Argentine Senate rejects disputed tax; farmers rejoice

BUENOS AIRES, Argentina — In a stunning blow to President Cristina Fernandez de Kirchner, Argentina's Senate early Thursday morning narrowly defeated a controversial increase in grain export taxes that sparked four months of paralyzing protests by farmers.

The nearly 18-hour session ended at 4:25 a.m. Thursday when Vice President Julio Cobos, who presides over the Senate, broke a 36-36 deadlock by voting against his own government to reject the tax increase.

"In politics, they say that we have to go along with institutionality, with all the risk that implies," a visibly nervous Cobos said before casting his vote. "But my heart says something else.

"I don't think this is a reason to put at risk the country, governability and social peace. I want to continue being the vice president of all Argentines."

Speaking Thursday night in northern Argentina, Fernandez de Kirchner alluded to the Senate defeat.

"Those who maybe have not understood what we had said in October (when the president was elected) at some time will understand," the president said. "We hope that maybe some day they will get it."

She also greeted the crowd of supporters as those whom "we can look in the eyes and know that they have never betrayed us."

Sen. Miguel Angel Pichetto, the head of the government's allies in the Senate, launched more pointed criticisms.

"History is going to judge him poorly," Pichetto said of Cobos. "It's incomprehensible. It's very difficult that this could occur in a modern democracy."

Farmers and their supporters responded jubilantly to the defeat early Thursday morning, cheering and chanting in the Palermo neighborhood of the Argentine capital, Buenos Aires.

Farmers had organized a massive demonstration in the same neighborhood Tuesday that drew hundreds of thousands of people, while tens of thousands of pro-government supporters rallied elsewhere in the capital.

"Cobos didn't vote against the government," said Eduardo Buzzi, the head of the farm group the Argentine Agrarian Federation. "He voted in favor of the people. And all this is helping to resolve one of the problems that has made the biggest impact in recent times."

Fernandez de Kirchner touched off the crisis in March when her government implemented by resolution a sliding scale of grain export taxes that raised tariffs on soybeans to nearly 50 percent.

The president, who took office in December, said she wanted to force farmers to grow more foods consumed domestically, rather than soybeans, which are produced almost entirely for export. Higher food prices have contributed to an overall annual inflation rate that's topped 20 percent, economists said.

Argentina is the world's third biggest producer of soybeans and is a top grower of wheat, corn and other grains. The country's farm sector accounts for about two-thirds of its exports.

Argentina's main four farm groups responded angrily to the tax hike, saying that the new rates would drive out of business small- and medium-sized growers, who already were grappling with rising costs. The farmers blocked roads and withheld production in protest, costing the government hundreds of millions of dollars in tax revenue and sparking scattered food shortages in markets.

Middle- and upper-class protesters also hit the streets, to denounce the president's rhetoric against the farmers as well as to air grievances over inflation and crime.

With the president's approval rating dropping near 20 percent because of the crisis, Fernandez de Kirchner gave in last month and sent the measure to the country's Congress, where government allies dominate both chambers.

The lower house narrowly approved the tax bill July 5 by 129-122 after an all-night session, and many predicted easy approval in the Senate. The tax has remained in effect during the legislative debate.

The government's fortunes began to darken Thursday, however, when 12 senators from the president's Peronist Justicialist Party broke ranks and voted against the bill. Many of those senators represent rural provinces, where support for the farmers' position is strong.

With the defeat, the government will have to introduce a modified form of the bill or a new bill to save the tax increase.

Cobos said hours after his vote that he hoped the Congress would approve a version of the bill that would resolve the "little differences" that remained. Cobos hails from the Radical Civic Union party.

Farmers support proposals pending in the Senate that set tax rates based on production levels and offer tax breaks for the increased use of fertilizers, which have nearly tripled in price over the past year.

"We think they are intelligent laws that put the accent on higher production, which in the end means higher income for the state," said Alfredo Rodes, the executive director of the Confederation of Rural Associations of Buenos Aires and La Pampa, a major producers lobby group.

Political analyst Graciela Romer said the close Senate vote showed that the farm crisis had dangerously polarized this nation of 40 million.

"The most logical response would be for the government to take note of the significance of that 36-36 vote, which represents a country that is split and divided," Romer said. "That is the real danger for governability."

(Hudson is a McClatchy special correspondent. Chang reported from Rio de Janeiro, Brazil.)

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