Fernandez

BUENOS AIRES, Argentina (AP):

An Argentine Senate vote that struck down the country's divisive grain-export tax yesterday may put more food on the world's tables, as members of Cristina Fernandez's own party turned against her only seven months into her presidency.

Fernandez had submitted the vote to Congress in a largely symbolic gesture, given that her party holds a majority in both houses. But the Argentine political system was stunned yesterday as Fernandez's own vice president cast the decisive vote against her attempt to spread farm wealth among Argentina's 10 million poor.

Flow disrupted

Argentina, one of the world's leading exporters of soybeans and corn, should have ridden global food prices to record prosperity. Instead, protests over a tax increase imposed in March disrupted the flow of all kinds of farm goods as grocery shelves emptied and farmers stockpiled soybeans and other commodities intended for Asian markets.

The impact on Argentine food exports and the world's food supply will depend on Fernandez's next move, said Rafael de la Fuente, chief Latin American economist for BNP Paribas Bank.

"But in the short term, it's very positive," he said. "Local production should take advantage of this fact."

Even if Fernandez tries to levy new taxes, they will likely be lower and not tied to international grain prices, as were the ones rejected by the Senate. That would cause Argentina's agricultural production and exports to increase, said Martin Uribe, a Duke University specialist in emerging economies.

Little long-term impact

But while both soybeans and corn prices dropped in trading yesterday, analysts say the vote will likely have little long-term impact on global food prices.

"Argentina is not a significant price-maker, even in the soy market," Uribe said.

In March, Fernandez decreed the 10 per cent sliding-scale increase on export taxes, raising them as high as 45 per cent on soybeans. She said the increases were needed to share soaring farm profits. The World Bank estimates that food prices have risen 83 per cent in three years among all Argentines.

Farmers said higher taxes made it hard for them to make a living and reinvest profits in production to meet rising demand. Their protests, which started in rural areas, eventually spread to the cities.

Government supporters shout in Buenos Aires, yesterday as Argentina's Senate narrowly rejected a grain-export tax package whose proposal has led to nationwide farm strikes and regional food shortages. The lower house approved the tax hikes earlier this month and the Senate's approval was the last obstacle for ratification. - AP