South America Calling

Argentine Congress Thursday approved a supply bill that could allow the government to confiscate grain stocks and cap domestic food prices.

The lower house voted 130-105 to offer President Cristina Fernandez greater powers to control the economy, setting profit margins for large companies and confiscating goods sold at unjustifiably high prices.

The move reflects the dire straits in which Argentina's government finds itself. The economy has stalled, inflation is surging at over 30%, dollar reserves are dwindling dangerously low and it has been forced into default on its sovereign debt.

In the face of a hard currency shortage, Fernandez has been particularly dismayed by the farmer's policy of stocking soybeans, and corn, as protection against economic volatility. Soybean exports carry a 35% tariff, which accounts for a third of government dollar revenues. But farmers continue to stock 43% of the last soybean crop up to the start of September, almost double the percentage normally held, according to government numbers.

Fernandez's administration has repeatedly threatened the farm sector with intervention, if they didn't start selling. Now it has passed legislation that would allow it to do that.

"The new law opens the possibility of the government going to farms and confiscating oilseeds and cereals," said Luis Etchvere, president of the Argentine Rural Union.

The government will also now be able to set prices for food on the internal market and dictate production levels for agribusiness as part of its push to control inflation.

Economy Minister Axel Kicillof denied the government would be heavy handed in its intervention.

(AG)

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