March 20, 2009 / 5:39 PM / 10 years ago

UPDATE 4-Argentine farmers block roads, call strike over tax

* Farmers to halt grains, cattle sales for seven days

* Increased tensions send U.S. soy prices higher

* Conflict flares as election campaigning gets under way (Adds reaction from interior minister, comment on soy prices from analyst in Chicago, paragraphs 9, 13, 17)

By Helen Popper

BUENOS AIRES, March 20 (Reuters) - Argentine farmers blocked roads and called an anti-government strike on Friday, reigniting a year-long standoff over soy taxes and challenging the president three months before a mid-term vote.

The protests erupted a day after ruling party lawmakers refused to debate an opposition-led bill to cut the taxes, further dimming prospects of a quick resolution to a conflict that has weakened President Cristina Fernandez.

Her cash-strapped government is battling to retain some $4.9 billion in tax revenue from soy exports in the run-up to the congressional vote, which is expected in June.

“A great opportunity was lost yesterday,” said Mario Llambias, president of the Argentine Rural Confederations, one of the country’s four main farming groups, as he called the seven-day freeze on grains and livestock sales from Saturday.

Fernandez further riled farmers in the agricultural powerhouse with an announcement that revenue from the levies would be shared with provincial governments [ID:nN19456146].

“We’ve gone back to the 2008 situation,” said Alfredo de Angeli, the outspoken leader of a local FAA branch, who was arrested by military police last year when he blocked the same highway in the eastern province of Entre Rios.

Protesters stopped traffic by parking tractors on several highways in the fertile Pampas region, some burning tires in scenes reminiscent of last year, when blockades caused sporadic food shortages and sent local financial markets tumbling.

Friday's protests pushed U.S. soy futures and local livestock prices higher[ID:nLK734266], while the peso ARSB= and Argentine bonds fell.

Mario Balletto, a Citigroup analyst in Chicago, said “seven days will not cause too much excitement but the uncertainty that it could become longer would be supportive” for prices.

POVERTY

Fernandez has refused to lower the tax on soybeans from the current rate of 35 percent, even as global prices have slid 40 percent from last year’s record high and a severe drought has slashed corn and wheat production.

She defends the levies as a way to share wealth in a country where roughly one in four people lives in poverty.

Soy is Argentina’s top crop and income from taxes on soybeans, oil and meal has become more important for the government as the economy slows after years of robust growth.

Interior Minister Florencio Randazzo told local radio: “I’m worried that what the global economic crisis couldn’t provoke in Argentina, the farmers will end up provoking with their roadblocks and this commercial strike.”

Farm leaders condemn the roadblocks, but say it is impossible to control the grass roots.

Argentina is an important global source of corn, wheat, beef and soybeans, but the farming conflict is leading major soy buyers like China to look to the United States and Brazil for supplies, industry analysts said.

The current grains harvest, valued at about $17 billion, is expected to earn the government $5.6 billion in export levies, the vast majority from soy, according to a recent estimate by the Argentine Rural Society.

Randazzo repeated that the government will not lower soy taxes “because all our soy is exported and in recent years it’s been clearly shown that its profitability ends up reducing wheat, livestock and dairy production.” (Additional reporting by Lucas Bergman, Christine Stebbins in Chicago; Editing by Marguerita Choy and David Gregorio) For a snap analysis on the farm conflict, see [ID:nN20518155].

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