* Fernandez poised for landslide re-election
* Jobs key to government's popularity
* Global woes, falling competitiveness threaten outlook
By Helen Popper
BUENOS AIRES, Oct 5 The comeback story of
Grissinopoli, a bread-stick factory in Argentina, has a lot in
common with the country's own economic renaissance.
It also helps explain why President Cristina Fernandez
looks set for easy re-election this month even as a worsening
global outlook fuels doubts about the sustainability of her
unconventional, high-growth policies.
At the height of Argentina's devastating 2001/02 economic
crisis, Grissinopoli's workers camped out in the bankrupt
factory, stunned to find themselves facing unemployment as the
country's jobless rate surged above 20 percent.
Ten years on, the 14 founding partners run the company as a
cooperative called "New Hope," they have hired more than 20 new
staff including some of their children, and business is brisk.
"Having work is about the economy, and the economy is down
to the government," said Ivana Aguero, 51, as freshly baked
grissini sticks rolled by on the production line.
"We've had a lot of support (from the authorities), they've
helped us with subsidies to buy new machinery. They've opened
doors for us," she said, taking a break from packing boxes at
the small Buenos Aires factory.
As leaders in richer nations wrestle with discontent over
stubborn unemployment, the jobless rate here is around 7.3
percent, its lowest level in 20 years. Unemployment is at 9.1
percent in the United States and 10 percent in the euro zone.
Some Argentine companies are even struggling to find staff
with the right qualifications.
"For the kind of positions we fill, there's virtually zero
unemployment," said Daniel Iriarte, head of recruitment agency
Michael Page International Argentina. Industrial engineers are
in particular demand as new factories open and others expand.
Argentine industry languished during a wave of
privatizations in the 1990s and a subsequent recession, but a
sharp 2002 devaluation ARSB= slashed labor costs and gave it
a new lease on life. Five million jobs have been created in
Latin America's No. 3 economy since then.
Service sector businesses have benefited too and the state
workforce has mushroomed as spending soars. One in four new
jobs created since 2006 was in the public sector, according to
the Cordoba-based IERAL economic research center.
That could be harder to maintain as the primary budget
surplus dwindles. But for now, it is good news for Fernandez.
Opinion polls suggest she could win more than 50 percent of
the vote on Oct. 23, giving her a second four-year term and a
strong mandate to deepen the unorthodox measures that please
many Argentines but irk Wall Street economists and pro-market
business leaders and farmers.
Graphic on growth, jobs link.reuters.com/pyv24s
Election campaign coverage: [ID:nARVOTE]
Political risks in Argentina: [ID:nRISKAR]
Fernandez, a center-leftist who has softened her combative
tone since the death a year ago of her husband and predecessor
as president, Nestor Kirchner, often highlights Argentina's
revival since the crisis and the $100 billion debt default.
"People in Spain, north Africa or Israel are indignant
because they've lost their quality of life and aspirations. In
Argentina, the opposite's happened a bit in the last few
years," said economist Ernesto Kritz, a labor specialist.
Neighboring countries like Brazil and Chile have similarly
low jobless rates but in Argentina, a nation scarred by crises,
a buoyant labor market and rising purchasing power bring
particular political clout.
Looking to sustain growth averaging 7.6 percent a year
since 2003, the government has taken a raft of controversial
measures to stimulate the economy and protect local jobs.
When the global financial crisis hit Argentina in 2008,
Fernandez slapped import curbs on manufactured goods from toys
to shoes, riling leading trade partners Brazil and China.
She has maintained hefty energy subsidies for industry and
a managed-float exchange rate policy that keeps the peso
nominally weak. More recently, the auto industry agreed to
match imports with exports, a policy aimed at boosting the
domestic parts industry and a shrinking trade surplus.
Importers of Porsche cars are exporting wine to comply.
Still, the rate of job creation has slowed in the past four
years and skeptics say such measures will not be enough to
shield jobs if external factors sour and as double-digit
inflation whittles away the country's competitive advantage.
Many economists say Argentina is at greater risk of a
hard-landing than its neighbors as policy stimulus becomes
harder to maintain and inflation slows consumer spending.
"They have to give some signals on macroeconomic policy,"
Kritz said. "Fiscal and monetary policy are still very loose."
A deeper depreciation of Brazil's currency BRBYBRL=,
which fell more than 15 percent last month as the Argentine
peso was held flat by the central bank, would aggravate the
strain of Argentine salaries growing almost 30 percent a year.
"We're still competitive compared with Brazil. The next
question is where Brazil's (currency) will go. And there's a
much bigger question over the rate of salary increases in
Argentina," said Marina Dal Poggetto, an economist at the Bein
and Associates consulting firm, adding that more moderate
growth would allow sustained progress on unemployment.
"It's not necessary to have the growth we've seen in recent
years ... but something in line with the economy's potential
growth capacity, which is 4 percent to 5 percent," she said.
The government's goal is to drive overall unemployment down
to 5 percent and get more people into formal jobs. About a
third of Argentines still work off the books as the smallest
firms seek to dodge hefty social security contributions.
Officials' success in moderating wage demands, controlling
fractious trade unions and keeping people employed could prove
decisive for Fernandez in a second term.
When the global crisis in 2008-09 stalled Argentina's
rebound, her approval ratings sank to 20 percent, aggravated by
farmer protests over a tax hike on soybean exports.
Officials acknowledge it will not be easy if the world's
economic woes translate into lower prices for Argentina's key
soy exports or a slump in demand from Brazil.
"It depends on what happens in the rest of the world," said
Marta Novick, the labor ministry's under-secretary for
technical programming and labor studies. "Considering the state
Argentina was in 10 years ago, what's been achieved so far is
enormous, but there's still much more to do."
Grissinopoli's workers have modest ambitions.
"Our dream ... is for the factory to keep operating,"
Aguero said. "For our children to continue along the path we
left them and go as far as they can."
(Editing by William Schomberg and Kieran Murray)
(email@example.com; +54 11 4510 2505; Reuters