The Fernández-Kirchner Political Touch

An Uncertain Presidential Hand: Whatever Happened to the Fernández-Kirchner Political Touch?

- President Cristina Fernández de Kirchner declares an agricultural state of emergency which ends up providing inadequate relief for struggling Argentine farmers
- Farm owners continue demonstrations in opposition to the Fernández administration’s failure to respond appropriately to rising commodity prices
- There could be further repercussions to the national food supply chain if rain doesn’t soon fall on the Argentine Pampas
- Fernández, upon Kirchner’s advice, prepares to commit hari-kiri

The Farmers Receive a Break
The devastating drought that has ravaged the Argentine Pampas and other agricultural areas since March 2008, has reached an agricultural state of emergency. In January, President Cristina Fernández de Kirchner announced a measure that allows farmers who have lost at least 50 percent of their crop or livestock to defer tax payments until 2010. The declaration also eliminates the grain transportation tax. Because of the declaration, the government risks a loss of $4.4 billion in export tax revenues alone.

Extending from the southern province of Río Negro through the central provinces of La Pampa and Córdoba and to the northeastern provinces of Buenos Aires, Entre Ríos, Santa Fe, Corrientes, Chaco, Formosa and Santiago del Estero, the drought has caused widespread food shortages from the hinterland to the core metropolitan areas. Over 800,000 cattle have been lost thus far—a major concern for one of the main national players in the global meat market. With regards to grain, over 90 percent of the wheat crop has been lost in the province of Entre Ríos. Moreover, the Pampas region, regarded as having some of the most fruitful farmland in the world, has suffered particularly from poor harvests since the drought began. Due to its broad geographic reach within the country as well as its severity, this year’s drought is one of the most catastrophic natural disasters to afflict Argentina within memory.

According to a report by the National Institute for Agricultural Technology (INTA), “in many parts of the pampas region, rains have been at their lowest level in 100 years.” The drought is without a doubt the most critical issue now facing Argentine farmers. Historically a major exporter of beef, soy, wheat, and corn, Argentina’s economy will continue to suffer grievously if the weather does not soon improve.

Given the magnitude of the current drought, farmers have become desperate for some sort of aid from the government, and while Fernández’s recent tax break is a useful first step, it is not surprising that the farmers generally have spurned it. “The only thing this announcement achieves is to postpone the payment of taxes, and that is of no use to the farmer who has lost his entire crop,” mused Cristian Roca of the Argentine Agrarian Federation (FFA), the organization spearheading the effort to obtain assistance from the government. At a January 6, 2009 meeting, Argentina’s four main agricultural federations pleaded with the government to suspend the export tax and increase domestic prices for crops so that they might reflect international levels. Up until now, Fernández has done the opposite by raising the export tax on commodities, which only has given the farmers an incentive to launch a nationwide protest campaign. Even with this quasi-sardonic gift from the government, it is unlikely that the longstanding hostility between Fernández’s peronista administration and the farmers will turn amicable anytime soon, maybe not even before October’s midterm legislative elections.

Decline in Production Could Lead to Unforgiving Consequences
On top of this dispute, Argentine farmers now face a threatening drought. According to the January 16, 2009 Buenos Aires Cereals Exchange estimates, Argentina’s 2009 wheat crop will decline to 8.7 million metric tons, a far cry from the 2008 yield of 16.3 million metric tons. Moreover, corn production is projected to diminish to 16.5 million metric tons, down from 20.9 million metric tons in 2008. According to the U.S. Department of Agriculture, Argentina is the world’s second largest exporter of corn (following the U.S), and the world’s third largest producer of soybeans (following the U.S. and Brazil).

“We are at a moment in which the government is going to make decisions that either alleviate or worsen the crisis,” asserted the increasingly activist leader of the FFA, Eduardo Buzzi. “This is the only country in the world that punishes its exporters.” Now, as the soybean and corn harvests begin (and continue through June), the farmers may be forced to resume an all too familiar, if grim, course of action.

Storm Clouds Over the Pampas: The Government-Farmer Brawl
No more than three months into her presidential term, Fernández faced the first of a crescendo of conflicts with the farmers, who sought a suspension of what they would argue was an exorbitant export tax which former Argentine President Néstor Kirchner (also predecessor and husband of President Fernández) had installed. Beginning in March 2008, farmers (who historically were considered the prima donnas of the Pampas, for their arrogance and self-absorption) protested with a countrywide campaign of strikes and roadblocks. Angry over what they saw as their hopeless situation, hundreds of farmers driving tractors as well as 10,000 sympathizing citizens on foot took to the chaotic streets of Buenos Aires. The farmer’s primary goal was to persuade Congress to negotiate the reduction of the export tax. The dispute paralyzed the entire country and brought forth exceedingly high levels of political polarization.

Fernández responded to what became the four months of protests by saying, “I won’t give in to extortion.” Meanwhile, professor of Latin American Politics at Universidad Católica Argentina, Ignacio Labaqui explains that, “As a result of the bad and tense relationship between farmers and the government, the latter is reluctant to make any concession to the former, as it sees it as a sort of political enemy, or if you will, part of the opposition.”

President Kirchner faced similar economic challenges during his term in office (2003-2007), when Argentina attempted to recover from the dreadful economic crisis of 2001. Consequently, the populist leader continued to promote measures such as commodity price caps, to supply Argentines with cheap foodstuffs, especially those in his main constituency, the urban dwellers.

The urban poor electorate was normally consonant with these measures because they are greatly affected by any rise in the price of foodstuffs. Over time, the market improved, yet Kirchner persisted with his hard-line, strict control of trade.

As farmers failed to earn substantial revenue from their sale of farm staples, there were significantly smaller crop yields as well as diminished investment in future crop production. In order to generate more significant profits, farmers were forced to sell their goods abroad due to the mandated price caps on basic commodities at home, which had been put into effect by Fernández. As a result, the Argentine farming sector was being transformed into an export-based strategy. This meant less food for the domestic market while commodities such as soy were being shipped to Asia and India in record volumes. Between 2001 and 2005, soy exports swelled from 6 billion kilograms to 10 billion kilograms, as prices rose at home and exports were bringing in record earnings abroad. The situation quickly shifted, however, as the government increased export taxes in order to both avoid externally induced inflationary pressures and to boost revenue (total export tax was amounting to some 15 percent of government revenue).

The wrath behind Kirchner’s and Fernández’s export tax created a dilemma for producers: sell goods domestically and thus receive less revenue, or sell abroad and face excessive taxes. It was with this de facto tax increase that the farming industry decided to fight back. Labaqui maintains that, “it was the government-introduced controversial sliding export tax scheme – a mechanism of which the tax rate increases or decreases as the prices go up or down, that triggered the conflict. This decision proved to be the last straw for farmers who despite having benefited in recent years from better prices and an improved economic environment, were dissatisfied with governmental policies that prevented them from reaping the benefits of peaking international prices.”

The Urban Population Enjoys Eating
Domingo Faustino Sarmiento, renounced author and the seventh president of Argentina, portrays the dichotomy between civilization and barbarism as paramount in the conflictive nature of Argentina and the rest of Latin America as well. And while Sarmiento wasn’t writing about the agricultural emergency of today, his content is certainly relevant.

Fernández’s opposition has attracted the unanticipated support of the urban masses in huge numbers and the explanation for this may be as much a cultural matter as anything. Argentines, in general, hold almost mystical feelings towards the countryside, which produces some of the most prized cattle in the world. For many, vast expanses of untouched countryside characterize the interior region, and with it went a certain sense of romanticism and nostalgia for the days of an Argentina of the past. Argentines also eat more meat per capita than any other population worldwide. Thus, they reacted to the farmers’ predicament by backing their cause even if, paradoxically, it didn’t make economic sense for them, since the personal consequence for them would be increased retail prices. But, if they wanted to eat at reasonable prices, they had to help resolve the roadblocks that hobbled their food supply from arriving in the metropolitan centers. This, they did, in impressive numbers.

Fernández Visits an Ailing Ally
Fernández’s visit to Cuba last month had great importance for the political, economic, and social relations of Argentina as well as the rest of Latin America. The trip represented an intensive effort on the part of the Argentine president to recover her meager regional standing as well as foster a relationship with what has become an especially key hemispheric nation. The November 2008 admission of Cuba into the Rio Group, a regional body composed of Latin American and Caribbean nations has been seen as an integral phase in Cuba’s continued emergence in the region. Cuban journalist Nidia Díaz contends that, “Cuba’s induction into the Rio Group illustrates the unanimous collective decision to recognize, with respect and gratitude, the island’s role on the continent, its firm resistance in defense of sovereignty, and its solidarity and cooperation with many of its neighbors during difficult times.” The Fernández-Castro meeting does not merely signify cordial chat amongst chums, but rather an attempt by Fernández, a failing president in the eyes of many, to regain a sense of authority and respect in the region though what many see as the kind of political legitimacy that enhances her reputation – false or not.

A Chance at Success for the Kirchners?
Fernández currently has an abysmal 28 percent approval rating that has dropped as low as 20 percent during April 2008. Provincial governors are running away from her rather than trying to be associated with the central government in Buenos Aires, as it continues, according to the opposition, to expropriate wealth from the rural economic sector. In the face of such challenges, the question remains whether Fernández will be able to evade a complete political nose dive and mediate the grim state of her relationship with the agriculture sector, or if she will ruin the Kirchner name for any forthcoming attempt by her husband to once again run for the presidency.

While it is well understood how Argentines do not manifest much good will towards Fernández, their current opinion of Néstor Kirchner remains to be seen. Has his wife’s disappointing period in office thus far generated an attitude of disenchantment on the part of the electorate who once, in great numbers, admired Néstor? Opting not to run again for re-election in 2007, Kirchner supported his wife’s bid for the presidency with the intention of returning to office in 2011 for a second term. It is still uncertain whether voters will blame the duo collectively for the country’s economic and social woes, or if they will request a return to the days of fiscal prosperity that characterized the Néstor era. From 2003-2007, Argentina had GDP of 8 percent growth or more. It seems problematic, however, to think that people will look with favor upon his reelecting given the woebegone level of governance demonstrated by Cristina up until now.

Future Implications for Argentina’s Growers
With October’s midterm elections approaching, the ruling Partido Justicialista (PJ) faces a largely divisive electorate and a rebellious party structure. Sensing the regional unpopularity of the current Fernández administration, none other than Eduardo Buzzi (head of the FFA) is considering running as deputy for the farm-center province of Santa Fé.

Yet the existing conflict spawned by Fernández’s allegedly anti-farmers initiative is of pressing concern and must be resolved forthwith if her presidency is to retain any remaining viability. Export tax revenues are not getting distributed amongst the provincial governments, but rather, are being accumulated exclusively at the federal level. And while some provincial governors remain loyal to the administration, they face incessant protests from farmers affected by the drought. Since they must secure their own electoral prospects, provincial politicians recently pressed the government to provide emergency subsidies and tax breaks for farmers, which came in the form of Fernández’s January 26 declaration. According to Latin News, on February 23, three legislators broke ties with Fernández’s Frente para la Victoria (FPV), a political wing of PJ. They now join senator Carlos Reutemann’s newly-formed Santa Fe Federal grouping, in concerted attempt to uphold the concerns of the agricultural provinces.

Buzzi exclaimed that, if needed, “Farmers are ready to withhold their produce. We know that this has an economic impact and affects markets around the world.” Fernández is expected to meet with farmers on March 3 to discuss a potential solution to the conflict. Fernández would be wise to try to work to find a compromise for the two bitterly divided sides if she is to head Argentina’s return to economic prosperity, or at least minimal stability.

ENDS

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