(AFP) – Jul 5, 2008

BUENOS AIRES (AFP) — A controversial grain tax bill cleared the Chamber of Deputies Saturday by a 129-122 vote, giving a first-round win to President Cristina Kirchner in her struggle to defuse a months-long farmers' strike.

The bill raising grain export tariffs from 35 to 47 percent, on a sliding scale, threatens to rekindle a 100-day export strike by farmers and truckers that emptied store shelves of staples, in Kirchner's first major crisis after 18 months in office.

"This is the first round. The second one will take place in the Senate next week," farm sector leader Eduardo Buzzi told reporters after the vote, which followed a 17-hour debate by lawmakers.

Depite losing the vote, Buzzi was pleased socialdemocrats and other leftist political groups had opposed the bill, which the government proposed only after weeks of strike and social pressure against its initial tax hike decree in March.

Kirchner decided to raise the tax on grain exports to redistribute the farming sector's growing wealth from spiraling commodities prices. The farmers balked at the measure, claiming it would devastate one of the country's most profitable businesses.

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

The March-June strikes dealt a heavy blow to the country's economy. The impact was compounded by roadblocks by farmers and truck drivers, causing food shortages around the country.

Farmers suspended their strike in early June after they accepted a confidential deal with Kirchner's administration.

Buzzi said that until the Senate takes up the grain tax bill there would be no further strike action.

"There's no way we'll launch a new union struggle while (government) institutions are at work," he said, adding however that the sector "is under alert and farmers are holding meetings" across the country.

The government bill calls for lower tariffs for small producers -- 30 percent tariff for up to 300 tons of grain exports per year, and 35 percent for up to 750 tonnes, which would benefit 85-90 percent of Argentine farmers, officials said.

It also calls for setting up a special fund to reinvest some of the tariff revenues in public work projects such as building new hospitals, schools and roads.

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