Globalization: Argentinian Farmers Strike, Food Prices Increase

Argentinian Farmers Protest

Argentinian farmers, whose strike for more than two weeks has crippled the country, have agreed temporarily to break off their strike, to negotiate with the government. Details via the BBC:

Farmers in Argentina have suspended a crippling strike called in protest at rises in export taxes on farm products.

A farmers' spokesman said the 16-day protest - which included roadblocks and caused food shortages - had been halted to allow talks with the government.

Argentine President Cristina Fernandez de Kirchner had refused to negotiate with the until the action was stopped.

She says the taxes will redistribute wealth, but farmers say they and their communities will be hit hard.

Does any of this matter to the US, and if it does, where is the reportage about this strike in the traditional media?

This story is about globalization. Argentina exports food to Europe and the US. So Argentinian domestic disputes about food and taxation of food have immediate repercussions in the global market and shortly after that in your supermarket. Put another way, the policies of the Argentinian government as it attempts to handle its domestic economic crises directly affect the cost of your food.

The strike in Argentina is about excise taxes of up to 45% imposed on food products. According to the NY Times:

Argentina has been one of the world’s main beneficiaries of a global surge in commodities prices. But farmers abhor government measures like export bans and price controls, which are being put into effect to stem inflation and to increase revenue. The farmers say they intend to continue the strike as long as necessary, demanding that the government repeal a new sliding-scale export tax regime that raises levies on soy and sunflower products at current prices.

Ms. Kirchner has said the taxes help redistribute wealth in a country where nearly a quarter of people are poor.

The BBC adds:

Farmers are furious over the government's decision to introduce a new sliding scale of export taxes, raising levies in some cases up to 45%.

President Fernandez - who took office in December last year, succeeding her husband, Nestor - says the taxes are a means to raise badly-needed revenue, curb inflation and guarantee domestic supplies.

Argentina, a leading exporter of beef, corn, soya oil and soybeans, has benefited from the recent global surge in commodity prices.

Apparently, the Argentinian president recognizes that the agricultural sector of her economy is now one of the country's most profitable because of rising global demand for beef, corn, wheat and soybeans. Adding large excise taxes to food products will bring revenue to the government, but the increase in price locally and to global trading partners will also drive demand down. The farmers are, of course, furious:

As well as causing meat and dairy shortages in the shops, the strike has hit exports and triggered clashes in the capital Buenos Aires.

Protesters have stopped lorries carrying farm produce, either turning them back or dumping the goods on the road, while trade at grain and cattle markets was also disrupted.

According to the Times:

Elsewhere in Argentina, farmers blockaded highways to keep trucks from transporting agricultural goods. The government said it would clear the roads by force if necessary to get food to market.

Several suppliers of Argentine soy and soy oil declared force majeure to back off from sending cargoes to China as a result of the protest, following a similar move on soy meal shipments to Europe, traders and industry officials said.

The strike has slashed foreign currency inflows from agricultural exports, sending the local peso currency to its weakest level against the dollar in five months.

As of today, both sides are unable to move expeditiously to solve the problem. The farmers are waiting to resume their strike; the government has proposed talks for Monday. The Guardian notes that the strike is the biggest crisis Fernandez has faced since taking office in December, and says that US ships are caught in the strike waiting to be loaded.

If Argentina does not scrap the excise tax increase, and if it somehow manages to find a way to get farmers to release their goods for sale, the strike will result in further increases in the global price of food.

The strike has already led to shortages of meat and dairy products, paralyzed local grain and livestock trade and forced major exporters of Argentine soy products to renege on some contracts. And this is only the beginning if the matter isn't resolved.