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Oct 22, 2012 | 10:30 GMT

Argentina: Protests Rooted in the Economy

DANIEL GARCIA/AFP/Getty Images
Summary

Discontent from all segments of the population has led to growing social unrest in Argentina. In recent weeks, various union factions have staged protests that attracted tens of thousands of participants, and social media groups are rallying Argentines to gather Nov. 8 for a national-level protest that will mirror a September rally that took place in cities across the country. The rising dissatisfaction reflects Argentina's growing economic troubles as government restrictions across all sectors of the economy have exacerbated the challenges already facing many Argentines, particularly the middle class.

Protests in Argentina fall into roughly three categories. The first are protests by groups with an established political presence. These are the protests involving major unions, such as the anti-government factions of the Argentine Workers' Central Union and the General Confederation of Labor, dockworkers' unions and the Argentine Agrarian Federation. 

These groups are established opponents of the government and have formal internal political structures. Although these unions do not represent all workers, and some unions are even having favorable negotiations with the government, leaders from the Argentine Agrarian Federation and the anti-government faction of General Confederation of Labor hold a significant amount of political influence.

General Confederation of Labor leader Hugo Moyano recently had a complete break in relations with Argentine President Cristina Fernandez de Kirchner's government and is using the momentum from that confrontation to exert political influence. In recent months he has met with opposition politicians throughout the country to forge ties between political parties and the workers' unions. Moyano has been in and out of politics for years. Though he is unlikely to run for office, he is positioning himself as a political voice ahead of national and provincial legislative elections in 2013 by presenting a 21-point political plan addressing labor issues, education and ongoing inflation challenges. He will use his position to help opposition candidates take office where possible.

Complementing Moyano's efforts, Argentine Union of Rural Workers and Stevedores leader Geronimo Venegas, a member of the General Confederation of Labor umbrella union, has started a new political party called Partido FE. The new party's objective is to provide a platform for dissident members of the Peronist Justice Party (an umbrella party of which Fernandez's Front for Victory is a member) ahead of the 2013 elections. Some factions within the Justice Party already oppose Fernandez's dominance of the party, so Partido FE probably will not play a major role. However, its creation is a clear sign that unions are taking political advantage of the growing dissatisfaction with the Fernandez government. In an environment without a unified political opposition movement there is room for this kind of politicking, but any major political challenge to Fernandez and her supporters would require a consolidation of opposition parties.

The Argentine Agrarian Federation, also in attendance at recent protests, is another group to watch. Although not all agrarian unions in Argentina are at odds with the government, this federation's leader, Edward Buzzi, is firmly anti-government and played a key role in the 2009 farmer protests that led to a major political defeat for the Fernandez administration. This group, in combination with other unions across Argentina, will play a pivotal role in motivating national protests to challenge the Fernandez government.

Map of Argentine Provinces

Map of Argentine Provinces

Conflicts with Security Unions

The second category of protests involves strikes and public demonstrations by security workers. The Argentine Gendarmerie and the Naval Prefecture are the country's national-level policing forces, and their employees are deeply unsatisfied with recent changes in their pay scales. They have protested all over the country, starting in early October after a decree from the central government that appears to have reduced security salaries and benefits by between 40 and 70 percent. According to Fernandez, that was a mistaken application of the decree.

The government fired 10 commanders from the gendarmerie on Oct. 3, and the strike was lifted Oct. 10 and the security workers were called back to their barracks. However, according to a gendarmerie spokesman, the group will join the next national-level protests sponsored by the Argentine Workers' Central Union and the General Confederation of Labor, which will be held sometime before the end of the year. These developments are extremely unusual and highlight Argentine security forces' willingness to challenge the government.

This dissatisfaction is also present in the Argentine armed forces, which were also affected by the decree. The Argentine army, navy and air force immediately began their own backchannel negotiations for higher salaries, according to Argentine media reports. The military in Argentina has a very poor relationship with the Fernandez government and is deeply alienated from Argentine society as a result of the brutal military dictatorship that lasted from 1976 to 1983. The Fernandez government and the government of her husband and predecessor, Nestor Kirchner, waged a public relations campaign against the military over the past decade. The military is therefore not in a position to garner much public sympathy. Nevertheless, the emergence of very public dissatisfaction across the ranks of Argentina's security forces points to a potentially dangerous erosion of control by Buenos Aires.

The Rise of the Cacerolazo

The third type of protests are slightly more spontaneous and made up of a more eclectic mixture of Argentine society. These protests are known as "cacerolazos," a word that has its root in the Spanish word for "casserole dish," in reference to the banging of pots and pans during protests. This is a traditional kind of protest in Argentina when economic times are tough. This year, protests began in late May and have been held all over the country since then. In Buenos Aires, the protests began in the wealthier neighborhoods, such as Recoleta, but spread and multiplied in the rest of the city. In September, tens of thousands of people gathered in cities all over the country to protest the government.

These protests have a much less political character, although they have been organized by a number of small anti-government groups and are a sign that middle-class Argentines are dissatisfied with government policies. For the government, these protests are a stark warning to tread lightly. Buenos Aires' response to the September protests was uncharacteristically muted. Cacerolazos were common during the 2001-2002 economic crisis, and while the government can deal with regular protests, it wants to avoid the kind of public unrest associated with that crisis.

A Narrow Set of Options

The government is operating within a very narrow band of policy options. The challenges facing the country now — shortages of foreign capital, high inflation and plummeting hydrocarbon production — are results of government policies. Argentina remains cut off from international capital markets largely because of consistent underreporting of inflation statistics, a practice that reduces Argentina's payments on inflation-linked bonds. Inflation is high because of high government spending. Energy production has fallen sharply as a result of price control policies that limit incentives for greenfield production.

These challenges have been growing for years, and the government has undertaken a series of short-term ad hoc solutions. Many of these efforts — including trade restrictions that helped Argentina to generate a significant trade surplus in 2012 — have been highly successful. However, efforts to cut spending have largely failed, and with the nationalization of Argentine energy company YPF, pressure on government finances is only growing.

The government is attempting to attract investment from all over the world, but the response has been overwhelmingly negative. Considering Argentina's highly volatile domestic political situation, there is little to assure investors that the government can guarantee stability and a return on their investments. At the same time, growing restrictions on capital flows recently forced Chaco province Gov. Jorge Capitanich to repay dollar-denominated bonds in pesos. This has worsened investor confidence, deepening Argentina's already stark isolation from international capital markets.

In the 2001-2002 crisis, the suspension of disbursements from the International Monetary Fund after a decade of close partnership between Buenos Aires and the fund triggered the collapse of Argentina's currency peg to the dollar, plunging half of the country into poverty and provoking riots. But the buildup to that trigger took many years. Now, Argentina is more isolated from external shocks, and everything the government does is designed to prevent the kind of deterioration seen in 2001-2002. But populist guarantees like price controls and cash transfers are nearly impossible to rescind, investors are unlikely to be reassured and the trade and currency measures designed to keep dollars in the economy are consistently damaging public confidence and pocketbooks. In the end, short-term policy solutions will only produce additional challenges in the future.

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