July 5 (Bloomberg) -- Argentina's lower house of congress approved the government's plan to increase taxes on exports of grains and oilseeds, risking a resumption of three months of strikes by farmers.

The measure, passed by a vote of 128 to 122 after 17 hours of debate, requires Senate approval to become law. It ratifies a March 11 government decree that sparked protests among farmers in Argentina, the world's second-largest exporter of corn and third-largest of soybeans.

President Cristina Fernandez de Kirchner imposed the variable levies for grains and oilseeds to keep domestic food prices from rising. She asked Congress to approve the increases reckoning that enacting them into law would quell protests that resulted in food shortages.

``If this bill is finally approved by the Senate, the damage to farmers will continue,'' Hugo Biolcati, vice president of the Argentine Rural Society, told reporters at Congress today. ``We have hope in the senators' responsibility regarding the people who voted for them.''

The sliding-scale system, pegged to Chicago exchange prices, boosted soybean levies to more than 40 percent from a fixed 35 percent rate.

``The decision to set a variable export tax was right and will make the sector more predictable,'' said Agustin Rossi, a lawmaker for the ruling Peronist Party.

Benefits for Small Farms

The lower house introduced some changes to the government plan, making more farmers eligible for soybean-levy refunds in a bid to benefit small- and medium-size farms, Rossi said. The senate is scheduled to discuss the bill next week.

``This project doesn't solve the problem, and if it doesn't solve the problem, this isn't a good exit,'' said Daniel Katz, a lawmaker from the Concertacion Party, which is a member of the government coalition party.

Striking farmers withheld their harvests and blocked highways, choking off supplies to grain crushers and ports on Argentina's Parana River operated by food-trading companies including Cargill Inc. and Bunge Ltd.

Last month, truck drivers blocked roads to protest the loss of business and demanded that the government come to terms with farmers. The protests have prompted institutions including Barclay's Capital to trim forecasts for growth in Latin America's third-largest economy.

The farm protests have also taken a toll on Fernandez's popularity, which fell to 19 percent in June from 23 percent in May, according to a poll last month by Buenos Aires-based Giacobbe & Asociados.

To contact the reporter on this story: Eliana Raszewski in Buenos Aires eraszewski@bloomberg.net

Last Updated: July 5, 2008 18:38 EDT