October 21, 2014
Kirchnerites, UIA clash over cuts
Dispute brews after Méndez calls for adjustments across the board
Industry Minister Débora Giorgi and Deputy Economy Minister Emmanuel Álvarez Agis yesterday hit out at UIA industrial chamber head Héctor Méndez over his call for austerity to confront the economy’s current woes, a remark published in an interview with local daily Tiempo Argentino.
“An (austere) adjustment is required. I could be critical and say it should have been done earlier, but I don’t want to be the person that says: ‘I told you so,’ Méndez stated, adding that “what matters is knowing what is required at the moment and working toward it.”
The UIA leader also mentioned his relationship with the president was not particularly a warm one, because “sometimes I say things that don’t sit well, but I say what I have to and try to support (the government).”
Asked whether subsidies should be cut, Méndez responded negatively, arguing “they need a general revision of costs.”
Seemingly dodging the question, he added that he was not calling for subsidy cuts, but rather “more transparency,” singling out the government as the “least willing to adjust.”
“The government is lost,” he sentenced.
UIA’s relationship with the Cristina Fernández de Kirchner administration had seemingly defrosted upon the departure of Ignacio de Mendiguren from the chamber’s leadership, with the head of state including Méndez in a series of negotiations with what she deemed “big-league players” over the direction of the economy.
But yesterday’s remark from Méndez added to previous criticism only two weeks ago, when the chamber leader called for more dialogue with business leaders and said that “if producers are not allowed to generate wealth, the state will have nothing to distribute.”
Giorgi was swift to retort on Nacional radio yesterday, arguing that subsidies are “one of the factors that make industry competitive” and thus effectively untouchable.
“The amount of subsidies that reach Argentine families for them to pay their different utility bills” or making the cost of transport cheaper “indirectly, or rather, directly benefits industrial sectors,” because otherwise, the people would protest in demand of higher wages due to higher tariffs.
She added that it is not a coincidence for the country to have the “most advantageous” electricity and gas rates “in Latin America, and that also adds competitiveness for industries.”
On March 27, the government unveiled cuts for natural gas and water subsidies that will see bills rise between 100 and 400 percent. Lower income sectors and those who reduced gas consumption by 20 percent would retain their subsidies.
No progress has been made yet in applying such cuts, while further reductions are in the works for electricity subsidies.
Another form of austerity already implemented by the government was January’s sudden 15-percent devaluation, as well as the hike to the luxury goods tax at the start of the year.
Asked if he wanted less taxes for companies, Méndez replied that he wanted a lesser tax burden for the workers, pointing to the currently under debate income tax floor.
“The UIA president should ask himself who is going to purchase the products of industry, cars, clothing and food if the government makes the adjustment that many are calling for,” said Álvarez Agis.
Economy Minister Axel Kicillof’s technical number-two challenged Méndez by saying that “when he talks about subsidy cuts, he is referring to cuts on consumers’ subsidies, and not industrial companies that pay gas, energy and fuel cheaper, from which they have benefited for the last ten years.”
Álvarez Agis assured “we are seeing a slowdown” in price hikes since the end of the “psychosis seen in February.” The official pointed to the calming effect of the Price Watch scheme and that the exchange rate was stabilized below the rate on the black market, as well as “workers not demanding what can’t be paid during collective wage bargaining.”
Herald with DyN, Télam