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Will Argentina’s Unions Stand in the Way of Macri’s Reforms?

The Argentinian labour unions are among the most powerful in the region; old allies of the Peronist Party, they are well known for the ability to take out presidents. So as conservative president Mauricio Macri tries to implement “market friendly” policies, will the unions stand in his way?

Jul 21, 2017 // 5:00PM

It is said that since Argentina returned to democratic rule in 1983, not a single president that did not belong to the Peronist Party has been able to finish his term. It happened to Ricardo Alfonsin in 1989 and to Fernando de la Rua in 2001. They were both forced to resign in a climate of social turmoil and a great economic crisis.

One of the main reasons for both of these situations was pressure from the biggest union groups, which are known to react to economic reforms with mass scale strikes and protests that have left the country virtually paralyzed. To this day unions have an enormous influence in Argentina.

Even though they emerged in the second half of the XIX century, their prominence today stems from their alliance with former president Juan Domingo Peron (1946-1955, 1973, 1974).  Peron relied heavily on labour unions is his quest to consolidate his power, and it is widely thought that during the 1940s and 1950 the unions were heavily involved in the decision-making process of the state. As claimed by Peron himself, the unions were the backbone on which the Peronist movement was built.

Mauricio Macri, the centre right leader who won the presidency in 2015 with the promise of economic reform, formed a type of administration that the unions tend to oppose. However, being familiar with the fate of his none-Peronist predecessors, among the first things Macri did was to strike a deal with the main union's leaders, in which they pledged to abstain from actions against the government in return for better salaries and other monetary compensations.

This “honeymoon” period lasted exactly 15 months; in March 2017 after a series of failed negotiation attempts, and with little indication that the economy was growing at the expected rate, the unions finally called for a 24-hour strike, accompanied by a massive protest in front of the Congress.

However, much to the satisfaction of the government, this strike was not universally followed by all the groups, even as it did result in severe disruption in the country’s public services.

Strikes a Political Tool

According to Argentinian economist Pablo Kummetz, “strikes in Argentina are not usually limited to the revindication of labour rights, but are used as tools of political influence, so the recent strikes against Mauricio Macri economic agenda are mostly political strikes.”

“Currently, the big unions are divided along political lines, there is a sector still aligned with Kirchnerism, which completely opposes Macri; there’s a bigger sector, however, which so far has proven to be willing to negotiate. This has made it more difficult for them to coordinate and carry out nationwide strikes, giving the government more room to negotiate,” the economist explained.

This doesn’t mean that unions could not impede Macri’s efforts to reform the economy: they have been very successful in exercising pressure on topics related to the economy with several different governments.

“So far, however, Macri’s government has been able to negotiate with the big unions' leaders - he even settled (with public funds) an outstanding debt the unions had with the former government. This, however, might change if the economy doesn’t improve,” Kummetz warned.

He does believe that due to the “poor reputation of the Kirchnerist administrations, the internal divisions within the unions and a budding growth in economic activity in the country, the possibility that unions could affect the implementation of the new economic plan is unlikely.”

Still, it is a fact that unions were directly affected by the termination of populist policies carried out by the Kirchner administration, and by the opening of the economy, which entailed the end of protectionist tendencies. Kummetz believes that “at least half” of the unions have understood that neither populism nor protectionism will create a successful long-term economy.

“The Kirchners’ governments distributed money (mostly through subsidies) among the most vulnerable sectors of the population, but they did it without any collateral; they printed money without control, which resulted in uncontrollable levels of inflation. On the other hand, the protectionist policies carried out by the former administration only served to scare off foreign investors. To this, you need to add the self-inflicted financial isolation they submitted on Argentina when they refused to settle the debts with the holdout funds, despite the fact that the New York courts ruled in favour of the bondholders on several occasions,” the economist commented.

Macri is still betting on negotiating with the unions and has so far succeeded in avoiding direct confrontations, even conceding certain benefits to them in his year and a half in power.

However, in specific cases, like the episode with the teachers’ unions, he has remained firm in his position. Kummetz praised this strategy and mentioned that a combination of negotiation and strength has proven to be effective for now.

“In the long-run, it will all depend on whether or not the Argentinian economy finally takes off. It is imperative to maintain a stable social climate, so radicalization of the unions would be counterproductive. Argentina is expected to grow 2.5% in 2017 and 2.6% in 2018, so if these targets are met, this will be the most powerful argument for the government at the negotiating table”.

For Macri to continue to implement his comprehensive economic reforms, he needs to attract foreign investors, but to do this, he needs to show the international community that Argentina is able to change its way, conveying strong commitment to fiscal responsibility, efficiency and socially stability. To achieve this, he ought to keep the unions in check and form a consensus with all sectors of Argentinian society.

Argentina Policy & Government Latin America Macro

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