BUENOS AIRES, Argentina — President Cristina Fernandez de Kirchner’s refusal to recognize the real rate of inflation is catching up with her as she faced her first national strike Tuesday by the country’s largest unions, her former power base.
While wages have risen in recent years along with inflation estimated by analysts at 25 percent, the government hasn’t lifted the lowest taxable income brackets as Fernandez insists that real price growth is about 10 percent. Tuesday’s strike halted most transportation services, businesses and trash collection.
Fernandez, 59, has seen her popularity plunge since winning re-election in a landslide in October 2011 as growth stalls, purchasing power declines and unemployment reaches a two-year high. The government’s failure to contain rising prices coupled with stagnant growth led to a 75 percent jump in the budget deficit in the third quarter from a year earlier, limiting the government’s ability to respond to today’s protest. Argentine borrowing costs are now the highest among major emerging market countries.
“The underlying challenge over the past five years has been high inflation and how to deal with it,” Daniel Volberg, an economist at Morgan Stanley, said in a phone interview from New York. “They haven’t dealt with it and what we’re seeing now is a combination of a hard landing in terms of economic growth combined with still high inflation that is basically resulting in rising social tension.”
Doubts by local economists and the International Monetary Fund about the veracity of Argentina’s official inflation figures have intensified since Fernandez’s predecessor and husband, Nestor Kirchner, replaced the staff in charge of producing the monthly report in 2007.
The official inflation numbers don’t match the estimates made by economists
Since then, official inflation numbers have on average been less than half of those estimated by economists and distributed by lawmakers. Last year, the government fined more than a dozen researchers as much as $125,000 for failing to use the correct methodology.
In September, the IMF’s board of directors gave Argentina until Dec. 17 to respond to concern about the quality of its official data. Argentina is the only member of the G-20 that has refused to allow the IMF to do its annual review of its economy, a procedure known as an Article IV consultation.
The strike reduced activity on the stock market, at banks and closed the grains port in Rosario and was called a “success” by union leader Pablo Micheli Tuesday.
Trash piled up along sidewalks of near empty streets in Buenos Aires, while unions member blocked highways, halted train, bus and subway services and disrupted flights. Workers represented by the General Labor Confederation and the Argentine Workers Association umbrella groups are halting activities for the first time in at least nine years, according to union leaders.
Latam Airlines, which became the world’s most valuable carrier when it bought Brazil’s Tam in June, canceled Argentina flights because of the strike.
The industrial action is “extortive and inappropriate,” Interior and Transport Minister Florencio Randazzo said Monday, according to the presidential website. He said the strike is political as it seeks to damage the government.
Union demands include an increase in the threshold at which wages start to be taxed and an increase in the minimum salary to 3,500 pesos ($729) per month from the 2,875 pesos the government has announced for February 2013.
Confidence in the government fell for a fifth consecutive month in October, according to a poll released by Torcuato Di Tella University Oct. 31. The confidence index dropped 36 percent from a year earlier, the survey of 1,209 people showed. Confidence fell 1 percent in October from September to 1.67 on a scale of zero to five.
The popularity of Fernandez, who first took office in 2007, has plunged by more than half since her re-election with 54 percent of votes, according to a survey by Buenos Aires-based pollster Management & Fit.