WSJ: Argentina Farmers Call Strike After Tax Increase

June 1, 2012 9:08 am0 commentsViews:

BUENOS AIRES—Argentina’s farmers are vowing to protest a steep rise in rural property taxes in the country’s leading agricultural province as cash-strapped local governments turn to the fields once again to plug swelling deficits.

Buenos Aires Province’s lower house passed the tax increase Thursday under intense pressure from provincial governor, Daniel Scioli. Mr. Scioli signed a controversial executive order raising the taxes earlier in the day, forcing Congress to a vote. The Senate is expected to swiftly approve the measure.

“This is going to hit farmers hard … some aren’t going to be able to make it,” Luis Etchevehere, vice president of the influential Argentine Rural Society, said. “There’s lots of pressure to call a strike,” he added.

The province’s leading farm group has already announced a nine-day stoppage starting Saturday. In a statement Thursday, the group urged its members to stop selling all but perishable goods and to take to the streets to protest the taxes.

Farmers virtually shut down grain exports and caused shortages of beef in the cities in 2008 through a series of strikes and roadblocks to protest President Cristina Kirchner’s attempt to increase grain-export taxes. The government eventually backed down in the face of broad public support for the farmers.

Rapid economic growth and high international grain prices helped to smooth over lingering resentment between farmers and Kirchners in the years after the strike.

However, Buenos Aires Province’s dire finances forced its pro-Kirchner governor to take on the countryside. Scioli—who is frequently mentioned as a possible successor to Ms. Kirchner—was expected to tap global bond markets this year to close his budget deficit.

But the deepening crisis in Europe and the recent nationalization of oil company YPFSA YPF -0.74% have driven up borrowing costs to prohibitive levels.

“There’s practically no chance of the province being able to place bonds in the voluntary debt market,” research firm Abeceb.com said in a report.

Higher property taxes and other levies will likely raise an additional 2.69 billion pesos ($602 million) this year, but that still isn’t enough to cover a deficit estimated at 4 billion pesos, according to Abeceb.com.

Despite stiff resistance from farmers, the provincial government is standing firm on the tax increase.

This “is 60 years overdue,” Mr. Scioli’s cabinet chief, Alberto Perez, told local news channel C5N. “It’s tied to progressive taxes, equality and responsibility.”

Only 38% of the province’s farmlands will see their taxes rise, he said.

But the tax increase could be extreme in some cases, and farmers from across the country are crying foul amid signs that other agricultural provinces such as Entre Rios, Cordoba and Santa Fe are likely to follow suit, said Jorge Chemes, federal congressman for the opposition UCR party from Entre Rios Province.

“This is simply confiscatory,” Mr. Chemes said. Already almost 80% of farm profits are taken by taxes, he said.

In Buenos Aires Province, property taxes will rise between 300% and 400%, while in Entre Rios province some farmers will see property taxes rise by as much as 960%, he added.

Mr. Chemes said that a farmer in Entre Rios Province with 395 acres will see his annual property tax rise from 2,400 pesos to 24,000 pesos.

“It’s not that the farmers don’t want to pay, it’s that they can’t,” he said. “This is going to end up being a nationwide issue with an extended strike.”

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