agriculture - Argentina - commodities - taxes

Argentine Senate blocks controversial soybean tax

Thursday 17 July 2008

Argentina's President Cristina Fernandez-Kirchner saw her proposed tax on soybean exports defeated by one vote after weeks of farmers' protests over the disputed levy on the commodity.

BUENOS AIRES - The Argentine Senate on Thursday rejected a controversial tax hike on soy exports that set off months of anti-government protests by farmers, dealing a sharp political blow to President Cristina Fernandez.

In a stunning outcome, Vice President Julio Cobos cast the deciding vote against a government-proposed bill to increase the tax after a Senate vote ended deadlocked in a 36-36 vote.

Hundreds of farmers and their supporters who watched the nationally televised debate on big-screen televisions set up in a Buenos Aires park erupted in cheers after Cobos announced his vote.

A hushed Senate chamber awaited the decision from Cobos, a member of the opposition Radical Union Party who has clashed with Fernandez over the tax bill.

Fernandez introduced the tax in March, sparking a political crisis that has divided Argentina and interrupted agricultural exports. More than 300,000 people attended rival rallies for and against the export taxes in the capital on Tuesday.

Congress has largely been a rubber stamp for Fernandez and her husband and predecessor, Nestor Kirchner, who oversaw Argentina's spectacular rebound from a deep recession at the start of the decade.

But some Peronist senators from rural provinces have broken ranks with Fernandez over the soy tax as farm groups persuaded them it would hurt the agricultural sector.

The proposed sliding-scale tax on grains and oilseeds would eliminate a fixed-rate tariff and link levies to global prices. At current prices, the new regime raises export duties on soy, which is Argentina's top crop and represents 24 percent of total exports, bringing in $13 billion last year.

In the bitter fight over how to make the most from a soy income bonanza, Fernandez and Kirchner have accused farmers of backing a bloody military dictatorship 30 years ago and trying to destabilize Argentina's historically fragile democracy.

Farmers have blocked highways as part of their protests, sometimes causing food shortages and driving up prices for basic goods.

The government has pledged to spend proceeds from the export duty on rural schools, roads and clinics and says it is a fair way to redistribute wealth.

Farmers, fed up with price caps and export curbs on wheat and beef, say they are again being squeezed to finance growing government spending.

Fernandez took office in December, pledging to continue her husband's policies, but her approval rating has plunged as many Argentines see her as being inflexible in the farm dispute.

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