* Unions demand 30 percent raises as inflation accelerates
* Gov't, companies try to limit hikes due to weak economy
* Labor unrest threat to president as elections approach
By Guido Nejamkis
BUENOS AIRES, Feb 22 A stagnant economy and one
of the world's highest inflation rates are making Argentina's
annual wage talks thornier than ever this year just as President
Cristina Fernandez turns her attention to mid-term elections.
Fernandez, who hails from the left of the Peronist party
that has dominated Argentine politics since the late 1940s, has
an increasingly difficult relationship with the unions and that
is raising the risk of strikes ahead of the October elections.
The combative president has divided Argentina's largest
labor federation, the CGT, ostracizing leaders who became
critical of her six-year-old government and recruiting more
amenable replacements with whom to negotiate.
But a sharp slowdown coupled with inflation forecast by
private economists to reach 30 percent this year is exposing
cracks in her alliance with government-friendly unionists.
Galloping prices and a rising tax burden are eroding
consumers' purchasing power, and even allied union leaders are
unwilling to accept a 20 percent ceiling the government and
companies want to set for wage claims.
"The unions are going to react," said Sergio Romero,
secretary general of the UDA teachers union that belongs to the
pro-government wing of the CGT.
"We went to the negotiating table with a flexible approach
and what we got was a unilateral response. We expected a bigger
effort from the state to improve the education system," he told
Reuters. "The government is condemning teachers to survive on
3,000 pesos ($600) a month."
Members of Romero's union want a 30 percent pay rise, a
demand shared by the large food industry union, which also
belongs to government-friendly CGT ranks.
"It's going to be a different round of pay talks this year.
Inflation is higher and the economic recovery has been feeble,"
said economist Ernesto Kritz, a specialist on employment issues.
Inflation in Latin America's third-biggest economy sped up
slightly to 25 percent in 2012, according to private economists,
while economic activity grew a meager 1.9 percent, suggesting a
decade-long boom has finally sputtered out.
Referring to the upcoming wage negotiations, Fernandez
called in January for "a bit of good sense," saying inflation
was not "a natural phenomenon, but something that all sectors
play a part in."
She seldom mentions the word inflation and dismisses
criticism from economists, consumer groups and the International
Monetary Fund of the state's official consumer price data, which
put last year's inflation rate at just 10.8 percent.
Shunning orthodox monetary policy recipes to cool prices,
Fernandez instead forged a two-month price freeze accord with
supermarket chains and appliance stores.
Pay talks normally start in February and last until July,
with teachers traditionally kicking off the public sector
In a sign of what may lie ahead, the education ministry last
week made teachers a non-negotiable offer of 22 percent to be
paid in three stages over the course of the coming year. They
swiftly rejected the raise and called a strike.
Hospital workers in Buenos Aires province, home to nearly 40
percent of the country's population, have vowed to walk off the
job on Monday after the cash-strapped provincial government
warned it cannot meet their demands.
Businesses, meanwhile, say wage hikes that keep pace with
inflation are becoming unsustainable as Argentine industry
rapidly loses competitiveness.
"Pay rises of 30 percent are just not viable. We need a dose
of rationality or else we're likely to lose companies and lose
jobs," said Daniel Funes de Rioja, president of the COPAL food
Although unemployment remains at low levels of about 7
percent, inflation is eating away at living standards and is a
growing concern for voters, who will elect almost half of
Congress in the October legislative elections.
The vote could determine Fernandez's political future
because she will only be able to run for a third consecutive
term in 2015 if she gains the two-thirds congressional majority
needed to seek constitutional reform.
Fernandez's current approval ratings suggest she could
struggle. Her positive image was 30.7 percent in a January
survey by the Management & Fit polling firm, up slightly from
December but far below the 59.1 percent of February 2012.
The opposition's persistent weakness, however, and the fact
that Fernandez also did badly in 2009 mid-term elections before
easily winning re-election two years later might help her allies
strengthen their grip on Congress.
Much will depend on her success in balancing the conflicting
demands of workers and industry on salaries.
"People are worried about mundane issues that affect their
everyday lives - wages, prices, inflation ... and this could be
played out when it comes to voting," said Mariel Fornoni, a
director at Management & Fit.