Economy Politics

Alberto Fernández is setting the ground for a business-labor pact

10th October 2019

By Ignacio Portes

Alberto Fernández is setting the ground for a business-labor pact

With still two weeks to go before the election that is likely to crown him as president-elect, Alberto Fernández is already acting as a national leader, mediating in multiple conflicts and taking on one of the classic state roles in interventionist economies: calling on business chambers, labor unions and any other influential actors such as religious organizations into the negotiating table.

</p> <p>In the last few days, the presidential favorite held an <a href="https://www.ambito.com/la-uia-recibio-alberto-fernandez-y-le-entrego-un-documento-propuesta-reactivar-la-industria-n5057798">hours-long meeting</a> with the influential Argentine Industrial Chamber (UIA), led negotiations to push forward for the <a href="https://www.clarin.com/politica/gesto-unidad-alberto-fernandez-cta-hugo-yasky-aprobo-iniciar-fusion-cgt_0_LgNK2X9p.html">unification</a> of the country’s two massive umbrella labor unions (CGT and CTA), talked airline workers into <a href="https://www.lanacion.com.ar/politica/fernandez-sello-una-tregua-hasta-el-ano-proximo-con-los-gremios-nid2295138">backing off from a strike</a> against the state-owned Aerolíneas Argentinas and launched a <a href="https://www.infobae.com/politica/2019/10/07/alberto-fernandez-convoco-a-trabajar-contra-el-hambre-a-juan-grabois-la-iglesia-y-las-grandes-empresas/">campaign against hunger</a> with the support of multiple civil society organizations including universities and churches.</p> <p>These actions are the prequel to a more ambitious “social pact”, which would include a price-salary agreement between unions, business owners and the state aimed at controlling inflation.</p> <p>Yesterday, the likelihood of such a pact became more evident, as CGT union leaders Antonio Caló and Rodolfo Daer visited the UIA headquarters and said they agreed with the need to <a href="https://www.cronista.com/economiapolitica/Primer-consenso-UIA---sindicatos-actualizar-convenios-sin-una-reforma-laboral-globla-20191009-0033.html">reform some of the country’s labor regulations</a>, although on a sector-by-sector basis instead of sanctioning a broader labor reform.</p> <p>This kind of business-labor pact has several precedents in Argentina, especially under Peronist governments, with outcomes ranging from successful to chaotic and disappointing.</p> <h2><strong>Contrast with Macri</strong></h2> <p>Although President Mauricio Macri’s government — especially during Alfonso Prat Gay’s stint as Economy minister during the first few months of the administration — made some noise about engaging in dialogue and holding talks with business and labor unions, deep down most top officials did not really believe much in that style of leadership.</p> <p>Many actors that will likely be involved in talks with Fernández’s government were seen as either illegitimate or part of a corporatist Argentina whose interests had to be left behind to make room for progress and modernization.</p> <p>Key unions such as teachers and truck drivers, as well as the owners of the more protected and less internationally competitive industrial sectors (many of them members of the UIA), were all seen as part of this group by Macri and Cabinet Chief Marcos Peña.</p> <p>In broader society, be that at the still big and influential Catholic Church (and the social movements linked to it), within prestigious universities, or at a small and struggling neighborhood sports club, the feeling about a lack of genuine lines of communication with government decision makers in downtown Buenos Aires was increasingly shared.</p> <p>In the end, the list of those not seen as valid partners for dialogue became too big, and those actors ended up converging at the doors of the opposition, despite the many differences amongst them.</p> <h2><strong>A long list of precedents</strong></h2> <p><a href="https://gettheessential.com/politics/2019/09/19/is-fear-of-a-peronist-return-justified-argentina-peronism-peron-history-democracy-authoritarianism">Peronism</a>, on the other hand, has a long history of alliances with (and sometimes even trying to take over and control) civil society’s organizations.</p> <p>Fernández’s idea of sitting down with representatives of different interest groups has a long list of precedents.</p> <p>During her public reappearance earlier this year, presenting her best-selling book <em>Sinceramente</em>, former President <a href="https://gettheessential.com/politics/2019/05/16/peronism-courts-and-unions-move-closer-to-cristina-kirchner-after-public-reappearance">Cristina Fernández de Kirchner mentioned</a> the social pact led by Juan Domingo Perón’s Economy minister Juan Gelbard in 1973 as an example to look into.</p> <p>Gelbard started as a small provincial businessman but became very politically savvy and well connected. In a context of escalating political violence, he managed to get unions and businessmen to sign a price-salary agreement aimed at containing the country’s inflationary spiral. But the plan relied heavily on price controls, which led to scarcity and black markets, as monetary and fiscal aspects meant that the Argentine currency continued to lose value.</p> <p>With international stress also increasing due to the 1973-74 oil crisis, the social pact’s health deteriorated even more, and the original directives of the plan soon started being ignored or renegotiated. Eventually, the country’s political crisis cost Gelbard his position and right-wing Peronists opted for a shock austerity program instead, in what became the build up to the 1976 military coup.</p> <p>A somewhat more successful case came in 2002, when interim president Eduardo Duhalde called on the Catholic Church to help contain rising poverty and hunger following the massive 2001 financial crash and 2002 devaluation, while working on a pact between the UIA, the CGT and agricultural exporters.</p> <p>The economy eventually bounced back strongly, but the extent of the social crisis and the exclusion of informal workers and the unemployed from a seat at the table led to country wide street protests and murderous police repression, with Duhalde calling for an early election which Néstor Kirchner eventually won.</p> <h2><strong>Multiple demands</strong></h2> <p>Fernández took over as Kirchner’s cabinet chief, with the latter promising “a normal country” in his inauguration speech after years of economic chaos and social upheaval.</p> <p>The presidential favorite often cites those years as proof that he has experience on how to deal with the biggest of crises — similar in scale to what Argentina looks close to facing. Critics say Kirchner and Fernández came to power with an already re-balanced macro economy following Duhalde’s “dirty work”, and that the same won’t be true in 2019.</p> <p>Fernández will be facing multiple demands, with the <a href="https://gettheessential.com/economy/2019/08/29/debt-renegotiation-argentina-imf-foreign-bonds-local-law-imf-default">Federal government</a>, the <a href="https://gettheessential.com/economy/2019/03/28/the-pesos-downfall-could-just-be-getting-started">Central Bank</a> and <a href="https://www.lapoliticaonline.com/nota/122123-kicillof-alerta-por-las-cuentas-de-la-provincia-y-sugiere-que-pedira-un-salvataje-a-alberto/">provinces</a> saddled with debt, wage earners unhappy after years of purchasing power losses during Macri’s administration, poverty <a href="https://gettheessential.com/politics/2019/09/26/social-unrest-food-emergency-poverty-unemployment-economic-crisis-protests-chubut-buenos-aires">steadily growing</a> and businesses fighting bankruptcy and recession.</p> <p>Despite promising a 20 percent salary hike after he takes office, analysts believe that an increase in money printing to finance government spending plus the growing peso-denominated Central Bank debt is likely to lead to higher inflation and further losses in workers’ purchasing power. How long will unions’ patience last in such a context? And how likely is it that businesses might also step down from an agreement if higher taxes or price controls end up being a key part of Fernández’s proposals?</p> <p>Although Fernandez&#8217;s ability as a <a href="https://gettheessential.com/politics/2019/05/23/who-is-alberto-fernandez">political middleman</a> has been proven throughout the years, the campaign promises made to everyone from <a href="https://gettheessential.com/economy/2019/10/03/is-an-uruguay-style-no-haircut-debt-restructuring-feasible">creditors</a> to social representatives might end up clashing with the hard limitations imposed by an economic crisis that seems far from being over.</p> <p>

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Ignacio Portes

Ignacio Portes is The Essential's General Editor. Former Economy editor at the Buenos Aires Herald, he has also written for publications such as Naked Capitalism, NSFWCorp and Revista Debate.
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