Argentine farmers plan show of force

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Argentina’s farm strike on Friday night headed for another week of stalemate after producers extended their action until next Wednesday and the government refused to negotiate.

The action over higher export tariffs, which for two months has paralysed grain exports from the world’s third-biggest producer of soyabeans, sixth biggest producer of wheat and leading exporter of soya oil, continued to push up international soyabean prices amid the global food crisis.

The Argentine strike contributed to a 35-cent rise in July soyabean prices to $13.85 a bushel on the world market on Friday.

Argentine financial markets calmed, however, after panic dollar-buying earlier in the week triggered by fears of a currency devaluation that forced the central bank to use $1bn of reserves to defend its pro-export competitive exchange rate.

The farmers’ refusal to budge on the strike followed a conciliatory speech by Cristina Fernández, the president, seen as an overture to farmers.

“We thought they were really going to be rational and return to negotiations,” said Florencio Randazzo, interior minister, saying the decision caused “surprise, frustration and indignation”.

Farmers are planning a show of force at a mass rally on May 25, Argentina’s independence day, overshadowing the government’s plans to announce a social and development pact. The strike by the country’s most powerful economic sector is developing into an unprecedented challenge to the government’s authority, turning the farmers into the main opposition force in a country where traditional opposition parties are divided and weak.

Even governors and officials from the ruling Peronist party have begun questioning the government’s response to the strike.

Ms Fernández, who has largely stuck to her husband and predecessor’s confrontational style as well as his economic policies, says the new export regime is vital for redistributing wealth in a country still grappling with widespread poverty after its 2001-2002 debt and devaluation crisis.

Argentina’s rebound from that crisis has given the presidential pair faith in its heterodox economic policies which prioritise high growth rates fuelled by consumer demand and a complex web of subsidies. They are reluctant to change tack now, after five years of growth of more than 8 percent, trade surpluses, record reserves and booming exports.

But soaring inflation and rapidly growing public spending are raising fears that unless the government takes action, Argentina is heading for a hard landing.

“The government isn’t dealing with this conflict so what’s the likelihood they’ll deal with the real problems?” said Carola Sandy, a Latin America economist at Credit Suisse.

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