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High unemployment, rising crime, and corruption are three issues that could keep any new president busy. When you add to this a recession — expected to cut Gross Domestic Product by three to four percent this year — that has damaged economic self-confidence and eroded tax revenues, one can have a measure of the problems faced by Argentina’s new president, Fernando de la Rúa, who took office Dec. 10 after winning two months earlier as the candidate of a center-left alliance, thus ending ten years of Peronist Party domination.
The new administration’s ability to act quickly appears to be limited. De la Rúa’s predecessor, Carlos Menem, pushed through sweeping change in his first period of office from 1989, putting his stamp on his country to an extent that few other democratic Latin American leaders have achieved. Deficit-ridden state enterprises were sold off, the role of the paternalistic and inefficient state was pared back, and hyperinflation was quashed. But in his second period that began in 1995 other necessary reforms took second place to Menem’s personal agenda of seeking a change in the Constitution so he could run for a third consecutive term, that turned out to be a fruitless effort.
Financial constraints make it difficult for the new administration to move ahead on its broader social agenda that seeks to develop a more equitable society after what the alliance calls Menem’s “savage capitalism”. However, De la Rúa will be helped by the fact that during Menem’s decade in power the outcome of each and every elections showed that a new political consensus has been forged around free-market policies, the abandonment of non-alignment rhetoric and close relations with the United States. Meanwhile, the army, which mounted rebellions against Menem’s predecessor, has been truly remanded to barracks.
Even though Argentina’s new president is far from having Menem’s flamboyant personality, he appears to have learned from his predecessor how important it is to launch the most controversial initiatives as soon as possible.
With the economy deteriorating rapidly and hyperinflation at four-digit figures, as soon as he took office in 1989, President Menem imposed an austerity program and launched the reforms of the Argentine economy which, although initially unpopular, came to be appreciated when inflation, raging at a rate of 5,000 per cent annually, was brought down to single-digit figures and the peso achieved parity with the dollar — the main reasons for Menem’s reelection in 1995.
Now labor laws remain to be reformed in Argentina if the country’s development is going to enter a new stage. Following Menem’s strategy, with only a month in office President de la Rúa is betting that he will win in a confrontation with the labor unions. He presented to Congress a package of reforms opposed by the unions, and signaled the firmness of his position by taking away from the unions control of a $360 million workers’ healthcare fund which has been a source of cushy jobs and easy money for labor leaders.
De la Rúa lacks an overall majority in Congress, but he hopes the double purpose his reforms would serve, attracting foreign investment and making Argentina more competitive with neighboring Brazil, will find the support they deserve. If approved, the trial period for workers before they get irreversible benefits — which include virtual tenure in the job, given the cost of firing an employee — will be extended from one months to six, with the option of renewal for a further six months; payroll tax reductions would be granted to companies if they create jobs; unions would be pushed to negotiate by ending the automatic renewal of labor agreements when the two sides cannot come to an agreement; and the system of sectorial negotiations would be changed to negotiations at each workplace.
This may be the right moment to face the unions. A recent opinion poll showed 84 percent thought union leaders opposed the reforms “to defend their own interests”. Only seven percent thought the leaders goal was to “defend the interests of workers”.
Nevertheless, in their hostility to the proposed measure, the union leaders may go as far as declaring a general strike. But public opinion is expected to stand firm on the side of the government.
It is a risky move for President De la Rúa but the proposed reforms, important as they are economically, are even more important politically. If the president wins this confrontation, he will deal from strength for the rest of his presidential period.
Claudio Campuzano is U.S, correspondent for the Latin American newsweekly Tiempos del Mundo and editorial page editor of the New York daily Noticias del Mundo. He writes weekly for World Tribune.com