President Cristina Fernandez de Kirchner’s government faces a second national strike in less
than five months tomorrow, saying it has been backed by hedge
funds that led the country to a default in July.
Truckers, train drivers, port workers and waiters are among
the union workers taking part in a 24-hour strike in demand of
higher wages and in protest at a wave of dismissals. It will be
the third strike at a nationwide level since Fernandez’s late
husband and predecessor Nestor Kirchner took power in 2003.
“It’s a reflection of worker discontent,” said Manuel Mora y Araujo, a Buenos Aires-based political analyst. “Prices
are rising and wages aren’t.”
Fernandez, who refused to pay $1.5 billion to holdout
creditors from a 2001 record default, faces growing social
discontent over accelerating inflation and slowing growth. The
default threatens to speed the decline in reserves, increase the
fiscal deficit and widen the gap between the official and black
market exchange rates that could trigger a currency crisis,
according to Bank of America Corp.
The Argentine Football Association said it would postpone
as many as seven soccer matches, including ones involving River
Plate and Boca Juniors because of the strike.
The bus drivers’ union said it won’t strike tomorrow and
protesters may picket entrances to Buenos Aires to stop people
getting to work, said Carlos Germano, a Buenos Aires-based
political analyst.
Falling Behind
Consumer prices rose 38 percent in mid-August from a year
ago, according to Elypsis, a Buenos Aires-based research firm.
The government hasn’t issued a figure for annual inflation since
February when it unveiled a new index. Registered salaries rose
29 percent in June from a year earlier, according to the state-run statistics agency.
Companies are also cutting back. Volkswagen’s Argentina
unit suspended 900 workers for 10 days between July and
September because of a fall in demand from Brazil, Ambito
reported July 23. Chicago-based printer RR Donnelley Sons Co.
declared its Argentine unit bankrupt and dismissed 400 workers
Aug. 11.
The government in January devalued the peso by 19 percent
to 8 per dollar as it sought to boost competitiveness and shore
up international reserves that have fallen to near an eight-year
low of $28.7 billion.
The peso slumped to a record low today of 8.4077, deepening
its slide since last month’s default to 2.4 percent and
prompting government officials to say holdout creditors are
behind a speculative attack on the currency.
Street Market
On the illegal street market, the peso weakened to 14.2
pesos per dollar yesterday. Argentines have bought a record
$229.3 million dollars for savings in August, surpassing the
previous record of $205.7 million in July, according to the tax
agency. Central bank reserves have fallen for seven consecutive
days to their lowest since May 30.
The government has sought to kick start the economy, which
contracted 0.2 percent in the first quarter from a year ago.
Spending rose 57 percent in June from a year earlier as the
government raised salaries and energy subsidies. Still,
unemployment climbed to 7.5 percent in the second quarter from
7.2 percent in the same period last year. Gross domestic product
is forecast to contract 1 percent this year, according to the
median estimate of 22 analysts in a Bloomberg survey.
‘Vulture Funds’
Tomorrow’s strike is led by Hugo Moyano, secretary general
of the General Workers Confederation, a former ally of the
government.
“You’re going to have a relatively significant strike but
I doubt you’ll see substantial changes in the government’s
economic policy,” he said.
The strike is political and backed by “vulture funds”
seeking to damage the government’s image, Cabinet Chief Jorge Capitanich said today.
Argentina defaulted July 30 because New York District Court
Judge Thomas Griesa blocked a $539 million interest payment due
June 30 on restructured bonds after Fernandez refused to comply
with an order to also pay holdout creditors. Paying the
holdouts, whom Fernandez calls “vultures” because they buy up
distressed debt in order to sue for compensation in court, would
have triggered demands of as much as $120 billion, according to
the government.
The default is delaying Argentina’s ability to borrow
dollars as borrowing costs rise and legal restrictions increase.
That’s will probably widen the fiscal deficit to about 3
percent of gross domestic product, or $19 billion, this year,
according to Luciano Cohan, chief economist at Elypsis.
Mounting Tension
As the economy weakens and prices rise, tension has been
mounting in Argentina since late 2013.
Rising prices triggered looting in several cities in
December in which at least eight people died. The looters took
advantage of strikes by police for higher wages. That prompted
demands from other public sector workers, which may force the
government to enter into a second round of wage negotiations
this year, according to Bank of America.
Tensions probably will mount further as Argentina enters
the hot summer months later this year, Germano said.
“What you’re going to find is a lot of social conflict,
especially in December,” he said.
To contact the reporter on this story:
Charlie Devereux in Buenos Aires at
cdevereux3@bloomberg.net
To contact the editors responsible for this story:
Andre Soliani at
asoliani@bloomberg.net
Philip Sanders