News Center

Tariffs divide Argentine ruling party
Financial Times
June 27, 2008

By Jude Webber

Outside Argentina's Congress, an unusual campsite has sprung up.

Half a dozen large tents emblazoned with banners, slogans and flags have been erected by pro-government movements opposite the parliament building, where deputies began discussing changes to farm export tariffs this week. The changes have sparked the worst political crisis since 2001.

Meanwhile farmers, whose opposition to a new sliding-scale export tariff regime introduced in March by President Cristina Fern ndez has triggered a conflict lasting more than 100 days, have set up a rival tent.

The farmers' tent had a giant inflatable bull, while the government supporters had inflatable penguins in reference to Ms Fern ndez's husband and predecessor, N stor Kirchner, who hails from Argentina's far south. One penguin had a big red heart, the word Cristina and the slogan "Kirchner leads".

Inside Congress itself, where preliminary hearings have been held this week, the government has a comfortable majority in both houses. But divisions in the ruling bloc over the tariffs have sparked days of frantic arithmetic as parliamentarians assess whether the numbers for or against the government's bill add up.

Ms Fern ndez sent her new tax regime to Congress in a bid to end a bitter conflict that halted grain exports in the world's second largest corn exporter and third largest soy producer and sparked road blocks and serious shortages of food and fuel.

The move was an unexpected concession, although the government's crushing majority in Congress could have been expected simply to rubber-stamp measures.

However, the conflict has opened such divisions in the country, and fractures within the ruling Peronist party, that the government is not assured of victory, analysts say.

"Next year, half the deputies and a third of the senators have to be re-elected and those who have to vote on this bill have to return to their provinces. Many will be seeking re-election," said Carlos Germano, a political analyst and pollster. "It's going to be very difficult."

A number of Peronist parliamentarians have already made clear that they want changes to the bill - a slap in the face to Ms Fern ndez and to Mr Kirchner, who is now head of the party.

Roberto Urqu a, a Peronist senator and owner of a big food and edible oils company, quit as head of an important budget commission, saying "I can't support the government's current proposal". His place was taken by a government loyalist.

Opposition parties, who are dwarfed in Congress by the Peronists and their allies, were searching for the cohesion that has so far eluded them.

The opposition met farm leaders yesterday in order to hammer out a rival bill keeping intact the sliding-scale scheme, which the government defends as fair, but reducing the rates to levels more acceptable to farmers.

Despite increasing cracks in the government ranks, the opposition bloc has yet to emerge from the shadow of the Peronists and set the agenda.

Meanwhile, some dissident Peronists have also floated plans to present a series of amendments to the government bill.

The government took out full-page adverts in newspapers on Wednesday to highlight what it said was a rise in exports and big increases in profits for farmers despite the 100-day conflict. It said grains exports increased by 28.8m tonnes in the first five months of 2008, resulting in a profit after export tariffs that was 63 per cent higher than during the same period last year.

But Manuel Solanet, an economist, said the cost of cultivating a hectare of soy had risen 58 per cent in the first half of the year.

"This has neutralised the effect of higher international commodities prices," he said.