Argentina Tries to Reconcile Exporting Food With Prices at Home

Carlos Fernández is the new economy minister.
Carlos Fernández is the new economy minister. (AP)
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By Monte Reel
Washington Post Foreign Service
Saturday, April 26, 2008

BUENOS AIRES, April 25 -- Inside a busy church hall early Friday morning, many of the 60 men waiting for a free breakfast tilted their heads upward to watch news flashes periodically scroll across a wall-mounted television.

"Government in Crisis . . . Minister of Economy Quits . . . Price of Food Increasing Worldwide . . . "

This country, in theory, should be protected from the global food crisis. Argentina's government touts steady economic growth, and in recent years the country has become a top exporter of the same grains, vegetable oils and beef that are now in such high demand.

But instead Argentina is becoming a symbol of the far-reaching effects of global food inflation. Like other developing countries that depend on agricultural exports, Argentina is struggling mightily to figure out how to protect local food sources without breaking the backbone of its economy.

"This country is in chaos right now," said José António Oliveira, 54, who said he has been eating at the church food kitchen in recent months because he can't afford food at today's escalating prices. "They tell us the economy is growing, but what's growing is hunger. The food kitchens are always full now because prices are going through the clouds."

Inflation -- and the government's efforts to control it -- have magnified existing fissures in the economy. The government and the country's agricultural producers for years have had a troubled relationship, but now they are locked in a full-scale war. Citizens are choosing sides, increasingly divided over an economic strategy praised for stimulating growth and cursed for fueling inflation. A lack of reliable economic data undermines constructive debate.

In March, President Cristina Fernández de Kirchner announced the third tax hike in six months on exports of soybeans and other products -- part of an overall strategy that aims to keep local food prices low and generate revenue.

That revenue, she said, would allow the government to redistribute the agricultural sector's disproportionate wealth to the people most vulnerable to price hikes.

But farmers balked at her plan, launching a three-week strike and setting up roadblocks that sparked food shortages and intensified inflation. A temporary truce between the government and leaders from the agricultural sector has resulted in bitter and as-yet unfruitful negotiations. After the truce ends May 2, more protests could erupt.

From the farmers' perspective, the government is threatening to smash the country's golden egg: soybeans.

"We feel as if we're committing suicide," said Pablo Karnatz, a soy farmer and cattle breeder who has participated in negotiations with the government. "After Argentina's economic crisis in 2001, you wouldn't have seen the economic growth we've experienced if it wasn't for soybeans."

Cultivation of soy has nearly quadrupled since 1990 and now consumes about half the country's farmland, generating nearly $25 billion a year in export income.

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