BUENOS AIRES (Reuters) - President Cristina Fernandez's campaign to bolster the state's role in Argentina's economy took a big step forward on Thursday when Congress approved a bill allowing the government to intervene in the pricing and output levels of large companies.
The House of Deputies voted 130-105 early on Thursday for the so-called supply law. It enables the government to set profit margins and confiscate merchandise from private companies judged to have hiked prices unjustifiably.
The vote came despite strong opposition from big business and the nation's key grain sector. The bill has already passed the Senate. Fernandez still has to sign the measure into law. This, though, is widely seen as a rubber-stamping exercise.
Fernandez's leftist government says the law will protect consumers from unfair price rises and stem job losses in times of crisis. The administration has shrugged off opponents' criticisms that more state intervention will stifle the economy.
The bill "creates the conditions for regulations by the state in order to prevent large firms abusing their strong positions and holding back stock without good reason," Cabinet chief Jorge Capitanich told reporters.
Capitanich said the bill would protect small and medium-sized companies, encourage investment and boost job creation.
Leaders from the agricultural, banking, industrial and retail sectors vow to sue to get the law thrown out on grounds that it violates private property and trade rights.
In a marathon debate that dragged on into the early hours of Thursday, opposition lawmakers accused the government of suffocating growth of the $490 billion economy.
"This government has a parasitic relationship with production and work because it feeds off them but simultaneously wants to destroy them," said legislator Carlos Brown.
The supply law is one of a series of interventionist policies announced by Argentina since it defaulted on its debt in July.
Rattled by the default, markets will watch to see how the new rules are enforced in a country where private economists forecast inflation may top 40 percent this year as the currency tanks and the economy shrinks.
Central bank reserves have fallen 20 percent over the last 12 months to $28.2 billion.
Farmers worry the new law will allow the state to grab corn and wheat crops if it decides domestic food prices are too high. Economy Minister Axel Kicillof said those fears were unfounded.
"The state does not want to intrude on the economy, but it does have to regulate the economy," Kicillof told local radio while the bill was being debated Wednesday afternoon.
"The government does not have the ability or the desire to control all the comings and goings of the economy, all the prices, or go confiscate grains from the silos," he added.
But Martin Fraguio, executive director of Argentina's Maizar corn industry chamber, called the law "a serious threat".
"This puts the entire corn chain - planting, harvesting, buying and selling - at risk," Fraguio said.
Argentina is the world's No. 4 corn exporter and No. 3 supplier of soybeans.
Additional reporting by Sarah Marsh and Richard Lough; Editing by Lisa Von Ahn and Andrew Hay