Provincial cash crunch triggers strike in Argentina

Reuters News
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Posted: Jul 04, 2012 5:20 PM
Provincial cash crunch triggers strike in Argentina

By Alejandro Lifschitz

BUENOS AIRES (Reuters) - Public-sector workers in Argentina's largest province went on strike over pay on Wednesday in a challenge to the popular, centrist governor seen as a potential successor to President Cristina Fernandez.

The one-day walkout highlights the dire state of provincial finances in Buenos Aires, which is home to more than a third of Argentina's 40 million people and accounts for about 40 percent of gross domestic product.

Tens of thousands of teachers, doctors and judicial employees downed tools to protest a decision by Governor Daniel Scioli's cash-strapped administration to pay a bonus in four installments instead of the usual single payment.

Most Argentine workers receive an additional month's salary, half of which is paid on July 1 and the other half on January 1.

"The protests are going to multiply until the government of Buenos Aires guarantees payments on time and in the right way. You've got to pay the workers. You can't resolve the financial crisis by taking money from those who have the least," Hugo Yasky, general secretary of the pro-government CTA labor federation, said in a speech.

Buenos Aires is one of many Argentine provinces facing tight finances as brisk spending -- fueled by double-digit inflation and soaring wage claims -- outpaces tax revenue due to a sharp slowdown in Latin America's No. 3 economy.

Scioli, a long-time ally of Fernandez who has been distanced from her government over the last year or so, has high approval ratings and is seen as a possible successor in a 2015 presidential election.

Like Fernandez, he is a member of the fragmented Peronist movement that has dominated Argentine politics for 70 years, but he is favored by Wall Street investors and disliked by her allies on the grounds that he is too right-wing.

Argentina's constitution limits presidents to two consecutive terms, meaning Fernandez could run again only if she sought to amend it and follow in the footsteps of fellow Latin American leftists such as Ecuador's Rafael Correa and Venezuela's Hugo Chavez.

FINANCING GAP

Scioli, a former speedboat racer, asked for help from the federal government to plug the financing gap, but the Economy Ministry transferred only about a third of the $620 million he requested.

Fernandez suggested the shortfall was due to mismanagement by Scioli in the province, a Peronist stronghold that includes the densely populated outskirts of the capital and the sprawling Pampas plains of the country's agricultural heartland.

"(Their) conflict is political and ideological. Political because Scioli is a pre-candidate for 2015, and he's said so explicitly," political analyst Rosendo Fraga said.

"It's ideological because Cristina represents a center-left version of Peronism and Scioli, the center-right," Fraga added, warning that Fernandez's strategy of "wearing down Scioli" could backfire by raising tension in the province.

Buenos Aires is on track to end the year with a fiscal deficit twice as big as estimated in the budget.

The deficit is set to reach about $2.3 billion and the province must also meet debt repayments of some $950 million, according to the Economia y Regiones consulting firm.

Scioli has been forced to announce cuts in infrastructure spending as he struggles to balance the books without having to resort to more-drastic measures that could dent his popularity.

The combative Fernandez's increasingly unorthodox economic policies -- such as curbs on foreign currency purchases and imports -- are riling investors and middle-class Argentines, and her popularity has fallen this year.

A poll last week by the Management & Fit consulting firm showed Scioli had overtaken Fernandez as the country's most popular politician, with a positive image rating of 44.8 percent. That compared with Fernandez's 38.1 percent.

(Writing by Helen Popper; Editing by Dale Hudson)