‘THE CRISIS HIT US BUT WE ARE MORE COMPETITIVE TODAY’
Production and Labour Minister Dante Sica on the economic downturn, the motors for recovery in 2019 and what sectors the crisis hit hardest.
AN INTERVIEW WITH PRODUCTION AND LABOUR MINISTER DANTE SICA BY JAIRO STRACCIA & PATRICIA VALLI
Production and Labour Minister Dante Sica welcomed Perfil journalists Jairo Straccia dn Patricia Valli for an exclusive interview, just a few days after the turn of the year.
How big is the crisis?
Let’s split up gross domestic product into thirds.
One third did not fall throughout the year despite the crisis – fisheries, knowledge services, the energy sector, meat [beef, chicken or pork], telecommunications, tourism, etc. That third accounts for a quarter of all jobs.
Then you have 30 percent of GDP which slumped all year – agriculture [due to the drought] and textiles, footwear, leather, food, metal and engineering and ancillary construction industries. But they account for 37 percent of jobs. That’s where it’s felt most, especially in the industrial sector.
And then you have a third of activities which made a very strong start and then fell off or slowed down such as construction.
You tell me which sector and I’ll tell you how you passed the year. If you go to Neuquén, you had a great year but in La Matanza or Florencio Varela odd jobs and the building industry fell off while light engineering suffered.
Is that a problem of a model which does not favour labour-intensive sectors?
No, I don’t think it’s the model, rather the impact of the crisis.
What are the motors for recovery in your view?
You are going to have sectors acting as tractors for continuing or returning to growth. One is farming, due to climatic factors. And then there are the export industries. Many sectors previously geared to the domestic market which always clamoured for protection will have overseas markets to compensate for the fall of the domestic.
Furthermore, as from last month following the collective wage bargaining of September and October, aggregate income will begin to outstrip monthly inflation in real terms, which alongside a stable dollar, will bring about a recovery of consumption.
What would you say to workers who have lost their jobs in Greater Buenos Aires? That they retrain to return to their industry or that they look elsewhere for other options in places like Jujuy or Neuquén?
There’s no single reply to that question. Some programme is needed for those families losing their jobs, a pro-
cess of retraining.
On average 22 families are moving to Neuquén every day, both for the wells and due to the intense demand of accompanying services. The same’s going to happen in the north with the lithium.
Demographic mobility in Argentina until now has been from the hinterland to Greater Buenos Aires due to low job demand.
And you’re saying that’s going to be reversed?
My feeling is that somebody coming from a northern province, thinking that he would find more work in Greater Buenos Aires or the Federal Capital, will now start realising that there are job niches which they did not have before and that it would cost them less to go home than for somebody from
Merlo to move inland.
Many companies are suspending workers or bringing forward vacations in the hope of seeing through the summer. Is another wave of lay-offs on the way?
If you look at services, job creation has only started slackening off over the last month while construction trends were positive in the first five months of 2018.
Today the provinces have fiscal surpluses and a greater capacity for public works than the national government. Those sectors in the middle and upper classes who dollarised their savings are now better-off. The worst effect was on industry.
Why?
Until 2015 you had a closed economy where many imported consumer products were not available and many industrial sectors enjoyed above-average growth from supplying, imperfectly, what could not be brought in from the outside world. These companies became increasingly less competitive.
You might say that that they were sustained by a model privileging labour-intensive industry.
Pure fiction with no real sustainability. It was maintained by subsidies which
ended up generating problems for the energy sector as well as inflation.
Today, in Vaca Muerta, you pay the oil companies seven dollars for gas worth four to stimulate production. That also sounds a bit fictitious.
Yes, but it’s part of a process of normalising prices and there are also technological changes.
You said that wages were already starting to outstrip inflation last month but aren’t the utility bill increases heating up the cost of living?
Those increases have an impact on regulated prices but core inflation is stabilising and receding. Perhaps the approximation between core and overall inflation will slow down in this quarter due to regulated prices. But monthly incomes should move ahead of inflation.
But a fall in consumption is forecast for 2019?
I think that still remains to be seen. The negative lag effect will be high, around 2.7 percent, with a slow start to this first quarter.
Within a framework of exchange rate stability and real wages commencing their recovery, consumption is recovering amid greater job stability and pickup for services and construction – credit will then follow when the Central Bank
“Until 2015 you had a closed economy where many imported consumer products were not available and many industrial sectors enjoyed above-average growth from supplying, imperfectly, what could not be brought in from the outside world.”
has more margin to lower interest rates and assist the recovery of consumer credit.
All your forecasts are premised on the dollar remaining stable. What if it doesn’t?
We now enjoy better macroeconomic conditions than a year ago, after lowering the deficit and moving towards a balanced budget, thus eliminating one of the main causes of inflation, which was printing money to fund that deficit. We already have 2019 financed and I would say 2020 as well. And if you look at debt renewal in pesos, we are also pre-financing 2021. Our exchange rate policy makes for greater predictability. We have lowered the deficit in the balance of payments and completed most of the correction of relative prices.
Your former colleagues among consultants speak of the impact of dollarising the economy with electoral aims in mind and also of the risk of Cristina Fernández de Kirchner returning to power…
It’s a risk we have to face. As the elections draw closer and the opinion polls begin to show firmer tendencies, the position will improve and that should surely not be something which will affect us.
You’re the Production and Labour minister. The data for both production and employment are worse than in 2015. Why should a Cambiemos (Let’s Change) voter from 2015 re-elect you?
It’s not all about whether production rose or fell by magic as the result of two sets of policies.
We are working to restructure the economy which was never done in the last 30-40 years. The crisis hit us and caused demand to fall but from a structural standpoint we are more competitive today than in 2015.