General Strike in Argentina

In June, several million workers joined a one-day national strike to protest Argentina's economic austerity program. It was the second general strike this year in Argentina. Major cities and most of the countryside were paralyzed as railroad, subway, bus, truck, and airline workers joined the walkout. Many bridges were blocked by demonstrators, and taxicabs and buses driven by scabs were damaged by strikers. Thousands of stores closed, and the courts and government offices were forced to close. The strikers walked out to protest a $938 million cut in public spending announced in May as part of a deal between new Argentine President Fernando de la Rua and the IMF for a $7.2 billion loan.

The austerity package will cut salaries for government workers by 12 to 15%, reduce payments from the public pension fund, and ban government workers from receiving their pensions if they work a second job in the private sector. This new deal with the IMF follows on the heels of a $1.4 billion cut in social spending imposed in January, in the first few weeks of de la Rua's administration. Union members are also upset about a move to deregulate the health care industry.

De la Rua was elected last November on a platform to end corruption, improve the economy, cut the budget deficit, provide jobs for everyone, and equalize incomes for all Argentinians. Within a month of his inauguration, he rammed a new budget and tax package through Congress designed to cut Argentina's budget deficit (at the expense of social programs) and struck a deal with the IMF for a new loan. In February, he pushed Congress to pass a new labor code that guts Argentina's labor law, undercuts the bargaining power of unions, lowers payroll taxes paid by businesses, and allows businesses to more easily hire scab labor. This satisfies one of the main requirements of the new IMF loan: cut labor costs.

The new Argentine labor code was not designed specifically to help small or medium-sized businesses; it was written to keep multinationals from shutting down their operations and moving to Brazil, where currency devaluation has made labor costs extremely cheap. Since the collapse of Brazil's currency, 60 multinationals--including Tupperware, Goodyear Tire and Rubber, Royal Philips Electronics, General Motors, Ford Motor, and Fiat--have closed their plants in Argentina and relocated to Brazil. In the meantime, Argentina's currency has remained pegged one-to-one to the strong U.S. dollar in order to avoid inflation.

De la Rua has broken his campaign promises. The new labor policy has not created new jobs; the unemployment rate has risen to a three-year high of 16%. He has not cut the budget deficit; the cut in payroll taxes and increased interest payments on the new IMF loan will raise the budget deficit from $5 billion to nearly $10 billion this year. On the campaign trail, de la Rua promised to cut $1 billion from the budget without touching social programs, but they were the first to be slashed. Meanwhile, the economy is in a shambles.

Even de la Rua's promise to fight corruption was a lie. On October 6, Argentine Vice President Carlos Alvarez resigned in protest because of a major bribery scandal. Two of de la Rua's government ministers, Labor Minister Alberto Flamarique and Intelligence Director Fernando de Santibanez, were caught bribing nearly a dozen senators to vote for de la Rua's despicable labor code in February. Flamarique resigned as Labor Minister, but de la Rua immediately appointed him chief of staff. Former VP Alvarez is the leader of the left-wing of de la Rua's ruling coalition. His departure could threaten the government and force early elections. Even the head of de la Rua's own party is attacking him now--not for the bribery scandal or his dismantling of labor law, but for the poor state of the economy. Notably, de la Rua has followed IMF economic prescriptions to the letter.