Argentine mood sours despite economic boom

Argentina First Lady and presidential candidate Cristina Fernandez de Kirchner arrives for a meeting with businesmen in Pilar, some 40 miles north of Buenos Aires.
Argentina First Lady and presidential candidate Cristina Fernandez de Kirchner arrives for a meeting with businesmen in Pilar, some 40 miles north of Buenos Aires. Diego Giuidice / MCT

BUENOS AIRES, Argentina — With thousands of protesters blocking roads and people rushing to withdraw their savings, this country at times seems as if it's nearing the kind of economic collapse that sent more than half of Argentines into poverty seven years ago.

The reality, however, is that this nation of 40 million is living its finest economic moment in decades, and a robust recovery is still under way. Yet the mood on the street is dramatically different, and many here are preparing for dark times ahead.

What's brought on the public anxiety is a grueling, three-month-old fight between President Cristina Fernandez de Kirchner and the country's powerful farmers that's resulted in farm strikes and roadblocks paralyzing ever-larger swaths of the economy.

As the war of wills drags on, polls show that pessimism about the country's future is soaring and Fernandez de Kirchner's approval ratings are plummeting. One poll by the research firm Marketing & Fit found that only a fifth of Argentines were happy with how the president's six-month-old government is being run, a more than 50 percent drop from four months ago.

A poll that the University of Belgrano released last month found that 69 percent of people in the capital, Buenos Aires, thought another crash was "very probable" and 41 percent thought that out-of-control inflation could trigger it.

"They're killing us," mechanic Paulo Gutierrez said of the president and the farmers. "It's unknown how this conflict will end and what this country will look like when it's over."

Economists say the crisis is a product of the country's good economic fortunes as record worldwide commodity prices trigger an influx of export revenue.

At the heart of the conflict is a new sliding scale of grain export taxes that raised tariffs on soybeans in March from 35 to about 44 percent.

Fernandez de Kirchner said the tax hike would force farmers to share their record profits with the rest of Argentines, while farmers say the new taxes cut dangerously into their profit margins.

The conflict has shaped up as the biggest crisis confronting Fernandez de Kirchner and her predecessor in the presidency, her husband, Nestor Kirchner. The standoff also has turned the country's farmers into a serious political threat and virtually the only opposition to the Kirchners.

"This is the most gratuitous crisis in Argentine history," political analyst Rosendo Fraga said. "We've never seen a crisis during such favorable world conditions. . . . What the president needs to do is resolve this dispute with the farmers today and immediately start rebuilding her support."

The country's farmers, who produce about two-thirds of Argentine exports, have blocked highways all over central Argentina and held back their production from markets while repeatedly requesting dialogue with the government.

In March, those measures led to shortages of beef and other products in Buenos Aires, and some economists estimate that the nationwide loss in export revenue is already in the billions of dollars. The domestic strife in Argentina, the world's third biggest soybean exporter, also has aggravated already dire global food shortages.

Last week, the crisis intensified when the country's main trucking companies launched their own protest of the roadblocks by blocking yet more roads, saying they were tired of being unable to transport grain.

With more than 200 roadblocks across the country, gas shortages have hit some areas.

With much of the country at a standstill, Fernandez de Kirchner has accused farmers of trying to overthrow her government. She's also refused to repeal the export tax hike, a position that many think will send the conflict into overtime.

At current commodity prices, the new tariff should generate an extra $800 million in taxes this year, official estimates show.

"It's impossible to resolve the problem of poverty without a redistribution of income and without touching extraordinary profits," Fernandez de Kirchner said.

The farmers have complained that the government imposed the tax hikes without consulting them. In October, then-President Kirchner hiked export taxes on soybeans from 27 to 35 percent. Even before the tax hikes, the farmers were upset over export restrictions and price controls.

"The more they raise the taxes, the more it affects small farmers," said Juan Miguel Rossi, the financial secretary of the Argentine Agrarian Federation, which represents 150,000 farmers. "The government is putting a whole way of living and working in danger."

Regardless of what happens next, the political damage has been done, and the president's approval ratings probably won't return to their pre-crisis levels, Fraga said.

"This is a political turning point," Fraga said. "I knew this government would fall apart, but I didn't know it was going to happen this fast."

Even before the strikes, public anxiety about the country's economy was rising, with inflation at the heart of concerns. Economists estimate prices growing by about 25 percent annually, although official estimates show it at about one-third that rate.

Now the country's red-hot tourism industry is slowing, private investment is dwindling and worries about stretched energy supplies are growing. Banks have reported Argentines rushing to withdraw their savings for fear that the government will freeze bank accounts, as it did during the 2001-2002 crisis, to stop a financial collapse.

Yet the reality is that the country's economy has grown by an average of 8 percent over the past five years and government reserves are still near $50 billion, said Dante Sica, the director of the economic consultancy

The danger is that public perception could turn into economic reality, Sica said.

"People want more certainty and less confrontation," Sica said. "The economy is still strong, but we're killing the goose that lays the golden egg."

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