Argentina faces rise in social tension on looming stagflation

BUENOS AIRES – Social tensions are rising in Argentina with workers demanding higher wages and the poor seeking housing and state subsidies to ease the effects of rapidly increasing inflation and a slow economy.

“This is going to be a year of conflict,” said Carlos Germano, a political analyst in Buenos Aires.

Across the country, public school teachers are threatening to go on strike if the government does not meet demands for 30-35% wage increases, which could stall the start of the school year on March 5. Other unions are planning similar demands.

Housing is another demand. In Buenos Aires, more than 1,000 people started squatting on public land this week to demand to be given state housing and subsidies.

“We are not going to move,” a leader of the squatters said on television on Friday. “We are not going to encourage violence or repression, but we are not going to leave.”

The rise in unrest comes with the economy falling into a recession and inflation quickening pace, with private estimates saying it will surpass 40% annually this year – among the highest in the world – after hitting 28% last December.

Inflation in Argentina has been running in the double digits since 2007 but this is the first year companies are beginning to struggle with the pressure and may not be able to meet union demands to increase wages in line with inflation.

There is “an enormous probability” that Argentina this year will suffer “stagflation,” – a situation where high inflation, slow economic growth and high unemployment coexist – economist Carlos Melconian said on Radio Mitre.

“Inflation today takes away everybody’s dreams, especially the government’s,” Hector Mendez, president of the Argentine Industrial Union, said Thursday, according to InfoBase, an online news service. “Industry is a victim, a serious victim.”

This has created a battle between unions, who want a minimum wage increase of 35%, and companies, who say they cannot meet those demands without laying off workers at the same time.

This concern over job losses could temper the wage negotiations, said Germano. “If they demand too high of a wage increase, then there could be a rise in unemployment,” he said. “Nobody will want to lose their jobs.”

Mauricio Macri, the conservative mayor of Buenos Aires and a possible contender for president in the 2015 election, also warned of rising social discontent.

“We are living in a turbulent country, where the acceleration of inflation has impacted squarely on our behaviors and our challenges as governors,” he said in a televised address on Friday. “The economic outlook is complex, and that will affect our expectations, our moods and, above all, the social climate.”

Argentina`s government expressed support for President Nicolas Maduro`s government in Venezuela, where at least 13 people have been killed since anti-government demonstrations broke out in February.

The support has led some to suggest that the Fernandez de Kirchner government would use the police of National Guard to quell any protests but Francisco Resnicoff, a political analyst at Cefeidas Group in Buenos Aires, believes it is just part of government’s rhetoric blaming inflation on companies.

Earlier this month, Argentina’s government fined supermarket chains, including U.S.-based Wal-Mart, a total of $448,000 for failing to adequately stock shelves with price-capped products, or for over-pricing them.

They also encouraged consumers to report retailers that do not respect government-set price caps on stable goods.

“With the rhetoric, the president wants to sustain the backing of her supporters,” Resnicoff said. “She wants people to think that businesses are the cause of inflation, not the government.”

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