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Cablegate: Argentina: Agricultural Negotiations Make Little Progress

VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0592/01 1272016
ZNR UUUUU ZZH
R 062016Z MAY 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0950
INFO RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 000592

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV EAGR ECON ELAB ETRD AR

SUBJECT: ARGENTINA: AGRICULTURAL NEGOTIATIONS MAKE LITTLE PROGRESS

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

Aires 00379; (D) Buenos Aires 00386; (C) Buenos Aires 0398; Buenos
Aires 408; Buenos Aires 415; Buenos Aires 540

1. (SBU) Summary: Based on limited progress in agricultural
negotiations, farm sector leaders extended their truce with the GOA
from May 2 to May 6, but in the absence of any additional progress
it appears likely that strikes will resume in some fashion. GOA and
farming leaders did not reach agreement on variable-rate export
taxes (the priority issue in negotiations), nor have wheat or beef
exports resumed despite earlier reports of government agreements to
allow them. Farm leaders stated they will take no additional action
to disrupt commerce before May 7 beyond the protests already
organized. Any measures taken after that date will depend on
progress in negotiations. Farmers say they hope to avoid a repeat
of food shortages that risk reducing public support. The Kirchner
Administration has been unyielding, with nary a concession in sight.
(Press articles cite Nest Kirchner as saying privately he wants the
rural leaders on their knees.) The result has been minimal progress
at the negotiating table. Talks continue late May 6. End Summary.

Wheat Exports Open?
-------------------

2. (U) Under the wheat agreement reached between the rural sector
leaders andthe government, the GOA has agreed to open exports for
100,000 tons to Brazil (Argentina has an estimated 1.2 to 1.5
million tons left to export from this year's crop) and will press
wheat exporters to pay higher prices to producers. As of May 6 this
agreement is still pending implementation.

Beef Exports Open
-----------------

3. (U) On May 5, new Economy Minister Carlos Fernandez announced the
reopening of beef exports, although contacts in the industry
indicate that actual shipments were negligible and one daily
headlined May 6 that exports had not resumed. Rather than fully
liberalizing beef exports, the new regulation actually expanded the
authority of the GOA to restrict exports of beef and beef products
in the future. The revised regulation failed to include the
previous week's agreement with farm groups to allow more cooked beef
exports and increase the export quota. Control of beef exports will
now be in the hands of the National Bureau of Agricultural Trade
Control (Oncca), headed by Ricardo Echegaray, a former Customs
Director.

Agricultural Sector Response
---------------------------

4. (U) So far agriculture groups have organized several protests
since the formal end of the truce in the farm strike on May 2, but
agreed that they will not block the highways or take other measures
to disrupt commerce (at least for now). Rural sector leaders are
critical of the beef export terms, and remain skeptical about the
eventual implementation of any agreement reached with the GOA. At
the same time, they appear anxious to avoid giving the GOA any
excuse for breaking off the wider negotiations May 6. Leaders
stated they will take no additional action before May 7, and any
measures taken after that date will depend on progress in
negotiations. Farm leaders emphasize that they want to avoid food
supply disruptions in major cities and will not resume a total
blockade of major roads. One option under consideration is to block
trucks moving soybeans and grain to the export terminals in order to
prevent the GOA from collecting the export tax. The farm groups
are, however, under heavy pressure from their members to take
action. One local group is currently blocking movement of
agricultural products on a major road close to the city of
Reconquista in northern Argentina.

Administration Tactics - More of the Same
-----------------------------------------

5. (SBU) For the Kirchner administration, the stakes in the
confrontation with the agricultural sector quickly became political
as CFK's team apparently decided that any concession to the striking
farmers would be viewed as a sign of weakness. When Economy
Minister Martin Lousteau was forced out, there was some speculation
that the Kirchners would use him as a scapegoat and seize his
departure as an opportunity to retract some of their agricultural
policies. The Kirchner Administration has been unyielding, however,
with nary a concession in sight. Local press reports target
ex-President Nestor Kirchner as taking the toughest line. They
quote him as privately saying he wants the agricultural sector
leaders on their knees before an agreement is reached and report
that he has vetoed several concepts for agreement emerging from
talks. The result has been minimal progress at the negotiating
table, with no further progress expected in the negotiations May 6,
though talks continue late in the day.

Comment
-------

6. (SBU) We do not see an imminent breakthrough in negotiations, and
farm groups will be under heavy pressure from their members to take
action. Both sides appear to be preparing for a long dispute and
are looking for ways to retain public support should strikes resume.
The agriculture sector is considering resorting to only partial
blockades in order to avoid food shortages and public ire, while the
Administration in the form of President Cristina Fernandez de
Kirchner continues blaming the farm organizations' last strike and
its food shortages for rapidly rising inflation.

WAYNE

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