ECONOMY-ARGENTINA: Gov’t Cuts Wages to Meet IMF Commitments

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, May 29 2000 (IPS) - Argentina’s government announced cuts Monday in public sector salaries and pensions and the shutdown of some government offices in order to bring the budget deficit down to 4.5 billion dollars and keep its promises to the International Monetary Fund (IMF).

Economy minister José Luis Machinea reported that the spending cuts amount to 938 million dollars, and flatly rejected the possibility of a devaluation of the Argentine peso or a “dollarisation” of the economy in an attempt to boost the nation’s competitive strength on international markets.

Machinea called the announced measures a “reassignment” of resources because a portion of the savings is to be earmarked for social, health and education programmes.

Labour unions particularly criticised the cuts in salaries for national public administration employees, and announced that they would hold a march Wednesday to protest the IMF requirements.

Víctor de Genaro, leader of a government workers union, pointed out that the announced adjustment is not impartial, but seeks to ensure the transfer of resources from the public sector to a group of powerful private enterprises that enjoy fiscal and financial privileges.

With the salary reductions, the government expects to reduce the fiscal deficit from 10 billion to 4.5 billion dollars by the end of the year. This goal is the deficit level Argentina committed to before the IMF, which this Tuesday will send a delegation to Buenos Aires to monitor the performance of the economic programme.

Less than six months into his term, president Fernando de la Rúa has launched two budget adjustment packages. The first consisted of tax increases, which was made into law in March, but the results have been a disappointingly meagre increase in money for the government coffers.

Accompanied by all his ministers, De la Rúa emphasised the magnitude of the fiscal deficit inherited from his predecessor, Carlos Menem (1989-1999) and affirmed that the measures announced Monday to “restructure the State” uphold his goals for “equitable growth.”

The president justified the new adjustments, implemented after a series of delays, pointing to the adverse international circumstances, such as the interest rate hike in the United States, the devaluation of the Euro with respect to the dollar and the instability of the world financial markets.

This scenario – on top of the tax collections that increased barely two percent in March and April, and then fell in May – prompted independent economists to calculate that the Argentine economy would grow just two percent, instead of the projected 3.5 percent, and that unemployment would remain at a high 14 percent.

In simple terms, the new measures mean that public employees who earn between 1,000 and 6,500 dollars per month will see a 12 percent reduction, and those with higher salaries will take a 15 percent cut.

The wage cuts will also affect the Legislative and Judicial branches, though judges’ paychecks will be spared the axe.

As far as government incomes at the provincial level, the De la Rúa administration called for “urgent repairs” of the situation in which certain legislators and city councillors earn incomes are several times greater than that of the president, which is 4,800 dollars per month.

“The greatest part of the effort must be made by political leaders, who are asked to make personal sacrifices,” De la Rúa said. Economy minister Machinea, meanwhile, pointed to the “intolerable” salary disparities existing in the public sector.

The paychecks of government ministers are twice that of the president, and lawmakers see incomes of between 5,000 and 27,000 dollars each month, depending on whether they serve in the national or provincial legislature. Some city councillors earn the more than a national lawmaker.

The federal government’s adjustment measures also call for the closing or merging of public offices, including the areas of sanitation control, economic research, the congressional printers and the official news agency, Telam, which will no longer produce government publicity and will go through full restructuring.

Machinea emphasised that public employees will not be eligible to collect pensions from other jobs and the especially large pensions of the standout government posts will be reduced by 33 to 50 percent.

De la Rúa and Machinea stressed that social spending will not be reduced. On the contrary, they announced the creation of a Social Solidarity Fund for emergencies in the country’s interior, and that government expenditures for workers’ health services will be expanded.

In the area of government investment, De la Rúa’s announcements were less spectacular. The government had to back off from an ambitious infrastructure programme, though it expects some 10 billion dollars in private investment over the next three years.