Development & Aid, Economy & Trade, Food and Agriculture, Headlines, Latin America & the Caribbean

ARGENTINA: Farmers Up in Arms Against Export Tax Hike

Marcela Valente

BUENOS AIRES, Mar 21 2008 (IPS) - Farmers in Argentina are on their ninth day of protests against a recent government decision to increase taxes on exports of grain, whose prices have skyrocketed thanks to strong international demand.

The angriest protests are taking place in the heart of soybean country, in central and eastern Argentina, where hundreds of roadblocks have been staged.

Transgenic soybeans are the top export product and the most widely planted crop in Argentina, which is the third-largest soybean producer in the world after the United States and Brazil, and the leading exporter of soybean oil.

The reaction was triggered by a call from Argentina’s main rural associations, which urged farmers not to sell their grain or beef to wholesalers or commodity markets. The demonstrations, which are to continue until Tuesday, Mar. 25, could cause food shortages in the cities.

And although the rural associations promised to lift the traffic blockades during Easter vacation, farmers in some rural towns kept their roadblocks in place on Good Friday.

“The countryside on its feet”, “If they want war, they’ll have it” and “The rural sector says: Basta! (enough)” read some of the signs carried by farmers protesting on foot or on tractor, harvester and truck, which were parked across the roads.


Small, medium and large farmers have thus come together against the new sliding scale of higher taxes on grain exports, which were increased from 35 to 44 percent in the case of soybeans and from 32 to 39 percent in the case of sunflowers, for example.

Some analysts say the tax hike is aimed at keeping domestic grain prices artificially low and ensuring domestic supplies. Because international commodity prices are so high, without the tax on exports, there is little incentive to sell soybeans and other grains on the domestic market.

Agriculture is booming, with a record grain output of 90 million tons last year. Nevertheless, farmers complain that the taxes are absorbing a large share of their profits.

Economy Minister Martín Lousteau reiterated Wednesday that the export tax increase would remain in place, despite the opposition from the farmers.

The new taxes, announced on Mar. 11, will vary depending on international grain prices, rising as prices go up or shrinking as they drop.

The minister pointed out that the state provided relief to farmers in 2002 when the peso was unpegged from the dollar and abruptly plunged, and thousands of farmers indebted in dollars found themselves in serious trouble. He also noted that the current exchange rate of around 3.14 pesos against the dollar benefits farmers and serves as an incentive for production.

He compared the situation with the conditions faced by soybean farmers in Brazil, where export taxes are not charged, but the exchange rate of 1.73 reals to the dollar is less competitive than Argentina’s rate.

Lousteau also stressed that if demand for commodities, driven by China and India, continues to rise, prices will go up too, as will tax revenues, but that if prices drop, the state will relinquish part of its share.

However, Pablo Orsolini, vice president of the Federación Agraria Argentina, the rural association that represents small farmers, told IPS that “the government says it is not going to back down on this, but we’ll see what happens if food starts to be in short supply in the supermarkets and people complain.”

“The state is going to take in 12 billion dollars this year in export taxes on soybeans alone, but that money does not makes its way back to the countryside,” he protested.

Export taxes are not included in the tax revenues that are shared with the provinces by means of a co-participation system, but go to the national treasury, whose surplus stands at around four percent of gross domestic product (GDP).

Orsolini admitted that “except in certain cases,” the conditions in which small farmers find themselves today are “not anything like the situation they were experiencing in the late 1990s,” when thousands of heavily indebted farmers went bankrupt and lost their farms.

Back then, the Argentine peso was still pegged to the dollar by the currency board system, compared to today’s exchange rate of 3.14 pesos to the dollar.

In addition, farm commodity prices have grown steadily over the last few years, and demand is not expected to drop any time soon.

“At that time, farmers could not even afford fuel for their trucks, to drive to a roadblock,” said Orsolini.

But today, he added, “people are afraid of returning to that situation again.”

The Federación Agraria Argentina is not opposed to export taxes but argues that they should vary, depending on the size of the farm.

“These taxes hurt large producers very little,” said Orsolini.

He explained that his organisation is proposing a system under which those who produce less than 600 tons of soybeans a year would pay up to 25 percent in taxes, and farmers producing between 600 and 1,500 tons would pay 35 percent, while only those with harvests of over 1,500 tons would pay a higher tax.

“We are proposing this because 85 percent of farmers fall into the first two categories, and large-scale production, which is the most competitive and can pay higher taxes, accounts for only 15 percent of farmers,” he said.

Orsolini dismisses the government’s arguments, according to which the tax hike is aimed at discouraging the spread of monoculture soy plantations and at stimulating farmers to increase their incomes by adding value to what they produce, through agro-industry initiatives.

“If what they want is for farmers to have alternatives, there should be policies providing incentives, but there aren’t,” he argued. “The state says it helps dairy producers by means of subsidies, but that doesn’t suffice. There are many dairy farms that have preferred to close down, in order to plant soybeans instead.”

Some farmers have leased their land. “The current rental price for 100 hectares of land in the heart of soybean country allows the owner to live like a king without working, earning an income that until a week ago was 5,000 dollars a month,” said Orsolini.

Inca Paulero, who owns 500 hectares in General Deheza, in the central province of Córdoba, told IPS that “I lease my fields, and my income has risen by a factor of 7.6 since 2001.”

Paulero, 76, said he believes that the farmers who are protesting are “greedy” because “they have the ideas of the free market stuck in their heads.” But he said that “if you visit the province, it is obvious that the farmers are doing well.”

“You can see that in the small towns, where there are no industries, and everyone is building and producing,” he said.

As a result of the boom, the value of the farmland most suitable for growing soybeans has risen up to fourfold. “It’s true that costs have gone up, because the price of fertilisers is growing and many are taking advantage of the new situation, but the business is profitable just the same,” said Paulero.

In his case, the returns will stay in the countryside. “I’m building a cattle feedlot on four or five hectares where I had an abandoned five-bedroom house.”

To do so, he had to invest 50,000 pesos (around 17,000 dollars) to drill for water. The waiting list for the excavator has 22 people on it.

“I’m too old to start this business, but I’m going to rent it out to someone who’s interested in setting up shop,” said Paulero, who did not rule out the possibility of becoming a partner in the new undertaking.

 
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