Highlights
– Argentine government increases export tax to 44 percent in March 2008
– Argentine farmers protest for weeks
– Argentine Economic Minister resigns on April 24, 2008
– Relations between the government and agriculture sector will likely remain strained in the near-term to mid-term
In late 2007, one of Argentine President Cristina Fernandez de Kirchner’s first acts as President was increasing taxes on agricultural export items by nine percent putting rates at 35 percent. On March 11, 2008 President Kirchner and her administration again implemented a new export tax of 44 percent, enraging farmers throughout the country. Kirchner stresses the profit from the higher taxes will be used to keep the cost of staple foods to a minimum as inflation rises rapidly. The nation’s agriculture sector immediately responded to the tax increase by creating roadblocks and halting sales of grain and beef, resulting in empty food shelves in many markets around the country. In addition to raised taxes, Argentina’s Economic Minister resigned in late April adding to citizens’ anxiety. Currently, negotiations between the two sides are ongoing. Neither group has indicated they will stand down likely causing strained relations in the near to mid-term.
Tax Increases Lead to Demonstrations
Media sources report farmers have grown increasingly discouraged following former President Nestor Kirchner decision to limit beef exports in 2006 in order to guarantee lower priced beef in the country. This is especially important, as Argentina is reportedly one of the world’s top suppliers of beef. Since then, farmers have been hit with additional nine percent tax increase, which now stand at 44 percent, an increase of nine percent. Current president Cristina Kirchner has refused to rescind the new export tariffs and bans implemented in March. In early April, the government stated it would lift the existing ban on beef exports, but announced a few weeks later that the ban would remain. Furthermore, the government recently cancelled meetings with the wheat sector. In addition to the cancelled meeting and refusal to lift the beef ban, Kirchner has accused farmers of being “greedy oligarchs” and “unpatriotic plotters intent on overthrowing the government who concentrate too much on cash crops at the expense of products needed for Argentine consumption, like dairy and meat.”
Farmers protested the tax increases by creating roadblocks and refusing to sell grains and beef all over the nation, ultimately causing food shortages. The agriculture sector agreed to a truce while negotiations between the government and farmers were being held. On May 2, 2008 however, the truce expired and no agreement had been reached. Thousands of farmers resumed demonstrations by blocking roads and limiting the sales of agricultural goods; however agricultural leaders called for less extensive demonstrations than the preliminary protests. Farmers stated that protestors would not repeat the widespread roadblocks that caused so many problems in March.
Economic Minister Martin Lousteau Steps Down
On April 24, 2008 Economic Minister Martin Lousteau resigned from his position. Experts speculate Lousteau disagreed with several economic policies of former president Nestor Kirchner who still holds strong power in his wife’s administration. Carlos Fernandez, the head of the country’s tax collecting agency was appointed to the position. Media sources report Fernandez to be “closely aligned” with Mr. Kirchner’s views, who will remain in charge of economic policy. Experts state Mr. Kirchner and his supporters are unlikely to address the rising inflation and weakening economic situation.
Outlook
It is unlikely Argentina will experience widespread food shortages for a second time as farmers will concentrate on negotiating with the government in order to resolve the current export tax dispute. However, it does not appear Kirchner’s administration will focus its efforts on reducing the export taxes or improving the weakening economic situation. Nonetheless, if an accord can be reached between the beef sector and government in the near term, it is likely other agriculture divisions will follow, which may improve relations between the two groups.
Kirchner has experienced low popularity ratings since her inauguration five months ago. With Argentine citizens becoming increasingly frustrated with current economic conditions, it is likely her popularity rating will decrease even more in the near to mid-term. Additionally, it is likely several of her administration’s financial policies will continue to be challenged as rising inflation and deteriorating economic conditions continue to plague Argentina.
