BUENOS AIRES — The government rescinded Friday a controversial tax increase on grain exports that had sparked months of protests and bared deep divisions in one of the world's major food-producing nations.
President Cristina Fernandez de Kirchner pulled back the tax without comment a day after a stunning rejection by the Senate made possible by a crucial "no" vote by her own vice president. The Fernandez administration had asked a usually compliant Congress to make the tax, which had been imposed by decree, permanent by writing it into law.
"This should mean the end of the conflict," said a satisfied Luciano Miguens, president of the powerful Argentine Rural Society, a trade group.
The Senate defeat was such a blow that government spokesmen Friday were scrambling to deny rumors that Fernandez was poised to resign less than a year after she was elected to a four-year term in October.
The tax rollback apparently ends a national crisis that had dominated Argentine political debate since March 11, when the government put the new levies into effect. Under that plan, the 35% tax on soy exports could have risen to 50% or more, depending on market values.
Argentina has enjoyed more than five years of political stability and brisk economic growth. But farmers enraged by the tariff hike soon began blockading roads and holding back their produce, causing scattered food shortages and threatening an already stretched global food supply chain.
While much of the world frets about food scarcity, Argentina, a global breadbasket, found itself embroiled in a divisive dispute about food abundance -- and what to do with booming profits from sales of grains, especially soybeans bound for Asia and Europe. Escalating demand for food has brought new prosperity to agricultural nations such as Argentina and neighboring Brazil, both among the world leaders in grain and beef exports.
The Argentine government said the additional $1.2 billion or so to be raised annually from higher levies was needed for social investment and other necessities. The president also sought to lower domestic food prices by encouraging farmers to plant staples like wheat and corn, rather than export crops such as soybeans.
Taxing agricultural exports has long been a linchpin of the economic strategy of Fernandez and her husband, Nestor Kirchner, her predecessor as president.
