I'm with the farmers, or, see what happens while I'm away

Marisa and I came back from our Easter weekend vacations today. It all went terrific, except the countryside was burning (figuratively) while we were away, and reality eventually caught up with us when we headed back for Rosario. As you must know, agricultural producers are on strike because of the latest increase of the export taxes.

What's happening now is more important than the story of my vacations, so I'll put that off for today and begin by the end. We left Córdoba City on schedule, at 01:30 PM, with only a bit of concern for what we heard on TV about the road blockades put up by the farmers on strike. We headed southeast along the highway and National Route 9, and around 03:00 PM we were stopped near a town called Oliva. Farmers had blocked the way with harvesters and only a trickle of vehicles was allowed through.

We were cleared a few minutes later, and thought it was going to alright from then on. One hour later we arrived in Villa María, our first major stop. The driver got off and announced "We're stopping here for fifteen minutes!" so everybody could get off the bus, stretch their legs, go to the toilet, or whatever. We stayed beside the bus and waited. Twenty-five minutes later the driver came back and told us, "We're not moving from here until further notice." There was a road block that wouldn't allow anybody through, and several buses were held on the road already. Moreover, there seemed to be some tension developing between the farmers and the drivers of the cargo trucks detained by the block. It seemed safer to stay in the bus terminal, where we had basic facilities, rather than in the middle of nowhere outside town.

Some time afterward, someone said the president was going to give a speech on national TV, hopefully to untangle the mess, put forward some promise, some ideas for compromise, some hint of appeasement that could bring the farmers to dialogue. We waited.

Sure enough, at about 06:20 PM Presidenta Cristina K appeared. What followed was both the finest piece of oratory and the crappiest piece of diplomacy I'd ever seen. After angering the farmers, then going away on vacation as if nothing happened, she re-appeared and dumped this load of senseless vitriol on them. No sense of humility, no intention to fix the trouble, appease or compromise, no change at all from the standard Kirchnerist babble — self-exaltation of their achievements, denial of their faults, offensive defense, confrontation. What you could expect from an activist, an ideologue, or a legislator defending her party line — certainly not from a president of a country where major roads of the most populated and most productive provinces are being blocked by protesters.

Cristina was surrounded by the usual host of cronies and opportunists, including the governors of two provinces. The ones most involved, however, were not present: Schiaretti of Córdoba and Binner of Santa Fe. Schiaretti, a fervorous Kirchnerist, was being pressed by the local authorities of all the municipalities in the province, some of then openly in favour of the strike. And Binner, a Socialist, had already, if cautiously, established Santa Fe's official stance beside the farmers.

The question is not whether the farmers earn enough, not enough, or too much (whatever that means) . The question is: we produce a lot, the federal government takes a big chunk of it, and none of that money returns. It's used to finance federal spending, a lot of which goes to pay for pseudo-welfare: piquetero organizations affiliated with the government, who serve as shock troops and political meeting filler as appropriate.

Back to Villa María... After Cristina's speech people were extremely upset. I'd let my parents know I was going to be late; now I text-messaged them again, and also my co-workers, since I was supposed to be back at the office at 7 AM the next day. The General Urquiza bus company was a model of bad PR — the drivers didn't notify us properly on their intended course of action, and nobody offered to buy us all a meal, which was the least they could do. So we had something to eat on our own, and got on the bus again.

Other passengers came telling there was a demonstration and cacerolazo in Buenos Aires, and soon we learned the protest had spread. Thousands of people were banging pots and pans and honking their horns in Rosario near the Flag Memorial, and people other than farmers were joining the strike and the protests in Entre Ríos, La Rioja, Mendoza, and even Santa Cruz. The north of Córdoba was practically isolated by multiple road blocks. A group of demonstrators had come close to clashing with Gendarmería at the Hernandarias Tunnel below the Paraná River (between Santa Fe City and Paraná, Entre Ríos).

At the same time we heard of the Kirchnerist piqueteros in Buenos Aires, led by Luis D'Elía, violently assaulting and driving back the peaceful demonstrators at Plaza de Mayo, and a similar incident in Rosario involving a Kirchnerist movement called Libres del Sur. Although they claimed they went there on their own, it's obvious they were sent by the government, which now says they'll use force to remove the pickets if necessary.

In the 1950s, President Juan Domingo Perón co-opted the large unions, organized a corporatist model with control of the heavy industries, attacked the dissident press and the "oligarchy" of the old countryside landowners, and allowed the extreme factions of his multi-faced Justicialist movement to turn into militias, which could be put to use as needed. To this day historians hesitate whether to call this fascism, but we know Perón brought those ideas in after a visit to Mussolini's Italy. The Kirchners have been revisiting that sad story all this time. They haven't managed to silence the press or lead intellectuals into exile, like 20th century Peronism did. But we now know for sure that plain citizens won't be allowed to demonstrate peacefully against government policies in the large cities — not as long as busloads of indoctrinated lumpen and paid-for thugs can be brought in to dissuade them. The Kirchners don't tolerate dissent — you must like them and love them no matter what, or you become automatically the Enemy.

I stayed in the bus listening to the radio, feeling rather gloomy about the general state of the country, and fell asleep late. I woke up a couple of times to false alarms. We left at 7:15 AM, as the first light of dawn appeared.

We had an uneventful trip. I slept on and off, and took pictures of the passing countryside landscape. It all seemed so peaceful! There were no pickets anywhere else, though occasionally you could see traffic stations full of trucks, and other trucks along the sides of the road. As we entered the last part of the highway, somebody volunteered music for the drivers to put on the bus speakers. Some people cheered as we arrived at the bus terminal, at 11:30, almost 22 hours after leaving Córdoba.

Retentive government

Papa K is raising the export tariffs for grains again. I think export tariffs (not import — export) are a unique phenomenon in the world. Here we call them retenciones, which means retentions. The idea behind not calling them taxes is that the government is not just keeping money for itself, but retaining a part of the "excess profit" that the farmers make thanks to the internationally high prices of commodities and the locally high exchange rate. This "retention" theoretically keeps local prices in check and discourages producers from selling all of it abroad and leaving the local market unsupplied (is that a word?).

That's the theory at least. In truth, what happens is that the farmers, even with a 35% tariff deduced from their sales abroad, are getting filthy rich, while screaming all the time at the top of their lungs that they're desperately poor, and that the big bad government is snatching away the bread from their children's mouths. So desperately sinking into poverty they are, they've been increasing their crops and setting higher yield records every year since 2002. One of these days I think I'll wake up and see my garden turned into a soybean field.

Soybean field in Buenos Aires Province. Original image by Alfonso.

One assumes that, if selling abroad with such high tariffs were no good, then the farmers would stop doing it. The local market is not big enough for soybean and sunflower, but then we do need other stuff. Like tomatoes and potatoes, for example. And beef and milk. You can't have cows munching on expensive high-yield pesticide-resistant transgenic soybean, can you? (Soybean is displacing other crops, as well as cattle farming. It's also displacing natural forests, and is being planted in soils that will quickly deteriorate. See "Argentina: la cuenta regresiva para el granero del mundo" [via Pehuen.org, in turn thanks to Chileno].)

The government is keeping a lot of money that it wouldn't be getting if it weren't for the high exchange rate. If the price of the dollar in pesos went down, the national state would be deprived of much-needed funds (in fact, the fiscal surplus would evaporate), and the farmers would also get a lot less in local currency. Since it's the government that props up the dollar artificially, the perverse scheme at work is transparent. The government and the farmers yell at each other while they support each other at the same time.

I don't have an ideological problem with export tariffs, like many of their critics. I think they're perfectly fine. They should be better implemented, probably, but they're not wrong per se. The rules are not the same here as in developed countries. In a country with a weak currency and a very small and underdeveloped local market, without export taxes, it makes financial sense to screw your own and sell abroad. And if the product has little to no added value, better yet, in the short term. Oh, farmers do have to invest a lot these days, but they're not advancing technology, they're just using top-notch off-the-shelf tech to seed, care for and harvest million of tons of plants. (Argentina builds and exports very fine agricultural machines, too. That's the way to go.) Retenciones make producers think twice and pay a little attention to the local market. In the case of soybean, which is not a local staple, tariffs should serve to stop farmers from turning the whole country into a massive monoculture field.)

The problem with the tariffs is that all that money ends up in the national state's coffers and doesn't go back to where it came from, or to where it's needed most. The crop-producing provinces get nothing for their efforts, and the other provinces (typically poorer) don't see the money of their rich cousins redistributed. Instead, the money funds the government's grandiose public works scheme (plus bribes for the minister in charge and overpriced items for his friends who win the bids) and its political machine.

Last Friday, the government sent AR$140 million (~US$44M) to the municipalities of Greater Buenos Aires, to be used at the discretion of their mayors. Legal (thanks to an obscenely dependent Congress who allowed the budget to be modified freely) but fishy. The GBA has been ruled by these robber barons and virtual mafia bosses since ever, and it was them who gave Cristina half the votes she got (many of which, for all we know, were bought and paid for). The GBA surely needs those funds, being the metropolitan area with the worst quality of life in the country, but it's obvious they're not being used to make life better for the residents. This week Papa K also sent AR$80 million to some provinces. You'll also remember, surely, how K cut ribbons of dozens of public works in various states of completion throughout the campaign.

This is the usual way of favouring your loyal servants before an election, and rewarding them after it. And it's possible only because the national government has a lot of money to spend, while the local governments have little. Santa Fe is among the provinces most harmed by this. Export tariffs are not redistributable by law like other national taxes, so our province, which produces and exports a lot of the country's grains and vegetable oil, is subject to the whims of the national government. Since Santa Fe is comparatively rich, however, it can (politically) afford to be fairly independent of those whims, and it's been punished for that. The new Socialist government, we hope, will protest more than the obedient Peronist one we've had for the last four years.

Countryside on strike

The agricultural producers of Argentina are on strike since last Sunday, and boy, the spits of venom are flying all over us. Minister Miceli gave a press conference calling the strike "ideological and political", and dismissed the claims of the producers regarding their contribution to the wellbeing of the country. The government has been intervening in (some would say interfering with) the beef market and, to a lesser extent, with the wheat-flour-bread markets, in order to keep prices from rising; and of course there are the retenciones, or export taxes, in place since the economic crisis exploded.

The economic juggling act is as follows:

1. Exporters take advantage of the high exchange rate (over 3 pesos/dollar) to sell at internationally competitive prices and gather a good profit. The ones most benefitted by this exchange rate are the agricultural producers.
   
2. The Central Bank sucks up the incoming dollars, keeping the exchange rate artificially high (over 3 pesos/dollar), so as to maintain the competitiveness of the exporters.
   
3. The government taxes exports, differently according to what exactly is being exported (some things are not taxed, others are taxed 20%). This is how it gets a sizable part of the total tax revenue.
4. The very success of the above strategy places it in danger, since the more competitive exports are, the more dollars enter the local market, thus pushing down the exchange rate.
5. Not only that, but the Central Bank has to emit pesos in order to buy dollars. This effectively devalues the peso and expands the monetary base, indirectly fueling inflation.

The problem arises from the fact that the producers would like to charge the same price internally than externally. Absent that possibility (since most Argentinians cannot afford dollar-priced goods while getting salaries in pesos), most producers prefer to export rather than selling within Argentina. The export tax is also an attempt to "convince" them, by making exporting less profitable, but in general, Argentine producers can still get almost 3 times more by leaving the internal market undersupplied and shipping their goods abroad.

The agricultural sector in Argentina, as a whole, has no reason to complain about profits. During the 1990s, when the exchange rate was fixed at 1:1, many invested in imported machines and increased their productivity, but then they went broke as their exports were uncompetitive. Now they have a government that keeps the exchange rate high for them, making it prohibitively expensive for most of us to get certain imported goods, but they still complain.

One of the points of contention is the government doesn't have a plan for the agricultural sector and doesn't help the smaller producers, who are being bought up by their larger fellows. Indeed, the soybean boom has created a depressing landscape in which a few hundred landowners with huge plantations employ sophisticated machinery and very few people to plant any available patch of dirt over millions of hectares with a transgenic monoculture, then to harvest it and sell it to China (mostly), while producers of less-favoured crops (including many regional specialties in the poorer parts of the country) are struggling to keep up, and falling back.

For some reason, the conservative wealthy elite of the countryside have managed to present this strike as a just cause, as the fight of the economic saviours of the country for a free, undistorted market. The truth, of course, is that if they had their way, the national budget would run a huge deficit and we'd be having milk, bread and beef at three times the current price -- those of us who could afford them, and even then, only as much as the producers did not manage to sell abroad (the EU, for example, buys quality Argentine beef at a very good price, but only a small fixed quota; and both the EU and the US burden their imports with tariffs and regulations to protect their own producers). The controversial Secretary of Internal Commerce, Guillermo Moreno (the price control czar, so to speak, of the Argentine government) put it bluntly: "We can't have food at international prices."

The last cause of anger for the countryside folks was the announced decission of the government to employ force should the roads be blocked by the strikers to prevent the traffic of grain and cattle from their sources to the markets (a threat the strikers have already made -- and they already blocked the Rosario-Buenos Aires Highway for a while). The opposition pounced on it, calling it a double standard (which it is), since the government refuses to clear the road blocks set up by the piqueteros in Buenos Aires and by the pulp mill protestors on the roads before the international bridges linking Argentina and Uruguay, which are arguably causing as much trouble, though of a different kind.

This certainly looks like it will be a rough year's end.