Economy

Conflict with farmers breaks out sooner than expected

12th March 2020

By Fermín Koop

Conflict with farmers breaks out sooner than expected

The possibility of a new conflict with farmers was always in the air with the return of a Peronist administration, but the government certainly didn’t expect it to come so soon.

</p> <p>Alberto Fernández’s administration finally made use of the authorization that <a href="https://gettheessential.com/economy/2019/12/19/emergency-economic-bill-makes-its-way-through-congress-alberto-fernandez-tax-hike-pension-reform">Congress granted in December</a> to raise export levies on soybeans, soymeal and soy oil to 33% from 30%, seeking a larger tax collection to deal with the country’s debt. But the government was hoping that Fernández’s <a href="https://gettheessential.com/politics/2019/05/23/who-is-alberto-fernandez">negotiating style</a> would be enough to avoid a revival of March 2008, when massive farming protests broke out and escalated for months after a government attempt to change how export duties were calculated.</p> <p>Yet despite negotiations and concessions granted to the sector, the agreements ultimately broke down when the farming sector leadership could not convince their base that their deal with the government was good enough.</p> <p>As negotiations broke down, the country’s main farm groups held a four-day sale lock out with public protests this week against the hike, which they say is crippling their sector. The strike took place on the same date as the 12-year anniversary of the 2008 conflict, and it meant a significant drop in the number of grains and cattle sold and crossed accusations between the government and the farming sector.</p> <p>“We sow our land with a tax hike by the Macri administration and now harvested with another government and another tax hike. It’s like they want to provoke us,” said Guillermo Ulla, a soy farmer from Bell Ville, Córdoba province, told <em>The Essential</em>. “The new increase might not seem significant but it is for us, we’ve been dealing with a border-line situation for too long.”</p> <h2><strong>Pressure from producers</strong></h2> <p>The 33% export levies are only applicable to soy farmers that sell more than 1.000 tons, about 15.000 farmers, according to government estimations. Those who sell less won’t be subject to the increase. Meanwhile, taxes were lowered for sunflower, cornmeal and wheat flour.</p> <p>The fact that the increase only affects a part of the soy producers and that other taxes were lowered led to an open negotiation between the main farming lobby groups and the national government, trying to avoid a strike. Nevertheless, no agreement was possible as pressure scaled up from agriculture producers, some of which remember that exceptions for small farmers not always worked well during the previous conflict in the Kirchnerite decade.</p> <p>After cutting taxes shortly after taking office, former president Mauricio Macri felt forced to increase export duties on soybeans, soymeal and soy oil in 2018, from 24.7% to 30%, leading to an initial discontent. This was aggravated with the new hike – decided by some of the same officials that caused a major confrontation with the farming sector in 2008.</p> <p>Of the farm lobby groups, the Rural Confederations of Argentina, or CRA, was the one to push the most for a strike and caused a chain reaction in other groups, who had been hesitant about the strike first, such as the growers association Coninagro and the Argentine Rural Society (SRA).</p> <p>Others decided not to take a general stand regarding the strike and leave the decision to their affiliates, such as the Argentine Agrarian Federation (FAA), which represents small farmers. Nevertheless, the strikes had a strong effect. About 250 animals were sold per day at Liniers cattle market, 90% less than usual, for example.</p> <p>“The government is doing an incorrect assessment of the sector. They believe there’s more margin for us to pay taxes but we don’t have a single extra peso to spare,” said CRA’s head Jorge Chemes. “I understand the financial need but they are looking for more money always on the same place.”</p> <h2><strong>Not booming anymore</strong></h2> <p>The higher export duties came amid a bear market in commodities that has seen prices drop significantly over the last years, with the fall in international soybean prices heightened over the last few weeks due to the effects of the coronavirus outbreak and the growth in Brazil’s soy harvest, among other factors.</p> <p>Back in 2008, when the months-long farmer strike against the former Fernández de Kirchner administration was launched, soy prices were at about US$600 per ton, while now they are at almost half that value, even though the tax imposed on the sector is not much lower than it was those days.</p> <p>The local farming scenario also isn’t favorable for producers due to a lack of rain in the main farming areas of the country. There are currently 1.76m hectares of soy in regular or bad conditions, according to Rosario’s Stock Exchange.</p> <p>“The outlook for the farming sector seems bleak for the near future due to the record drought. Soy and corn are among the most affected crops,” Pablo Mercuri, researcher at the Institute of Agricultural Technology of Argentina (INTA), told <em>The Essential</em>.</p> <p>Out of every US$100 that Argentina gets due to exports, USD 63.7 correspond to the agroindustry. Last year, Argentina exported USD 65.1 billion, USD 41.5 billion of which were due to the sale of grains, flours, beef and oil, according to the INDEC statistics bureau. This includes both commodities and manufactures for the agroindustry.</p> <p>In value, soy and its derived products are the most important export of Argentina, with USD 16.9 billion in products sold last year. This includes soybeans, flour, oil or biodiesel such as soy lecithin. When counted together, soy and corn exports were three-time larger last year than those from the vehicle sector.</p> <p>“At the moment, 77 percent of the producer’s income ends up in the hands of the state. With the remaining 23 percent the producer has to pay for all production costs, while also living and reinvesting,” Matías Lestani, economist at CRA, told <em>The Essential</em>. “This is one of the reasons why the country’s GDP has been stuck for a decade.”</p> <h2><strong>Crossed accusations</strong></h2> <p>The strike led to crossed accusations between the national government and the farm lobby groups. The transit wasn’t interrupted at any of the national routes, a possibility first mentioned by the farmers but then dismissed.</p> <p>President Alberto Fernández said the strike was decided by the “largest soy producers” in the country” and claimed the government wants to pay its debts “without affecting those in need.” Only a small group of farmers will be affected by the tax hike, he added.</p> <p>Senator Oscar Parrilli said to be “honored” by the fact that the farming sector is among the first ones to “attack” the Fernández administration. “The first strike against the government comes from a sector that got rich, took their money out of the country and is responsible of the current economic crisis,” Parrilli, a close Fernández de Kirchner ally, added.</p> <p>Coninagro head Carlos Iannizzotto said that famers decided to strike because they “don’t trust the government and number don’t add up.” A different set of policies is needed to boost the growth of the sector, he said, claiming that most farmers feel “abandoned.”</p> <p>Other voices urged more caution, like Clarín newspaper editor Héctor Huergo, one of the most influential voices in the farming sector, whose paper was attacked by the Kirchnerite administration after siding with the farmers back in 2008. &#8220;This way of proceeding (with the protest) is wrong, this is a delicate moment for the sector face a society where everyone has suffered the consequences of austerity. Everyone will talk about the farming sector like if it doesn&#8217;t want to make an effort, but that is not true. The effort of the farmers over the last few years has not been properly communicated,&#8221; Huergo <a href="https://marcelolongobardi.cienradios.com/huergo-el-campo-no-comunica-bien-el-esfuerzo-que-ha-venido-haciendo-en-los-ultimos-anos/">said</a>.</p> <p>

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Fermín Koop

Fermín Koop is an economic and environmental journalist from Buenos Aires. He is editor at Diálogo Chino and co-founder of Claves 21.