispersed immediately afterwards, as a heavy rainstorm bore
down on Buenos Aires.

----------------------------------
ARGENTINA'S DICHOTOMOUS PRODUCTION
----------------------------------

7. (U) Argentina's agricultural sector is a highly diverse and
efficient group of roughly 300,000 producers, ranging from
small-holders to large producers in various segments of agricultural
production (including beef cattle, dairy, grains and oilseeds,
fruits and vegetables, sub-tropical crops, and many other minor
crops). Each segment has disparate interests, depending on its size
and type of production.

8. (SBU) The most recent official data showing a break out of the
sector is from the Secretariat of Agriculture's Census of
Agricultural in 2002. Undoubtedly, there have been changes since
then, and there is little consensus on current figures due to the
difficulty in determining exactly what constitutes small producers
vs. medium producers, etc. This difficulty exists because scales of
production efficiency vary widely across Argentina's agricultural
regions. Nevertheless, it is estimated that in Buenos Aires, Santa
Fe, La Pampa, Entre Rios, and Cordoba -- which are the most
important agricultural provinces with respect to grain and oilseeds
production -- there are approximately 129,000 small- to medium-sized
producers (producing on less than 2,500 hectares), which represent
96 percent of farmers in those provinces. Despite the government's
rhetoric about "oligarchs" calling the shots in the Argentine
countryside, it is estimated that there are only 15 producers in
those provinces who farm more than 50,000 hectares. Post estimates
that approximately 10-15 percent of total grains and oilseeds
production is produced by extremely large producers with more than
50,000 hectares. Although official government figures estimate that
roughly 2,000 agricultural entities produce about 80 percent of the
soybean crop, that figure is contested by local experts. Post
contacts at the Argentine Soybean Growers Association believe that
there is much less concentration of production than what is stated
by the government. Approximately 70 percent of crop production in
Argentina is carried out on rented lands.

--------------------------
FOUR AGRICULTURAL ENTITIES
--------------------------

9. (U) The following four entities are the most important local
rural organizations which have been organizing support for the
agricultural strike:

-- Sociedad Rural Argentina (SRA): Founded in 1866 by large cattle
producers. A large portion of its current 10,000 members include
medium- to large-scale milk and crop producers. Its president,
Luciano Miguens, has generally been considered to be the most
"flexible" of the four presidents in trying to reach agreements with
the government. However, during this crisis, he has continued to


support demands that the GoA suspend the recent increase in export
taxes.

-- Confederaciones Rurales Argentinas (CRA): Founded in 1943, it
currently has 110,000 members of all sizes involved in the gamut of
agricultural activities. They are distributed in 310 groups which
form 13 confederations. Mario Llambias, the current president, is
considered one of the most "combative" of the presidents of the four
agrarian groups. CRA also demands suspension of the recent export
tariff increases.

-- Confederacion Intercooperativa Agropecuaria (Coninagro): Founded
in 1953, it includes more than 100,000 members and 500 local
agricultural cooperatives which market approximately 20 percent of
the country's total crop production. Coninagro also includes
producers of secondary agricultural products, including rice,
cotton, tobacco, and tea. Fernando Gioino, its current president,
is considered a moderate negotiator. Coninagro is interested in
expediting a resolution favorable to small- and medium-sized
producers of crops, beef and dairy products.

-- Federacion Agraria Argentina (FAA): Founded in 1912, it has over
100,000 members and represents small and medium producers throughout
the country. Eduardo Buzzi, its current president, is considered
aggressively combative. Until 2006, he maintained a close
relationship with the GoA, but since that time, FAA has been one of
the most outspoken of the four agrarian groups. FAA demands the
suspension of recent export tariff increases (at least for small and
medium producers) and wants to expand dialogue with the GoA to
resolve pending issues concerning dairy, beef, wheat, and other
agricultural activities.

10. (U) Historically, these four entities have had disparate
interests and have seldom come together as a single political voice
for the agricultural sector as a whole. Despite growing discontent
by the entire agricultural sector in recent years, there has been no
single event that persuaded different segments of producers to
overlook their particular group's short-term interests in favor of
making a united front against government intervention in the sector
- until now.

11. (U) As a result of the recent crisis, these four groups have
formed the "Comision de Enlace de Entidades Agropecuarias" (Rural
Organizations Liaison Commission) which is demanding: cancellation
of the recent sliding export tax regime; a long-term GoA commitment
to increase domestic cattle production; a freeing of the export
controls for high value beef cuts that are not of high domestic
demand; a reduction of export taxes on dairy; normalization of the
wheat market with full prices (before deduction of export taxes)
paid to producers; and to more clearly differentiate and define
small and medium producers from the large pools of production.

12. (U) In addition to the four groups above, a new agricultural
voice has emerged out of this crisis which is being referred to as
"Self-Convoked Participants" (autoconvocados). They are not members
of the traditional organizations mentioned above, but rather are
mainly producers, families, traders, students, and others who are
directly impacted by lower rural profitability. Most of them are
protesting on the highways and in towns of the most important crop
producing provinces (Buenos Aires, Santa Fe, Cordoba, Entre Rios,
Chaco and Santiago del Estero), but have also been represented in
large cities like Buenos Aires, Rosario and Cordoba. "Self-Convoked
Participants" make decisions based on their own judgment and
situation, but do listen to what the Rural Organizations Commission
has to say.

---------
COMMENTS
---------

13. (SBU) The agricultural sector was instrumental in helping
Argentina emerge from its 2001/02 financial crisis. Initially, the
sector accepted the GoA's "redistribution" of its rural income via
export taxes resurrected "temporarily" in 2002 as necessary to help
the country regain its economic footing. However, after five years
of strong GDP growth, the agricultural sector feels
disproportionately burdened by a combination of restrictions and
outright bans on beef, dairy, and some grains (to keep domestic
consumer prices in check) and by successive increases in export


taxes. The Kirchners' roots are in the Peronist movement,
historically considered to be hostile to the agricultural sector and
obsessed with Argentina's industrialization. The simmering
antagonism of the agricultural sector occasionally flares up, as it
did in August when Agriculture Secretary Urquiza stormed out of the
opening session of the country's biggest agricultural fair after SRA
President Migens publicly criticized GoA agricultural policy and
spectators unveiled critical posters. The recent change in tax
policy announced on March 12 was the "last straw" for the sector,
generating the first sector-wide front against the Kirchner
government's intervention.

14. (SBU) The Argentine agricultural community has evolved
considerably over the past fifteen years, and technology has played
a major role in that change. While producers have historically been
autonomously scattered across the country, facilitating their
exploitation by the central government, satellite TV, cellular
telephones, and the Internet have brought producers together as
never before. New communications technology have allowed agrarian
producers to better coordinate their actions and respond in real
time to the recent policy decision in a way that has to date
frustrated GoA attempts to undermine the strike. The Kirchner
administration's current efforts to break solidarity between the
various segments in the agricultural sector (namely, small vs. large
producers) has met a new-found solidarity never before encountered.
Despite the ongoing strike and uncertain outcome, the agricultural
sector as a whole has gained a political voice that marks the limit
of the Kirchner administration's ability to extract resources from
the sector to finance its agenda. END COMMENT.

WAYNE

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