A day off from work.... or a farm crisis turning into civil war?

Since our office is right at the end of Plaza de Mayo, whenever politically something serious is going on, we are right there! ...and since I have been around, there has not been a single week where nothing has happened! ...it is surprising how much energy and reasons Argentinans find to go on strike!

...more on strike culture (quite special here!) another day...because this post here shall be specifically about the latest events in this country:

Last Wednesday, for security reasons, we all got off work at noon (again)... because a big demonstration started in the afternoon and you never now how it ends...

But this time it was quiet, no riots. As locals explained to me, it ended up merely as a demonstration of power by the government. Thousands of people gathered at the Plaza with thousands of flags, signs and drums (!) "supporting" the President. Shouting, chanting, making noise... and waiting until the President (Cristina Kirchner) hold her speach. ...so much crowds there, and yet not too much ethusiasm somehow... easily explained: I was told, around 95% of the crowed is paid to join! They are transported from all over the country to these events... so they actually really do not care much about anything but the few pesos they get as a paycheck..... so what is going on that the government needs to demonstrate its strenght?

For months the country is having a big conflict between the farmers and the government, initiated by a significant export tax increasement on soya... the farmers have been reacting heavily on this, lots of strikes, blocking of roads for more than 100 days, boykotting agricultural product transportations... some days/weeks it has been difficult to buy fresh meat and vegetables and, of course, prices have increased since then... the discussions have been going on for a while w/o results and the athmosphere is quite explosive today....

...and I feel in this country you have to look even more into history than in other places to understand what is going on today... I feel the past depressions/crisis'/conflicts have heavily traumatized this society...(but again, this is another topic)...

------ The farmers perspective --------

So, going back a few years, Menem's government slashed farm taxes. Then in 2002 Nestor reinstated them starting at 10%, then quickly raising them to 24%, then 35% and now they sit at about 44%. So, certainly one can understand the frustration of the farmers.

The initial reason the government gave for the imposition of the new taxes was to avoid the "soyization" of the economy, meaning they were hoping that by increasing the level of taxes on soy, this would in turn compel farmers to turn to increased production of other commodities such as wheat, corn, dairy and meat. Now, the problem with this thinking has to do with timing. With Argentina as the number one supplier in the world of soy meal and soy flour, and number three in soybeans behind the United States and Brazil AND with international prices for soy on the rise, the question has to be asked: is this really the time to limit soy production?

A couple of weeks ago, the government then changed its story and said the taxes were created to more fairly "redistribute the wealth" in the nation through Cristina's announcement a week ago last Monday of her "Plan for Social Redistribution". In an obvious ploy to manipulate public sentiment she announced the new taxes would be used to fund 30 new hospitals, erect public housing and make roadway improvements.

Well, changing arguments like that doesn't exactly improve the government's credibility, right?

--- Okay, so let's take a look at the other side of the fence - arguments for the government? ---

The government has been artificially setting the rate of exchange of the peso low (deliberately devaluing it) to increase the profitability of purchasing Argentine commodities on the international market.
It was January of this year that the government purchased a billion US dollars to achieve that goal. Last year they were purchasing dollars by the hundreds of millions to achieve this aim.
Speaking metaphorically, dinner has been served and the bill arrives. As the farmers have been eating at this table of plenty, the government (and with good cause) wants them to chip in on the tab. After all, it is they, that have been benefiting the most from the demand for Argentine commodities stimulated by deliberately weakened peso. (So, the farmers we talk about here are not poor.)

Second point: Argentina is an agricultural based economy. There really isn't much other industry developed in the country at the present moment. Sure it seems unfair that historically the farmers have had to fund infrastructure. However, if they don't who the can pay that bill? There is a lack of any other viable sector in the economy tou turn to. That is unless, one wants to ask presidents and former presidents to open their foreign bank accounts.. ;-)

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Overall, to me, the conflict may have started off as an economic problem, but since the arguments - or lets say "story" - has changed, it is rather a political debate on principles... when I talk to locals, for some all this is about fighing "capitalism" and about the right to "distribute the wealth", while others fear growing "communism" and "populism"....

...to be continued...