Cristina Kirchner, the Argentine president, has cancelled plans to increase taxes on soy exports after the senate voted against the bill.

Thursday's rejection of the increase, which had prompted widespread protests from farmers across the country, has been seen as political setback for Kirchner.

The senate vote itself was not enough to cancel the tax increase because it has been issued by executive order.

Julio Cobos, the vice-president, cast the deciding vote against the government-backed bill to break a 36-36 tie in the senate, sparking outrage among the president's allies.

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

Strong opposition

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 per cent, on a sliding scale linked to global prices.

The vote came after rival protests for and against the bill on Tuesday, with hundreds of thousands demonstrating in the streets.

With the vote carried live on national television, hundreds of opponents of the bill gathered in the Palermo district to watch the  proceedings.

They erupted in celebration when the bill went down to  defeat.

Farm leaders welcomed the tax-increase cancellation.

"The conflict is over," said Luciano Miguens, head of the Argentine Rural Society,