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Argentina's Kirchner Rebuked In Soybean-Tax Defeat
Wall Street Journal
July 18, 2008

By Matt Moffett

Vice President Helps Senate Reject Plan To Increase Tariff

BUENOS AIRES -- In a rebuke to the government of President Cristina Kirchner, Argentina's Senate rejected an increase in the soybean-export tax, with Mrs. Kirchner's own vice president casting the tiebreaking "no" vote.

The 37 to 36 defeat is a huge political setback for the leftist government, which had invested an enormous amount of its credibility and political capital in the measure. Since the government announced the tax increase in March, Mrs. Kirchner has seen her poll ratings decline, endured massive street demonstrations and watched the economy stutter.

Now, for Mrs. Kirchner to get her eight-month-old presidency back on the rails, analysts said, she will have to try to reinvent herself and adopt a more consensus-based governing approach, rather than restricting decision-making to a tight inner circle centered around her husband, the ex-president N stor Kirchner.

The vote was "a rejection of a style of governing based on confrontation and intimidation, a style that has polarized Argentine society," said Riordan Roett, a Latin American specialist at Johns Hopkins University. If the Kirchners fail to change their stripes despite the Senate's repudiation of the government, Mr. Roett said, it could portend more conflict in Argentina.

The debate started four months ago with an effort by the government to change the 35% soybean export tax so that it would fluctuate in line with international prices, which have been rising in recent years.

The tax fight soon took on larger overtones. Farmers, who have been the motor behind Argentina's recent economic resurgence, complained that the tax was being imposed without consultation and assailed the Kirchner government as heavy-handed.

Moreover, opponents noted the soybean tax is different from most Argentine levies, in that the federal government doesn't have to share 30% of the revenue with provincial administrations. Farmers claimed the Kirchners wanted to use the additional tax revenue, estimated at about $1 billion, to fund political patronage.

Farm leaders and others watch, on an open-air screen in Buenos Aires, the Argentine Senate move toward rejection of a soybean-export tax increase.

In response, the Kirchner government tried to frame the tax fight as nothing less than an effort to preserve Argentine democracy. The Kirchners repeatedly characterized tax opponents as "coup-mongers" and tried associating them with Argentina's repressive military dictatorships of the 1970s and early 1980s. Farm interests and tax opponents wanted "to remove the government from office and destabilize the nation," said Mr. Kirchner, who is leader of the governing Peronist party.

On Tuesday, in the run-up to the vote, the government and farm interests held competing demonstrations in Buenos Aires. The farmers, who have won sympathy from the urban middle classes, attracted an estimated 200,000 supporters, substantially more people than attended the pro-government march. While support for farmers rose, the government was increasingly forced to rely on the backing of groups that many Argentines consider unacceptable, such as Peronist unions, which have often been linked to corruption, or bands of piqueteros, unemployed people from the barrios who depend heavily on government social programs.

Early Wednesday, the government expressed confidence that it had lined up a majority of the 72 senators to vote in favor of the proposal. A handful of senators deserted the government during the day, leaving the vote deadlocked 36-36 early Thursday morning. At 4:30 a.m. Thursday, it fell to Mrs. Kirchner's vice president, Julio Cobos, in his capacity as president of the Senate, to break the deadlock.

Mr. Cobos, who was elected last year on Mrs. Kirchner's ticket but angered the Kirchners in recent weeks by trying to negotiate a deal over the tax with government opponents, said he couldn't in good conscience vote in favor of it. He said it would cause further polarization among Argentines.

"History will judge me," Mr. Cobos, a former engineering professor and provincial governor, said during a 40-minute speech explaining his position. "I don't know how. And pardon me if I'm making a mistake."

Argentine political columnist Joaquin Morales Sola wrote that Mr. Cobos's vote marked the end of a period when the Kirchners could pretty much govern Argentina as they pleased.

That political style is largely a reflection of Mr. Kirchner, who took office in 2003 amid an economic collapse that had triggered street demonstrations that ousted a succession of Argentine presidents.

Mr. Kirchner, formerly a governor from Patagonia, managed to reimpose order and restore economic growth through an autocratic governing style that elevated nearly every issue into a moral crusade and often demonized political opponents. Mr. Kirchner helped get his wife, a senator, elected in October.

Argentines, who were willing to accept the Kirchners' strong-armed style during years of economic crisis, have become increasingly weary of the couple's combativeness and unwillingness to compromise, analysts said.