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Cablegate: Argentine Farm Strike Suspended, Grain Trade Resumes

VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0860/01 1752221
ZNR UUUUU ZZH
R 232221Z JUN 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 1404
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 000860

USDA FOR FAS/OA/OCRA/ONA/OGA/OFSO

SIPDIS
SENSITIVE

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

REF: Buenos Aires 0829 and previous

1. (SBU) Summary: Agricultural producers formally suspended the
farm strike, and trucks carrying grains, oilseeds, and cattle
started to arrive at processing plants and export terminals over the
weekend. Producers and truckers have lifted most of the roadblocks
around the country and, unlike the last strike suspension (two weeks
ago), it appears that some normal trade is resuming this week. The
dispute over the variable export tax continues, but the battlefield
has changed, as both sides focus on the Argentine Congress to decide
the issue. Faced with some wavering in its ranks, the GOA now
admits that it may be necessary to make some changes in the proposal
it submitted to Congress for ratification, but continues to insist
that the basic variable export tax is untouchable. It remains to be
seen whether the GOA will agree to modifications to the draft law
acceptable to the farm sector to resolve the crisis or will try to
use its large majority to ensure that the Congress simply ratifies
the export tax. Producers are no longer on the highways, but they
could return quickly if Congress simply approves the current export
tax system. End Summary.

-------------------
Grain is Now Moving
-------------------

2. (SBU) Farm groups leading the agricultural strike formally
suspended it at midnight on June 20 in order to concentrate on
lobbying Congress to make changes in the government's variable
export tax proposal. Contacts in the grain trade report that
substantial amounts of grains and oilseeds are now moving to the
main processing plants and export terminals. Movement of trucks
with grains and oilseeds started slowly on June 21 and has picked up
since then. Volumes entering Argentine ports on June 23 were still
not up to normal, but the grain trade is in the process of
normalizing. This is a major change from the last time the strike
was suspended two weeks ago, when almost no movement of grain took
place due to farmers holding back grains and a decision by truckers
to continue blocking highways. Contacts report that the grains
being delivered were previously contracted for sale, but that
producers had been unable to make deliveries for the last 45 days
because of the farm dispute. Prior to the suspension of the strike,
a reported 120 ships were delayed in Argentina, accumulating
substantial demurrage charges while waiting to load and transport
grains and oilseeds.

3. (SBU) Movement of other products has also started to normalize as
producers and truckers lifted roadblocks throughout the country.
Fuel trucks are now reaching rural areas and cities that were
suffering shortages due to the blockades, and supermarkets that were
suffering spot shortages are now able to resupply. The livestock
market in Liniers (the main market outside of Buenos Aires) on June
23 had its busiest day since 1991, with 27,000 head of cattle being
delivered for sale. This is substantially more than the 10,000
cattle delivered during the entire preceding week. Producers took
advantage of the break in the strike to sell cattle that have been
ready for market for some time. Many were anxious to sell their
cattle due to very dry weather that has limited the amount of
pasture available.

--------------------
All Eyes on Congress
--------------------

4. (SBU) The battlefield in the debate over variable export taxes
has now changed to the Congress (reftel). While the government has
a large majority, it faces heavy pressure from producers and members
of its own coalition to make changes in the variable export tax
regime. The GOA has backed down from its original position that the
Congress should approve the government proposal without
modifications ("not even a comma"). It continues to insist,
however, that any modifications leave intact the variable export tax
regime (the export tax was 46 percent on June 20) and that changes
be limited to supplemental measures to address other concerns of
producers, including modifying export restrictions currently in
place for wheat, beef, and dairy, as well as possible input
subsidies.

5. (SBU) The Congress started debate on the variable export tax on
June 23 amidst heavy lobbying by producers and elected officials
from agricultural regions. President Fernandez de Kirchner (CFK)
also agreed to meet with the four main farm leaders the same day in
an effort to rebuild confidence. She had criticized the same farm
leaders the previous week for blocking highways (reftel). The farm
leaders will reportedly ask that the government suspend the export
tax until it is approved by Congress, and will request discussions
on other agricultural issues such as dairy products, livestock
production and other products affected by heavy government
intervention to maintain low domestic prices.

6. (SBU) COMMENT: The decision of CFK to send the variable export
tax to the Congress has significantly eased tensions in Argentina.
While it is highly unlikely that the CFK administration will agree
to the farm organizations' request to suspend variable export taxes
pending Congressional consideration, it remains to be seen whether
the GOA will agree to farm-friendly modifications to the draft law
to resolve the crisis or will try to use its large majority and
power of the purse to ensure that Congress simply ratifies the
export tax. For the five years the Kirchners have been in power,
they have pushed through legislation virtually at will. Times have
changed. This is their first test in maintaining party discipline
in this new situation. For example, the provinces most deeply
involved and affected by the crisis account for more than half of
the deputies in the Congress. Contacts in rural areas report that
mayors who came out in support of the government during this dispute
have been forced to run their municipalities from Buenos Aires due
to their rural constituents' hostility, and numerous deputies voting
with the government would likely face the same fate. On the other
hand, Nestor Kirchner (in his peronist party role) and others are
working hard to maintain deputies' loyalty. Producers are no longer
on the highways, but they could return rapidly if they are unhappy
with the outcome in Congress. END COMMENT.

WAYNE

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