what is the government’s plan and which sector will lose

History repeats itself: as so many times in recent years, officials repeat that joint associations are free and the last thing they want to do is influence so that limits or ceilings are set. But, at the moment of truth, and especially when inflation puts pressure, it is a question of not having excess in union orders.

No one has expressed this position better than his Cristina Kirchner, who tried to be irresponsible towards the leaders who asked for increases that were subsequently unpayable and, then, two undesirable effects were generated: on the one hand, there were layoffs, and on the other hand , the dreaded price transfer has taken place.

It is for this reason that over the years we have always tried to locate related unions with which to give a reference to the rest of the market. And, just like in other times, the allies of the government Hugo Moyano or the metallurgists of Antonio Caló, now emerging as a support to mark the salary “ceiling” is Sergio Palazzo, the powerful banking union.

The priority this year is that the whole trade union world understands that it is necessary to take as benchmark 29% inflation what the minister planned Martin guzman in the budget.

Of course, there is a problem: no one believes this goal is achievable. 2020 ended with 36% inflation, and economists estimate that there was an inflation effect suppressed by the quarantine, but that the strong monetary expansion achieved last year will have a delayed effect that will explode this year.

In fact, they already believe it is exploding, given that last month inflation hit 4% and private consultants’ calculations predict a similar figure for January, with the aggravating factor that food is leading the increases, with 4.7%.

In this context, even the economists closest to the government do not believe the official forecast of 29%. The most optimistic say it is 35%, while the most skeptical think that inflation could reach 50% by the end of the year.

The government’s biggest fear is that there will be “spillovers” of union demands that employers agree to avoid facing conflict situations, but which could later turn into price increases in gondolas.

For example, just as meat – which has risen to a 9% monthly average, topping the list of basket increases – is taking center stage in national attention, agent of “cheap cuts”, the joint venture with the Federation of Meat Staff was closed.

In principle, a deal was made that everyone was happy with: the deal established a 5% increase for February and an additional 5% for March. This improvement is in addition to the 28% increase, so the annual sum has already accumulated 38%. For the union, this is quite an achievement, given that one-year inflation around March will be around 37%.

Also closed a agreement with the union, which a few days ago obtained an improvement of 21%, with which it partially recovered the loss suffered during the past year, rounding the annual 33% “from end to end”. But the agreement with the union led by Armando Cavalieri is reopened in April in view of what is happening this year, and affects no less than 1.2 million employees.

The problem, as with all unions, is what happens next: because economists are predicting inflation to accelerate that could make these numbers appear insufficient.

Sergio Palazzo, leader of the banking union, provided political assistance to the government by signing in accordance with the official inflation projection

A new benchmark?

In this frame he drew attention the political importance the government has given to the banking union agreement, one of the most capable of negotiating in the country, and who publicly thanked President Alberto Fernández for helping to “unblock” the negotiations.

The deal consisted of a pending 2.1% update that was pending in 2020. But the important thing is that impatiently it was signed for 29%, to be paid in three installments, one retroactive to January, the other in April – both by 11.5% – and a third, in August, by 6%.

Quite a message for the rest of the market, which perhaps perceives the installation of a new “Palazzo ceiling”. Of course, banks are aware that they are in an economically strong sector and that this gives them greater negotiating possibilities. Not only a starting salary over $ 100,000, but also the promise that at two times of the year there will be “a review of the agreement in the event of a price and salary problem.”

But that’s where the fine print will come in: a revision to be negotiated with the trade side is not the same as a trigger clause, in which an improvement is automatically triggered if inflation exceeds the expected target. .

In any case, the important thing is that the message the government wanted has been sent, and it comes down to the 29% figure. A fundamental fact when they have to renegotiate in sectors such as commerce -the greater parity of the country- or with the crucial public sector.

This solution serves the government politically, as it can honor the word of Minister Martín Guzmán, who, in a recent television interview, argued that< les salaires doivent augmenter plus que les prix >>, but at the same time recalled the importance of maintaining budgetary discipline.

State, still an adjustment variable?

This leads to another important aspect of the moment: in full negotiation with the International Monetary Fund, the government is aware that the salary situation of the more than three million state employees is under scrutiny.

Wages complain, rightly, of having lost purchasing power systematically since at least the start of the 2018 recession. But their complaint goes further: they know that when public accounts go wrong, they are candidates to be the adjustment variable.

Thus, according to an estimate from a consulting firm, the loss of state wages has been 60% more serious than that of private wages over the past five years.

Of course, in a year 2020 when a majority of public administrators were staying at home to telework with few real functions, unions did not feel in a political position to rush a parity which, in fact, they were “frozen” until the end of the year.

This implied that although Alberto Fernández had rejected all suggestions from economists to emulating the policies of other countries – which, at the worst time of the pandemic, slashed the incomes of the richest civil servants by 20% – in real terms, there has been a reduction.

Of course, the president has an advantage over his colleagues in the region: inflation liquefies wages on its own, without the need to take an unpleasant nominal cutting measure. However, in June the situation was so dire that an unprecedented payment in installments of half of the premium was announced.

Public officials, again facing the risk of losing income in an inflationary context

The truth is that public wages have lost purchasing power because they were almost frozen in a year with 36% inflation. It was not until October, when the AFIP collection began to show signs of growth in real terms, that a 7% improvement was seen, to which was added another increase in three installments. which will add 18% until May.

That is to say 25% until May, when the subject will be discussed again. By then, the political objective that the government sets for itself at the table of the price and wage agreement will be clear.

With the first agreements with the private sector and negotiations with the most complex productive sectors, the market is decode the first signals.

For now, the government hopes that this year, tax collection increased by 43%. Which would be an extraordinary achievement if indeed inflation stayed at 29%.

But the first signs do not give way to enthusiasm: in January, the VAT increased by only a slim 28%, and all the improvement in collection is due to the boom in agricultural exports, the same as, according to Cecilia Todesca, can bring you to the country an “imported inflation”.

On the other hand, the Minister of Productive Development, Matías Kulfas, provided another basic piece of information: the dollar is officially expected to rise by about four points below projected inflation. Speaking in numbers, 25%.

And the tradition of all governments is that in situations like the present one, they are trying to prevent the state payroll from growing in dollars. It is therefore likely that the government, both for its own fiscal limits and to give a signal to the rest of the market, will try to keep state wages from rising “excessively”.

Of course, by May the 29% inflation forecast will surely be able to be called into question, and there it will be difficult for historically conflicting unions, like ATE, to maintain the current good relations in the event. where there would be no revision of the numbers.

In numbers, if the inflation of the 50% that the average economists predicted in the REM survey were to occur and those in the state received an increase of 29%, that would lead to an additional loss of 14% in the year. .

On the one hand, for Guzmán, it will help to achieve a reduction of two points of GDP in the budget deficit. On the other hand, during an election year, it will be difficult to support from a political point of view, given that among the civil servants there is a good part of Kirchner’s electoral base.

This led, as the minister had predicted, to an attempt that there is a recovery in purchasing power – This is, as already indicated at other times, about five points above the official inflation projection.

But even then, the result would be an actual loss of 10%. Yes, in terms of public spending, that state wages have specific weight loss globally.

After all, according to an estimate of Mediterranean Foundation, the effect of the pandemic had caused – not by increase but by collapse of the collection – the wages of the State going from 31% of the resources to 51% at the most recessive moment. Reversing this situation is part of the “normalization” that Guzmán seeks. And this, as Kristalina Georgieva asks, helps that both want to tango.

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