Author Topic: Argentina: Another Farmers' Strike  (Read 345 times)

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Argentina: Another Farmers' Strike
« on: August 26, 2009, 11:12:28 AM »
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Argentina: Another Farmers' Strike

www.stratfor.com

STRATFOR TODAY » August 26, 2009 | 1615 GMT

Argentine farmers have once again decided to go on strike, promising to withhold meat and grain exports for a week. The move puts pressure on an already stressed Argentine government and underlines the influence wielded by a united agricultural sector.

Argentine farmers’ unions announced Aug. 25 that they will go on strike for a week beginning Aug. 28. The strike is in reaction to Argentine President Cristina Fernandez de Kirchner’s decision to veto a measure that would have granted temporary export tax relief to farmers suffering from a devastating drought. The strike is reminiscent of the March 2008 strikes that paralyzed transportation throughout the country.

The farmers’ decision adds a great deal of pressure to Fernandez, who is already struggling to hold the reins of power in the face of a faltering national economy and direct challenges from rival politicians. As an Argentine politician, Fernandez must satisfy the demands of three groups that form the core of Argentine political power: businesses, unions and the provincial governors. These three constituencies generally make or break public support for a presidency through rhetorical support of the federal government’s policies and (in the case of the unions) the direct delivery of votes.

But under Fernandez’s rule, a fourth font of political power has emerged: the farmers. Grains, meat and other agricultural goods form the core of Argentina’s exports, and export taxes are a critical source of government revenues. Furthermore, as a net exporter of food, Argentina relies heavily on domestic production to satisfy domestic demand — meaning that the farmers also control every Argentine’s dinner.

Traditionally, farmers have grouped together in smaller organizations that the government could play off of one another when necessary. However, in the past several years, agricultural leaders have united in opposition to government policies, especially export taxes that can go as high as 45 percent and provide 10 percent of the government’s tax revenue. Along with price controls, this heavy taxation has pushed many farmers’ balance books into the red, as evidenced by the rapid shift of agricultural investment to neighboring states and into crops like soybeans that are not consumed domestically and thus not subject to price control. The net result has been a rapid decline in the production of key crops. The area of land devoted to wheat and corn has declined 50 percent and 41 percent respectively over the past two years — an indication that farmers lack the will and/or ability to invest in the soil. This year’s drought, combined with low profitability, could turn Argentina into a net importer of wheat and meat by 2010.

Faced with high taxes and an investment climate in decline, farmers have found it much easier to unify against the government than before making agricultural groups a force to be reckoned with. The farmers know exactly how powerful they are, but they have to walk a line between pressuring the government and losing credibility with the population, which would be inconvenienced by prolonged road closures or blockades on internal food transportation networks (which could prevent goods from arriving at markets). Should the farmers go too far, they could alienate the public and give Fernandez leeway to take severe action. The farmers also have to look after their own bottom lines, and every day on strike is a day not spent in the fields.

So far, the farmers have not threatened to block central transportation routes during their upcoming strike; they will limit themselves to restricting grain and meat sales. The strike’s effect on Argentina’s exports will have limited effects because of existing stockpiles of some commodities (such as soy), and the fact that a port worker strike has already effectively blocked 90 percent of all exports for the past five days, and there is no fast resolution in sight.

This is not to say that the farmers will be unwilling to push the government as far as they can. But it is difficult to say at this point how far they will go, and it is safe to say that they have a number of cards to play, and this is a game that will continue for a long time to come.