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Argentina senate rejects grain tax
Vice-president votes against own government to scupper controversial hike.
Last Modified: 17 Jul 2008 20:14 GMT
Farmers had threatened to renew strike action if the bill was passed [AFP]

The Argentine senate has narrowly rejected a controversial tax hike on soy exports that sparked months of protests by farmers.

After more than 18 hours of debate, the senators were tied 36 to 36, leaving Julio Cobos, the vice president, to cast the deciding vote against the bill championed by his own government.

The outcome of the vote on Thursday has been seen as a major political blow to Cristina Fernandez, president, who's ruling Justicialista Party (JP/Peronists) controls both houses of Congress.

Al Jazeera's Lucia Newman, reporting from Buenos Aires, said that there was a lot a speculation about whether the vice-president had voted against the bill out of ambition or conviction.

"Julio Cobos is a very interesting figure because he was expelled from his own political party, the main opposition party in Argentina, when he agreed to run as president Kirchner's running mate, in what was suppose to be a show of consensus," she said.

Farming wealth

Kirchner said she had decided to raise the tax on grain exports to redistribute the farming sector's growing wealth from spiralling commodities prices to the country.

However, farmers had condemned the measure, arguing that it would devastate one of the country's most profitable sectors.

The vote came after hundreds of thousands of people staged rivals for and against the bill on Tuesday.

Once the results were announced there were celebrations in the capital Buenos Aires.

"This whole issue has really become an obsession in Argentina and at times it has even paralysed the country, it's also paralysed Argentine society and mobilised the middle class against the government," Newman said.

Argentina is one of the biggest food producers in the world, leading with exports of soybean oil and products at $24bn a year.
  
It is also the second-biggest corn exporter, after the United States, and the fifth-biggest wheat exporter.

Crippling strikes

Kirchner had sent the proposal to Congress after months of crippling strikes by farmers following her initial decree raising taxes on soy and grain exports issued in March.

The bill passed the lower Chamber of Deputies on July 5, where it faced stronger than expected opposition.

It proposed to raise grain export tariffs from 35 to 47 percent,  on a scale linked to global prices.

Roadblocks by farmers and truck drivers caused food shortages around the country until farmers suspended their strike in early June, but had threatened to revive the action depending on the outcome of the vote in Congress.
  
The government bill had called for lower tariffs for small producers, which would benefit 85-90 per cent of Argentine farmers, officials said.
  
It also proposed setting up a special fund to reinvest some of the tariff revenues in public ventures such as building new hospitals, schools and roads

Source:
Al Jazeera and agencies
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