Government seeks to ease social tension

Government seeks to ease social tension

On April 8th the administration of the president, Mauricio Macri, announced new measures to address public concerns about thestill-weak economic situation.

The announcements closely followed a larg-scale protest by unions and other social actors on April4th, highlighting the government's concern of mounting social unrest and its affect on governability.

AnalysisOn April 8th the Superintendence of Health Services announced that it would pay a debt owed toobras sociales(health funds managed by trade unions) that totals Ps13bn (US$308m, under 0.1% of GDP). Thedebt owed to theobras socialesis related to highly specialised medical care financed by these funds since 2016. Inaddition, theobras socialeswill receive an additional sum of Ps50m to cover the retirees that use their healthcare services.

On the same day, a government official announced that the Macri administration had reached an agreement with UPCN, a public-sector employees union, on a salary adjustment to compensate for thefall in real wages last year. InApril the government will grant UPCN workers a one-time Ps2,000 bonus, accompanied by a 3% wage increase in May. These will be in addition to previously agreed upon salary hikes of 3% in July, 6% in August and 6% in September, as well as to one-off payments of Ps2,000 in October and Ps4,000 in November.

These measures seek to improve relations with unions, and allay concerns about a new general strike that has been threatened by some union leaders such as Hugo Moyano—the general secretary of the influential truckers' union. The risk of public unrest was heightened after the April 4th protests,led by unions but also by representatives of small and medium businesses, reflecting widespread discontent with the government's macroeconomic adjustment programme.

The measures announced since the April 4th protests appear to have calmed the waters somewhat. For instance, although the confederation of transport unions did announce a strike for May1st, this has been widely perceived as a half-measure owing to the fact that the strike coincides with a national holiday (Labour day), and its impact will therefore be modest.

Impact on the forecastThe measures adopted by the government will stave off major friction with the trade unions. However, the scope of making repeated concessions to unions will be limited (owing tothe government's strict fiscal constraints). Inthis context the risk of social unrest will remain high, as already factored in to our forecasts.

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