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Cablegate: Farm Strike Resumes in Argentina

VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0615/01 1291857
ZNR UUUUU ZZH
R 081857Z MAY 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0995
INFO RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS BUENOS AIRES 000615

STATE FOR ECON WHA/BSC
USDA FOR FAS/OA/OSTA/OCRA/ONA/OGA/OTP/OCBD/OAO/OFSO
MERCOSUR COLLECTIVE

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EAGR ECON EINV PGOV ELAB PHUM AR
SUBJECT: FARM STRIKE RESUMES IN ARGENTINA

REF: Buenos Aires 0592 and previous

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Summary
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1. (U) Farm groups announced late on May 7 that they will resume
the farm strike due to the GoA's refusal to discuss making any
changes to the variable export tax regime. The farm groups will
continue protests for the next 8 days (through May 15), when they
will meet again to discuss their next steps. The strikers say they
will focus during this period on blocking export of grains and
oilseeds, which prevents the GoA from collecting the associated tax,
and on seeking the political support of provincial governors and
mayors. Some local farm groups also announced "selective" road
blocks around the country. Press reports indicate that Cabinet
Chief Alberto Fernandez admitted to the error of export taxes
increases, only to repudiate his statements at the command of former
president Nestor Kirchner later the same day. The apparent
"miscommunication" is further evidence of a widely rumored divide in
the administration, and fuels rumors that Fernandez could be
replaced on May 25. Fernandez's departure would pose serious
challenges for future negotiations, as he is the GoA decision-maker
with the greatest openness to dialogue. It would also have much
wider implications as Fernendez is seen as the chief "moderate"
voice in the government. End Summary

2. (U) Farm groups negotiating with the GOA announced on May 7 that
they were resuming the farm strike that caused major disruptions in
Argentina during March. They are, however, changing the form of
protest to avoid disrupting food supplies to the major cities and
other commerce, as occurred during the last strike. The farm
leaders asked local producer groups to protest on the sides of the
road and not block food shipments or other traffic. They are also
asking producers to stop marketing grains and oilseeds for export
during the protest so that the GOA cannot collect the export tax.

3. (SBU) The decision on any additional measures beyond refusing to
sell grains and oilseeds during the strike was left to local protest
groups. The most prominent protest group in Entre Rios province,
led by charismatic strike leader Alfredo De Angeli, has already
announced that they will block trucks carrying grains and oilseeds,
as well as trucks moving international trade with Brazil and
Uruguay. Elsewhere, local farmer farm groups have announced
additional "selective" road blocks. The Gendarmeria and National
Police are clearly concerned about being put in a position of having
to confront striking producers, who have the widespread sympathy of
the rural public and even in the security forces.

4. (SBU) Resumption of the farm strike came after meetings on May 7,
in which the GoA continued its refusal to discuss any changes to the
variable export tax. This variable tax at the heart of the dispute
was introduced on March 11 and initially increased the export tax on
soybeans to 44% (the tax varies as export prices go up or down) from
a previous fixed rate of 35%. The GOA has consistently refused to
discuss the variable export tax regime with farm groups, despite
indications in recent days that the GOA was considering some
modifications. (We understand confidential talks had identified
possible modifications several weeks ago but that ex-president
Nestor Kirchner had rejected them.

5. (SBU) The failure of the GOA to implement the few agreements
reached during the truce in the strike was also a factor in its
resumption. The GoA agreed in discussions during April to reopen
exports of beef and wheat. Despite these agreements, the GoA
continues to restrict exports to guarantee lower domestic prices.
In the case of beef, the most recent measures implemented by the GoA
actually increases its control over beef exports.

6. (SBU) Contacts in the grain industry indicate that they have port
storage facilities filled to the maximum. The farm strike in March
caught them off guard, and they were forced to suspend soybean
processing and exports at the start of the harvest season. The
decision to block marketing of grains and oilseeds for export was
widely expected and they used the truce in the farm strike to fill
their storage facilities to the maximum. The soybean production in
storage should allow them to continue soybean processing (crushing)
up to 30 days before having to shut down their export operations.
Soybeans and soybean products are Argentina's largest export good.


7. (SBU) The farm groups reiterated on numerous occasions that they
are not seeking a confrontation with the public and do not want to
disrupt food supplies. They have also expressed a strong desire to
reach a negotiated agreement with the GoA, despite its hard-line
position. In an effort to gain allies, the farm groups will meet
with provincial governors and mayors to seek their political support
during the next week.

-------
Comment
-------

8. (SBU) It appears that the hard-line position espoused by former
president Nestor Kirchner (NK) has carried the day in the GoA's
negotiations with the farm sector. If anything, the GoA's
regulatory grip on the farm sector is now greater than at the start
of the strike due to additional controls on the beef sector to
prevent supply shortages during the dispute. The former president
is widely quoted as expressing a desire to "bring the farm sector to
its knees." Local press reports that rural representatives allege
Cabinet Chief Alberto Fernandez admitted to the error of export
taxes increases, but later the same day retracted the statement at
NK's command after NK saw initial press stories about it. The
apparent reversal is further evidence of the widely rumored divide
in the administration, a battle the hard-liners seem to be winning
and one that fuels rumors Fernandez will be replaced on May 25.
Local commentators are writing that Nestor Kirchner wants to force
the ag sector to strike and cause food shortages so they will lose
public support and increase support for firm government actions.
This strategy or the departure of Alberto Fernandez would pose
serious challenges for future negotiations. Alberto Fernandez is
widely seen the senior person in the GoA with the greatest openness
to dialogue. In general, Fernandez has been seen the leading voice
for moderation among senior official on a range of issues. Local
contacts have expressed amazement that the GoA has managed to turn
the bonanza of high world prices for Argentina's agricultural
exports into a major political and economic crisis. END COMMENT

WAYNE

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