Without peace, Cristina lashes again and intensifies conflict

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Thousands of Argentines packed the center of the capital on Wednesday to rally support for center-left government, which is locked in a bitter three-month dispute with farmers over new export taxes.

The conflict, including blockades by farmers and nationwide protests against government, has eroded the popularity of President Cristina Fernandez and pushed Latin America's No. 3 economy into its deepest political crisis in six years.

In an effort to ease tensions, Fernandez asked Congress on Tuesday to ratify the tax hike on soy exports, which farmers fear will put small growers out of business.

A sea of banners in the blue-and-white national colors filled the square in Buenos Aires in front of the pink presidential palace for the rally, which government billed as a call "to defend democracy" in the face of farm row.

Striking farmers, refusing to send goods to market and blocking grains trucks on highways, said the president's decision to involve Congress was positive because it might allow changes to the tax hike announced in mid-March.

Farmers were due to decide whether to lift their protests later on Wednesday.

"Free up the roads, let Argentines get back to work," Fernandez told the rally. "We have to learn once and for all that we've got to overcome our differences democratically."

The demonstration sought to counter anti-government protests that erupted across the country on Monday, when thousands of people banged pots and pans in scenes reminiscent of the devastating economic and political crisis of 2001/2002.

"This government saved me," said Hector Lagomarsino, 55, a factory worker who was forced to earn a living doing odd jobs after he was laid off in 2000. "We've have had a lot of problems but now there's work. We've got to defend that."

Argentina recovered rapidly from its meltdown but the farming standoff has cast a cloud over five years of robust growth and raised fears of a hard landing.

Argentine stocks and bonds, hit by uncertainty over the conflict, were firmer on Wednesday and U.S. soy futures fell due to expectations of a resolution.

'WAKE-UP CALL'

Fernandez, who took office six months ago, has defended the controversial tax rise as a way to redistribute the bounty of high global food prices among the poor and to fight inflation.

Argentina is one of the world's biggest providers of soybeans, corn, wheat and beef but nearly a quarter of the population lives in poverty.

Political analysts said Fernandez's decision to refer the tax hike to Congress for ratification could mark a turning point in the conflict.

"The government appears to have got a bit of sense back," wrote a top-selling daily, describing the decision as "perhaps the most noticeable U-turn" made by the government in five years.

Pollster and analyst Jorge Giacobbe said the pot-banging protests were like "a wake-up call" for the government.

But opposition figures, who have criticized government for unilaterally imposing the tax hike without congressional debate, said referring export taxes to Congress did not go far enough.

Lawmakers will be asked only to vote for or against the export tax shake-up in its present form, not to draw up new legislation.

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