Against The Grain

There's an old saying in Argentina: "Throw a seed anywhere, and a plant will grow." But lately, the prized grains cultivated on Argentina's fertile soil have been sitting and spoiling, victims not of disease or drought, but of foolishness. In March, President Cristina Fernández de Kirchner imposed a tax on farm exports, just as global farm-commodity prices were peaking, shutting the Argentine breadbasket when it could have been most profitable.

Kirchner's plan led angry Argentine farmers to withhold exports in an effort to hit at the government's coffers. Protesting farmers have sporadically blocked roads, preventing food deliveries from reaching grocery stores and exports from getting to port. Soy, wheat and corn that would normally ship to Asia and Europe are now sealed in silos. Rotten milk has been dumped on rural routes. As the roadblocks have grown, so have the violent clashes between farmers and truckers, and the public's impatience over the three-month impasse. The government's inability to solve the stalemate has undermined Kirchner's popularity, which dropped to 26 percent in May, down 30 points since January.

The contrast with neighboring Brazil could not be more stark. There, a rich store of natural resources, cutting-edge agronomy and generous refinancing of farmers' debts have seen grain harvests almost double in a decade, from 77 million tons in 1998 to a projected 143 million tons this year. Brazil expects to export 23 tons of soybeans this year, a 17 percent rise over 2007. By all rights, Argentina should be in a similar position. It is the world's second largest corn exporter and third largest soybean supplier, and, like Brazil, it should have learned from years of hyperinflation how to deal with rising prices. Instead, economic growth is slowing from an average of 8 percent in the last five years to 5 percent, according to Vitoria Saddi, an economist at RGE Monitor in New York. Officially inflation is running high, at 9 percent. Economists say the real number is three times higher, largely because of the deliberately undervalued peso, low utility rates and subsidies. The current conflict will only make matters worse as domestic food supplies decrease because of roadblocks.

The lockout has created a new worldwide crisis of confidence in Argentina, which had only recently begun to recover from the damage its 2001 debt default did to its global reputation. In the last four months, Argentina has seen $4 billion pulled out of the country, the worst bout of capital flight since 2002. Moreover, the conflict has driven up futures prices on commodities, threatening to make supplies even more costly. "It is anarchy in the Argentine countryside right now," says Ignacio Uranga of Agro Uranga, a food exporter. "Argentina is missing the train during this commodities boom and we are causing price increases worldwide."

Alas, chaos is the norm in Argentina. During its 198-year history, the country has seen so many convulsions that many Argentines expect a crisis of some kind—dictatorships, hyperinflation, devaluation—every decade or so. Why is this? A lack of organization in the political, judicial and business sectors has allowed graft to thrive—and eliminated serious consequences for misdeeds. Labor unions—first rallied by Juan and Evita Perón in the 1940s—often resort to mafia-like tactics to pressure the executive branch. "Argentina's institutions are incredibly weak," says Graciela Römer, a Buenos Aires sociologist and pollster. "We continually elect people who are charismatic, but not good leaders."

The latest example was Nestor Kirchner, Cristina's husband, who won the presidency in 2003 and blamed the International Monetary Fund and Wall Street for the crisis of 2001. In spite of his unorthodox and often controversial economic policies, Argentina prospered, fueled in large part by rising global commodities prices. Succeeding her spouse in December, Cristina vowed to deliver on his populist promises to the poor, and it was in part to help support them that she imposed the commodity-export tax, which now takes up to 45 percent of farmers' profits. Farmers doubt the Robin Hood plan will work and that the money will ever arrive to the rural areas where most of the poor live. "This plan will do nothing more than bring another recession," says farm leader Alfredo de Angeli.

Like her husband, Cristina seems to prefer rowdy rhetoric over meaningful dialogue. So far, she has not blinked, despite three months of roadblocks, sagging poll numbers and the largest antigovernment protests since 2001. Now this stare-down is proving to be a bellwether for middle- and upper-class Argentines whose distaste for the Kirchners has simmered for years. Conversation in chic Buenos Aires cafés revolves around Cristina's penchant for European shopping sprees and heavy mascara, as much as rising crime, sky-rocketing supermarket prices—and the latest of Argentina's many lost opportunities.

With Mac Margolis in Rio De Janeiro

© 2008