Thursday, July 24, 2008

No small miracle...

While we were absorbed in rains ands markets, the farmers of Argentina changed the course of their country's history.  After I spoke at the Top Farmer Crop Workshop, where I rattled on about living in unprecedented times and the responsibility we have to succeeding generations, a gentleman from Argentina came up and spoke excitedly to me about the recent farmer's strike and what it meant to their future.

I had followed half-heartedly the last few months and the battle between the president and the producers, but frankly didn't think the farmers had a chance of holding outThen last week, decades of political history was redirected.
Ms Fernández clearly underestimated the pressures on her party’s legislators from Argentina’s interior provinces, whose districts were staunchly opposed to the taxes. Despite holding comfortable majorities in both houses, her Congressional block had to establish a costly rebate scheme for small farmers in order to win a very close vote in the lower house. The bill then passed to the Senate, where a torrent of defections from Ms Fernández’s supporters produced a 36-36 draw.

The decision thus fell to Mr Cobos, whose relationship with the president has become frosty. Ms Fernández had barely spoken to him in a month, presumably because she felt he had acted too independently during the conflict. The beleaguered vice-president all but apologised to her as he cast his deciding vote. “The Argentine president will understand me,” he said, “because I don’t think a law that doesn’t provide a solution to the conflict will achieve anything…I ask forgiveness if I'm wrong.” When Ms Fernández spoke the following evening, forgiveness was not on the agenda: “Let’s hope that those who didn’t understand what we said to the people in October [when the election was held] understand some day,” she said, leaving little doubt about to whom her words were addressed.

Ms Fernández’s stunning defeat shatters the aura of invincibility that she inherited from her husband, who won a series of contentious political battles during his four years in office. Mr Kirchner regarded dissent as virtual treason, and used his control over spending to keep legislators and local officials in line. But while his approval ratings reached 70%, his wife’s are barely above 20%. And while he enjoyed an ample budget surplus, her treasury has been depleted by last year’s pre-election spending binge and by rising costs for fuel and transport subsidies. Ms Fernández actually campaigned as a moderate consensus-seeker; she will have to start governing like one if she hopes to salvage her presidency. [More]

For Americans this would hardly be earth-shattering news. But this break in Peronist influence is a sign that the powerful executive model that has dominated Argentine politics since the days of Juan Peron coulf finally be shifting.  The farmers were not alone in their protest of executive over-reach.
``This was a historic cry for a federal country,'' Eduardo Buzzi, president of the Agrarian Federation, told crowds early this morning in Buenos Aires. ``We can't accept authoritarianism as a form of management.''

Fernandez and her husband had gotten used to a compliant legislature.

During his term, Kirchner persuaded Congress to grant so- called ``super powers'' to the executive branch that allows it to alter budgeted spending without lawmakers' approval. The powers also enabled Kirchner to restructure the country's $95 billion in debt in 2005 without having to go to Congress.

``Congress is showing that it is now recovering its faculty to legislate,'' Fraga said.

When inflation started to accelerate in late 2005, then- President Kirchner pressured industries and retailers to freeze prices.

In January 2007, he replaced personnel in charge of calculating the consumer price index at the National Statistics Institute to ``improve operations.'' Kirchner's former Economy Minister Roberto Lavagna and other economists said the move was aimed at tampering with the data.   [More]

The cost for Argentine farmers was considerable, and perversely US producers benefited as this major exported was absent from the global supply market. All the more reason to admire fellow producers who had the courage to lift their nation on their shoulders and reclaim basic rights from the government.  It would also appear they wisely planned ahead.
Despite the recent headline drop in monthly growth rates for agricultural exports, the strike seems to have had little impact on the total size of agricultural exports. Indeed, with the exception of wheat exports, we have seen no meaningful downturn in Argentina’s exports of agricultural goods. Corn and soy have escaped largely unscathed. Even in the case of wheat, the monthly decline in March-May appears to be simply ‘payback’ after exports were front-loaded to comply with new regulatory changes.
The farmers’ strike has had limited impact on agricultural exports – a key driver for economic activity. In contrast, the greatest casualty may have been in the political arena. The administration has seen its approval rating fall from 55% in January to 19% in June according to local pollster, Poliarquia Consultores. The good news is that in the near term, we suspect that the authorities are likely to continue to see strong fiscal and trade surpluses and be able to effectively manage the currency – an economic variable that is often highly sensitive to expectations. However, until the authorities address the issue of elevated and rising inflation, we suspect that Argentina’s policy mix will continue to raise serious questions. [More]
I want to believe such a spirit still lies latent in our own agriculture, but we have chosen too often to adopt a strategy of needy pathos rather than defiance to defend our rights to free markets and free enterprise. It is interesting to speculate on what actions - if any - US farmers would take to battle unfair economic or political policies. Perhaps the size and integration of our system precludes such protest tactics, or it may be that our response would be individual, rather than collective. 

Regardless, what would you do if our government suddenly added a 50% export tax on ag products? Or more likely some sort of consumption tax that began at the farm?

Given that many meekly yielded the right of habeus corpus in the name of security and protested instead the Supreme Court defense of same, the answer would likely be: not much.

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