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Controversial tax to fund Argentina's social programs

  • Story Highlights
  • Argentine president says export tax will fund massive public works program
  • Farm leaders urge calm as they plan response to president's announcement
  • The 44 percent tax has caused a 3-month standoff between farmers, government
  • Analyst suggests president's plan could turn public tide against farmers
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BUENOS AIRES, Argentina (CNN) -- Argentine farmers are planning their next move after the country's president announced plans to fund a public works program with revenues from a controversial agrarian export tax.

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Argentine President Cristina Fernandez de Kirchner has rejected demands for the repeal of an export tax.

Eduardo Buzzi, president of the Argentine Agrarian Federation, said the organization's directory board will meet Friday to discuss what steps it plans to take in response to President Cristina Fernandez de Kirchner's announcement.

"We call on farmers across the country to stay calm but to stay on the alert," the organization said on its Web site Tuesday.

The 44 percent export tax, which applies to soybeans, wheat, corn and sunflower seeds, has caused a three-month-old standoff between the government and farmers.

Argentina is the world's second-largest corn exporter and third-largest soybean exporter.

On Monday, farmers suspended roadblocks that had snarled traffic across the country, though reports indicated that groups in some rural areas were still blocking roads Tuesday.

Kirchner has argued that the tax, which was implemented March 11, pays for increases in seniors' pensions and financial assistance for the poor.

She has rejected the farmers' demands for a repeal of the export tax as "extortion."

Monday marked the first time Kirchner revealed details of how the government plans to use profits from the tax, which has generated about U.S. $1.5 billion, to lift people out of poverty.

"It is impossible to attack the problem of the poor without distribution of revenue and without touching extraordinary profits," she said in a televised address.

Kirchner said the Social Redistribution Program will include the construction of 30 hospitals and more than 300 health-care centers, as well as investments in the country's rural roads and in housing.

In an apparent criticism of the farmers, she lamented "the reaction of some who refuse to contribute in the redistribution" to "those who have least." She apologized, however, at the close of her speech for offending anyone.

Analysts suggested that the tax was a "strong attack" on on the farmers and their arguments against it.

Claudio Loser, a visiting senior fellow at the Inter-American Dialogue policy analysis center, said it could result in Argentine society being "less sympathetic to the farmers," noting that it was "surprising" that the government didn't come up with the plan until the tax was three months old.

Loser, who is from Argentina, also predicted that a continuation of the tax would provoke farmers into not investing.

Externally, the standoff has had a two-pronged effect on Argentina, he said.

"The conflict has resulted in a loss of market for Argentina," he said, as other countries have gone elsewhere for products.

Loser also said foreign investors may be more reluctant to invest in Argentina now.

CNN's Carolina Cayazzo and Taylor Gandossy contributed to this report.

All About ArgentinaCristina Fernandez de Kirchner

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