Argentina's Macri touts investment as cure-all

May 11, 2016, 2:25 PM EDT
Argentine President Mauricio Macri.
(Source: Gobierno de la Ciudad de Buenos Aires/flickr)

The debate over layoffs in Argentina continues to rage as the can gets kicked down the road for the time being. On Wednesday President Mauricio Macri visited a GM plant in the country to be present at the firm’s announcement of major new investments in Argentina. GM President Mary Barra extolled Macri’s policies, saying “his extraordinary economic reforms have led GM to strengthen its investments in Argentina.” Macri lauded the decision, saying that “jobs are not created by accident, but rather by investment and confidence. If there is no confidence, there is no investment.” He went on to describe his administration’s progress in rebuilding confidence of investors and the world in Argentina after years of bungled policies under his predecessor.

Argentina’s Congress is debating an "anti-layoffs bill" that would impose double severance pay and ban layoffs without cause over the next six months, which businesses of all sizes are against.

According to A.P., tens of thousands of state and private employees have been fired since Macri took office in December promising to cut bloated government spending and tame high inflation. His government says the layoffs are justified because many employees hired during previous administrations never showed up for work. Meanwhile, unions say workers are being indiscriminately fired.

However, on Monday Macri claimed to have reached an agreement with around 200 firms to voluntarily retain their payrolls for 90 days, largely as a compromise to placate the opposition. He also got an unspecified number of firms to agree to additional investments creating new jobs, one of his key demands. “Generating jobs, it’s an obsession for me. But we don’t want just any kind of jobs — we want quality, skilled jobs which add value,” he said. This is the core of the issue, where right-wing pro-business Macri is distinguishing himself from his left-wing populist predecessor, who mostly increased employment by adding to government payrolls. Macri is doing his utmost to enable the private sector to create jobs, pointing to GM as a perfect example.

And actually, small and medium firms are more worried about factors other than the anti-layoffs law, namely the rise in costs of inputs like fuel and public services, and the simultaneous decline in demand as the economy shrinks. To help them out, on Tuesday the government announced a new package of benefits including preferential credit access, deferred tax payments, and a reduction in red tape.

As firms and government agencies readjust, new jobs will be created, but obsolete jobs will be cut -- without seamless replacements. Thus, some workforce disruption is both inevitable and necessary. In a country where unions are powerful and very active in protecting their interests, this will mean mass protests and strikes in cities across the country. If many workers can be retrained and repositioned, that would be best. But for those who are not earning their keep, their reprieve may only be temporary.