Unemployment spike in Argentina should worry Macri

19,424 layoffs during March only should trigger a response from the government, which already has a serious approval problem.

Mauricio Macri´s first months as head of state have been tough, as radical economic and fiscal reforms have shaken up the economy, and have left a trail on inconformity that leads all the way to the Casa Rosada.

Unemployment has taken off upsettingly in response, the first three months of the year left around 125,000 newly unemployed Argentinian citizens across every sector of the economy.

The numbers are concerning, but should be even more so given the context in which they happen. Argentina has seen several labor strikes in the past months, from bank tellers to teachers, syndicates are taking to the streets and halting operations as a demonstration of their discontent with Macri’s new policies. In fact, Macri’s approval has fallen 10% since he took office.

A reform as extensive as the one Argentina has carried out this year is inevitably going to make enemies among certain parts of the population, as Cristina Fernandez’ left-leaning programs are drastically reverted in favor of a market-centered approach to economic policy.

Especially in the short term, free-market reforms are likely to be met with disapproval from syndicates, but Macri should watch out. His attempts to shrink the government led to 30,000 layoffs from public companies in the first two months of the year, and those kind of numbers might give way to stronger, more vocal opposition from the political class.

All this indicates the need for a response from the government in terms of labor, to avoid the escalation of these new problems.

The outlook for the future could be brighter, however. Government layoffs themselves account for 235$ million in savings, and should serve to stabilize a fiscal deficit that as of now accounts for 7% of the Argentinian GDP.

Argentina’s image abroad has also improved due to the reforms, as they correlate positively with free trade and integration, and resonate well in multinational financial organizations. The IMF, for example, welcomed Argentina’s exit from trade default with great enthusiasm, which should serve towards facilitating the credit Argentina so desperately needs to attain the development programs Macri proposed during his campaign.

The struggle for Macri then, will be to handle these recent responses to reform, the short-term problems, with a deft hand. If the government keeps these on check, solving their immediate concerns at low cost, then if measures come to fruition and inflation comes down along with the fiscal deficit, Argentina could find itself rewarded for their boldness.

LatinAmerican Post |

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