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Cablegate: Argentine Farm Strike Suspended

VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0686/01 1412115
ZNR UUUUU ZZH
R 202115Z MAY 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 1101
INFO RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 000686

USDA FOR FAS/OA/OSTA/OCRA/ONA/OGA/OTP/OCBD/OAO/OFSO

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: EAGR ECON EINV PGOV ELAB PHUM AR
SUBJECT: ARGENTINE FARM STRIKE SUSPENDED

REF: Buenos Aires 0665 and previous

-------
Summary
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1. (SBU) Under heavy fire from other sectors and political
supporters in provincial governments, Argentina's major farm groups
announced May 19 that they are again suspending their ten-week
strike in order to hold discussions with the GoA. This latest
suspension of the on-again, off-again strike comes earlier than
previously planned and will take effect early on May 21. The farm
groups are continuing with their plans to hold a large demonstration
on May 25, Argentina's Independence Day, in Rosario, the second
largest city of Argentina and the center of the Argentine soybean
region. The planned demonstration will conflict with (and possibly
overshadow) the official ceremony planned by President Cristina
Fernandez de Kirchner in Salta on the same day, where she will also
celebrate the fifth anniversary of the start of the first Kirchner
administration. The timing of the demonstration puts heavy pressure
on the GoA to reach an agreement rapidly. End Summary.

2. (U) The farm organizations leading the agricultural strike
announced on May 19 that they will suspend the strike in order to
enter into discussions with the GoA. The truce will start just
after midnight early on May 21, when producers will resume marketing
grains and oilseeds for export. The farm groups had been holding
out for an explicit signal that the GoA is prepared to modify the
variable export tax on soybeans. In the face of continued refusal
by the GoA to hold discussions during an ongoing strike, however,
they agreed to suspend the strike. Discussions with high-level
officials in the GoA will reportedly start on Wednesday, May 21,
after the strike is lifted.

3. (SBU) The farm groups have been pressured to lift the strike
since they announced its continuation on May 15. The farm sector's
decision to prolong their action caught many by surprise given that
it came in the wake of a more conciliatory speech by President
Cristina Fernandez de Kirchner on May 14, when she called for
resumed dialogue (Buenos Aires 0652). Other important sectors
joined the call for resumed dialogue over the weekend, when a joint
statement calling for suspension of the strike was issued by the
influential Industrial Union of Argentina (UIA), Association of
Argentine Banks (ADEBA), Argentina Chamber of Construction,
Argentine Chamber of Commerce, and the Board of Commerce of Buenos
Aires. Cordoba Governor Juan Schiaretti and Santa Fe Governor
Hermes Binner, two of the strongest supporters of the farm sector
and leaders of two of the most important agricultural provinces,
also called for producers to suspend the farm strike and meet with
the GoA. The Catholic Church has also called on both sides to resume
talks.

4. (SBU) Press coverage of the decision to extend the strike was
generally negative, adding to the pressure to enter into
discussions. While press reports had been generally sympathetic to
the demands of the farm groups and critical of the GoA, the press
changed its tone after the May 15 extension of the farm strike.
This shift in coverage appears to be mainly due to the strong public
desire to see an end to the strike, as indicated in a number of
public opinion polls published at the same time as the extension of
the strike, although one local media source claims that an agreement
between the largest media chain and the GoA to patch up their
differences was also a factor in the shift in coverage.

5. (SBU) Local contacts report that the farm strike has been highly
effective in stopping movement of grains and oilseeds to the major
processing centers and ports. Soybean processors, in particular,
have been drawing down stocks held at their port processing
facilities in order to stay in operation. Contacts in the industry
estimate that they would have had to shut down their operations
(soybeans and soybean products are Argentina's largest export items)
within a week to ten days without the strike's suspension.
The continued strike also exacerbated the weakening of the Argentine
peso in recent weeks. The strike contributed to the public's
perception of increasing economic uncertainty, driving ordinary
Argentines to seek safety in the dollar and reduce peso holdings.
Simultaneously, the strike reduced exports and lessened the inflow
of foreign currency into the country. This combined impact on both
demand and supply of dollars required much greater intervention by
the Argentine Central Bank to stabilize the peso (by selling dollars
locally).

6. (SBU) The GoA has taken some steps to address one of the
concerns of the farm groups, the failure of the GoA to implement
agreements on wheat and beef negotiated in April during the last
truce in the farm strike. The GoA has announced that it will accept
registrations for 100,000 tons of wheat to export to Brazil. It
also started to approve beef export registrations on May 15,
although export levels continue to be well below normal. These
represent a step forward, although overall exports of beef and wheat
continue to be severely restricted.

7. (SBU) COMMENT: The suspension of the strike is a positive step
for both parties and opens up the opportunity to reach an agreement,
although up to now the GoA has refused to discuss any modification
of the variable export tax on soybeans, which leads the list of farm
sector complaints. The falling popularity of the Administration
(Buenos Aires 0681) and increased economic cost of the farm strike
is, however, increasing pressure to negotiate. The farm protest
demonstration on May 25, Argentina's Independence Day, in Rosario,
which is the center of the Argentine soybean region, has increased
pressure to reach an agreement rapidly. The planned demonstration
will conflict with (and possibly overshadow) the official ceremony
led by President Cristina Kirchner in Salta on the same day, where
she will also celebrate the fifth anniversary of the start of the
first Kirchner administration. The mayor of Rosario, a socialist,
gave a hard hitting speech May 19 making clear he sees an
opportunity to make a lot of political "hay" this weekend.
Nonetheless, if previous GOA/farm sector meetings are any
indication, a definitive resolution is by the 25th is hard to
imagine. Both sides remain bitter. We are told that Nestor
Kirchner still believes the farm sector "betrayed" the government in
earlier negotiations, while at least some of the farm sector leaders
feel the same way about the government. We are told the outlines of
an agreement have been discussed between negotiators, but confidence
will clearly need to be created to reach an accord. END COMMENT.

WAYNE

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