July 26, 2014
Footing the bill
For better or for worse the Kirchnerite years will take some undoing. But oh wait, some of the stuff is already being undone by the Kirchnerite administration in charge. Have you not noticed? You soon will if you live in the metropolitan area and get your natural gas and water bills slipped under your frontdoor. The opposition had chirped for a long while that something had to be done about the state subsidies for energy.
On Thursday, Economy Minister Axel Kicillof and Federal Planning Minister Julio De Vido had an announcement to make. Subsidies for natural gas and running water will decrease up to 80 percent. The move will trigger rate hikes. The percentages look frightening. Water bills will go up between 70-400 percent. Natural gas rates will see increases of between 100-284 percent. But effectively rates have been practically frozen since the late Néstor Kirchner was elected president in 2003, meaning that they will continue to be relatively cheap compared to those in the rest of the continent. Yet the increases will still bite into pockets, and they come in a context of dwindling Central Bank foreign currency reserves and a shortage of dollars in general.
The price increases are piling up on all fronts. Metropolitan bus fares increased 66 percent in January. Buenos Aires City Mayor Mauricio Macri also recently increased the subway fare from 3.50 pesos to 4.50. Inflation in February, using a new nationwide index approved by the International Monetary Fund (IMF), increased 3.4 percent. It had clocked in at 3.7 percent in January.
Kicillof and De Vido insisted on the relative cheapness of rates despite the increases. The destitute on welfare and the industry sector have been spared from the increases announced on Thursday. Residential clients and stores will not see a hike if they save 20 percent on natural gas compared to the same period the year before. But a rate increase, even when it comes with a long explanation attached, is never popular and this specific hike comes in the middle of collective wage bargaining with the trade unions.
The strike called by teachers in Buenos Aires province was not over when the announcement was made on Thursday. President Cristina Fernández de Kirchner did not hide on the day. The president headed a ceremony in Olivos that was carried live on a national broadcast. The teachers’ strike had been raging for more than two weeks and it looked like Buenos Aires Governor Daniel Scioli, a moderate Kirchnerite who is expected to run for president next year, was in a tight spot.
Technically Fernández de Kirchner and Scioli are on the same side: they are members of the Victory Front coalition. But the president purportedly is not interested in endorsing Scioli’s presidential bid next year, even when polls indicate that he is the most popular potential Kirchnerite hopeful.
The school conflict had a political twist, which is not easy to explain. The teachers’ unions Scioli has been negotiating with belong to a pro-government faction of the CTA trade union umbrella grouping. Yet negotiators, especially the head of the SUTEBA teachers union Roberto Baradel, were extremely tough with Scioli. The salary talks were deadlocked and for a minute it really did look like the supporters of CFK were trying to make life impossible for Scioli. Then something changed on Thursday.
Scioli attended the ceremony headed by Fernández de Kirchner in Olivos. The president made a passing remark about Scioli — and a friendly one at that. She also underlined that the subsidy cuts did not amount to a “massive rate hike.” Fernández de Kirchner also told the nation that she felt responsible for the well-being of all Argentines. She feel like the “mother” of the entire population, the president quipped.
Thursday was the key moment of the week. The national government also reported that day that the Gross Domestic Product had increased three percent in 2013. The news came as a surprise because INDEC had been anticipating a higher growth rate. But effectively the official growth rate saved Argentina 3.5 billion dollars in coupon payments to the holders of GDP-growth linked bonds.
The rate hikes can’t make the trade unions happy. But on Friday the Scioli administration came up with an “improved” salary offer for the teachers unions (basically a sweeping hike of 30 percent for provincial teachers and not docking pay for the 18 strike days). Also on Friday the UOM metal workers union signed its annual salary agreement for an increase of 27.25 percent (or just over 29 percent depending on how you count the extras included).
Yet the trade union movement is divided and there are a number of heavyweights, including the teamsters union headed by Hugo Moyano, who no longer support the government. The anti-government CGT, headed by Moyano, has called a national strike for April 10 to voice salary demands. A smaller anti-government faction of the CGT, headed by the rightwing restaurant worker Luis Barrionuevo, is also backing the strike. The big industrial unions still support Fernández de Kirchner. But Moyano’s strike has the backing of the strategically-important UTA transport workers union, which includes the bus drivers. UTA still technically belongs to the pro-government CGT. But it will go on strike. No buses on strike day could make for a successful walkout even when the big industrial unions are ready to go to work on April 10.
But the anti-government camp also has its problems. Moyano and Barrionuevo took longer than expected to name a date for their much-anticipated strike. The announcement was made while lawmaker Sergio Massa, the rebel Peronist and former Kirchnerite official now openly at odds with the CFK administration, was touring the United States and trying to sound very business-friendly. Massa, who performs well in public opinion polls, is expected to run for president next year against the Victory Front.
Speculation was rife that Moyano and Barrionuevo were set to combine the call to strike with the launch of a “Massa for president” campaign. Yet something was not entirely right because Massa reportedly was not interested in the endorsement.
Barrionuevo has fiercely opposed the Kirchnerite administrations to the point of calling the late Kirchner a “scrooge” who deserved to die young. (Kirchner died suddenly of a heart attack at the age of 60 in 2010).
You don’t have to be a well-heeled spin doctor to realize that saying cruel things about dead people will not necessarily go down well with the electorate, even when it might not be entirely in the mood to vote for the Victory Front next year.
There was no formal “Massa for president” call from Moyano and Barrionuevo. The national strike was called. But there will be no protest demonstration on the day organized by the trade unions that oppose CFK. Massa, who is one of the most popular politicians in the land according to polls, gains nothing from the support of Moyano and Barrionuevo, who are notoriously unpopular and are used to voicing their demands aggressively.
The mood is not entirely wrong for a strike, considering the rate hikes that come with Thursday’s subsidy cuts. This is also likely to go down as the year salaries lost out to inflation in collective agreements. Kicillof has also implied that electricity subsidies will also suffer cuts soon. But the national government, and Scioli, can breathe easier now that the teachers and the metal workers have signed their salary agreements.
Calls were loud for the end of subsidies from the opposition (and the opposition press). But some critics are now complaining about “belt-tightening” and “adjustments.” Massa yesterday called for wage income tax breaks to compensate for the increases.
The rhetoric is always more colourful the less realistic it gets. But effectively Kicillof is trying to perform a soft landing to the benefit of Fernández de Kirchner. Will he get the landing right?
If he does Argentina will be in an unusual political situation because Fernández de Kirchner could leave office with at least some of her political reputation intact (even after losing the midterm elections badly last year).
The president could still lose face if voters decide to punish her party by handing Massa the presidency next year. Yet past democratically-elected presidents (think of Raúl Alfonsín during the hyperinflation crisis in 1989 and Fernando de la Rúa during the financial meltdown of 2001) have been humiliated when the economy collapsed.
If Kicillof is right, then 2015 will start to feel more distant. If the Economy minister is wrong, then voters will soon be looking to speed up the transition to something new. Yet speculation about an early exit for CFK has died down because Pope Francis is purportedly trying to protect the president from suffering such a disgraceful exit.