April 3, 2008
Farmers in Argentina temporarily halted the strike they began three weeks ago as a protest against recent tax hikes on exports of agricultural commodities. Those measures were part of the government's anti-inflation program. The showdown is not over, however, as the farm leaders say that have only suspended the strike for a "truce." Taxes on exports of soybeans, for example, have been raised to as much as 45 percent. In a speech to 20,000 people gathered to show support for her, she warned that the last time Argentina faced widespread food shortages was in 1976 -- the year that the last female president of Argenina, Isabela Peron, was overthrown by a military coup. See CNN.
Using such alarmist rhetoric, it seems that President Cristina Fernandez de Kirchner, who was inaugurated just last October, must be in serious trouble. Somehow her husband, Nestor Kirchner, who preceded her as president, managed to evade the consequences of his rather irresponsible economic policies, defying foreign banks and the IMF, while encouraging the Argentine people to live it up in the wake of Argentina's default on its foreign debt. Now, the chickens are coming home to roost.
Taxes on exports are often a convenient revenue-raising measure for governments that lack the administrative capacity to collect taxes on income or retail purchases. Argentina does not fit that description, however. Export taxes have a perverse effect on the economy, moreover: They curtail total export value, because foreign consumers are forced to pay a higher price for the goods, and the result is an unfavorable shift in the balance of payments. Ordinarily that means greater pressure on a country to devalue its currency (assuming it has a fixed exchange rate), which leads to increased inflation. The logic of what the Fernandez government is trying to do escapes me.
Colombian President Alvaro Uribe criticized Barack Obama for opposing the pending U.S.-Colombia free trade agreement. See AP / Google News; via InstaPundit. Obama apparently thinks that the United States can dictate terms to countries that fall short of our high standards, not realizing what the awful consequences would be if we turn our backs on solid allies such as Colombia. If the United States gives up on Colombia just as the Uribe government has the FARC rebels on the ropes after all these years of bitter struggle, we will have made one of the biggest strategic blunders in recent diplomatic history.