Declaring a “statistics emergency,” Argentina’s new president throws open the books
▶ ▶ Argentina’s new president, unlike the old ld one, wants to talk ▶ ▶ Drawing “a line between what’s true and d what’s a lie”
From a rundown government building in Buenos Aires, a reserved economist named Jorge Todesca is leading a glasnost of sorts in Argentina. A few weeks after winning November elections, President Mauricio Macri—a wealthy businessman and former Buenos Aires mayor—put Todesca in charge of the national statistics institute. Macri cleared Todesca and his ministers to talk freely about the nation’s economic data and just about everything else.
That may seem like the norm in other democracies, but not Argentina. The government of Macri’s predecessor, Cristina Fernández de Kirchner, was suspected of manipulating statistics so much that in 2013 Argentina became the first nation to be censured by the International Monetary Fund for inaccurate data. The then-finance minister called the censure “baseless.” Now, Todesca openly discusses recovering the ability to produce believable statistics: “This institution and others draw a line between what’s true and what’s a lie.” Fernández didn’t respond to requests for comment.
Macri, who was born into a wealthy family and was once president of the wildly popular Boca Juniors soccer club, won a narrow runoff victory on promises to attack corruption and drug trafficking, erase poverty, and scrap heavy state controls over the economy. Since taking office on Dec. 10, he’s eliminated currency controls, slashed export taxes, and sacked no-show state workers.
In mid-january, Macri sent his top finance officials to New York for talks with creditors demanding payment for bonds the nation defaulted on in 2001. A settlement would let the government borrow from foreign investors for the first time in a decade. “That transparency is going to be critical,” says David Tawil, co-founder of distressed-asset fund Maglan Capital in New York. Under Macri so far, officials at all levels are talking about inflation, taxes, exchange rates, and harvests.
Fernández, a lifelong member of the populist Peronist movement, seized control of vast sections of the economy, including the energy and media industries. She used welfare, generous state subsidies, taxes, trade protection, and currency controls to try to fuel growth. She left behind an economy in tatters, with inflation upwards of 25 percent, two years of stagnation, dwindling reserves, and escalating budget deficits.
Fernández’s ministers rarely commented on anything in public. The fear of speaking up touched all levels of society, business, and government, says José Nun, who was secretary of culture under Fernández and Néstor Kirchner, Fernández’s late husband and predecessor. “You have to understand that Cristina was above all a populist, and populists believe they are the sole representatives of the people’s desire,” says Nun, who quit Fernández’s government to join the opposition and now runs the doctorate program in sociology at San Martín National University.
In her eight years in office, Fernández communicated via prolific tweeting, pronouncements on national television, and pro-government programming on state media—but held very few news conferences. Marcos Peña, Macri’s 38-year-old cabinet chief, says his boss is already radically different. Macri has called two news conferences in his first month. He’s also planning to attend the annual gathering of the economic elite in Davos, Switzerland, something Fernández never did.
“Uniting Argentines has a lot to do with your word,” says Peña. “There has been almost a mega-devaluation of the value of the word of the state or of politicians, and that’s one of the biggest problems this country has,” he says, sitting in his sprawling office in the presidential palace, known as the Pink House.
Macri is trying to tone down a quarrel Fernández started. She clashed with farmers across the pampa, a Texas-size region of fertile farmland. She tried to jack up taxes on farm exports to make farmers sell more grain domestically. They faced her down with strikes and roadblocks, leading to food shortages. For years, she branded farmers as hoarders and speculators. “We never got anyone in her government to meet with us,” says Gabriel De Raedemaeker, whose family has 9,400 acres of soy, corn, wheat, and ranchland near Cordoba in the northern pampa. Says Raedemaeker, who’s vice president of a regional farming association: “You cannot imagine how exhausting that bellicose rhetoric was.”
Raedemaeker says he knows how the government muzzled critics. “Like clockwork, I would get a notice from the tax agency right after being quoted in the media,” he says. “And I had to go down there with my accountant and prove my innocence.” Ricardo Echegaray, who ran the tax agency under Fernández, declined to comment.
Macri has drawn criticism for bypassing congress via a flurry of decrees, including appointing two judges to the supreme court. “Decrees can be used, but not like this,” says Daniel Sabsay, a lawyer and an expert on Argentina’s constitution. “It comes close to a violation of the separation of powers.”
Macri doesn’t control congress, and he’ll need to form alliances with the opposition—including former Fernández allies—if he wants to govern, says Senator Juan Manuel Abal Medina, Fernández’s former cabinet chief.
“We think that some of these changes are not right,” says Abal Medina, referring to the currency devaluation and other initiatives by Macri. “They might be good for the financial markets in the short term, but over time they will erode advances for the poor that we worked hard to achieve.” Peronists control the senate and form the largest opposition group in the lower house.
Macri’s challenges become clear in the dimly lit offices of the statistics institute. He has declared a “statistics emergency,” giving Todesca the freedom to make radical changes. Todesca says it will take months just to get a reliable read on inflation—and he has opposition. Among the institute’s 1,700 workers are 200 delegates from a fiercely pro-fernández union who are trying to block his reforms.
Todesca is used to getting heat. In 2011 the commerce secretariat fined the economist 500,000 pesos ($37,000) for publishing his own inflation index. The fine was overturned in court. “I think that’s why the president chose me, because I tried to speak the truth about economic statistics and was punished for it,” Todesca says. “It’s a complex task, but worth it.” �Michael Smith and Carolina Millán, with Pablo González, Dan Cancel, and Charlie Devereux
The bottom line President Macri has inaugurated a new kind of openness and reform in Argentina, but he still has to deal with opposition in congress.
grow, unrest in factories and on construction sites is spreading.
Worker protests and demonstrations doubled last year, to 2,774, with December’s total of more than 400 such incidents, setting a monthly record. The protests come as China’s slower growth crimps profits and concerns about poor policymaking sap investor confidence. “The increase in strikes and protests began last August around the time of the yuan devaluation and subsequent stock market crash and continued to build during the final quarter of the year, as the economy has showed little sign of improvement,” says Geoffrey Crothall, communications director at the Hong Kong-based workers’ advocacy organization China Labour Bulletin.
That’s worrisome for China’s Communist Party, which came to power in 1949 claiming to represent the working masses. In a sign of its nervousness, Beijing on Jan. 8 formally arrested four labor organizers in Guangdong, amid a broad crackdown on rights activists. “The situation is not so good these days,” Zhang Zhiru, a Shenzhen-based labor campaigner, said in a text message. “It is not convenient to accept interviews from the foreign media.”
The government’s official unemployment rate for urban workers is fiction: It’s remained largely unchanged at around 4 percent even when China’s economy has dipped significantly in the past, as during the global financial crisis. Still, most outside observers estimate the real figure may be a couple of percentage points higher (the Conference Board’s China Center for Economics and Business puts it at about 6 percent). Wage growth has been outpacing gross domestic product growth in recent years, and 10.7 million urban jobs were created in the first nine months of last year, surpassing the official full-year target of 10 million, according to the Ministry of Human Resources and Social Security.
Cash-pressed companies in construction, manufacturing, mining, and services are delaying paying their workers, which is the No. 1 cause of labor strife and a likely precursor to staff reductions, says Crothall. “Companies have been delaying wages and cutting the workweek. They have tried these different measures to keep people employed. But now we expect greater outright layoffs,” says Beijing-based Andrew Polk, senior economist at the Conference Board’s China Center. “This year I expect it will be even more difficult to find work,” says one 30-year-old toy factory worker who hails from Hunan province. (He asked that his name not be used, citing the sensitivity of the labor situation.) “I am not satisfied with my salary. But everywhere’s pretty much the same.”
According to Chinese surveys of purchasing managers, companies have been reducing staff for at least the past 11 months. A separate private poll by Markit Economics and Caixin, a financial information media company, is similarly grim, with services showing their worst overall performance in 17 months in December.
Layoffs have been particularly high among export-oriented manufacturers in southern China’s Pearl River Delta. A survey last August of 570 companies in Guangdong by the Hong Kong University of Science and Technology and Beijing’s Tsinghua University showed companies had reduced their workforces by an average of 3.5 percent from 2013 to 2014, while low-skilled workers had been cut by 5 percent, says Albert Park, director of the HKUST’S Institute for Emerging Market Studies. Monthly wages for workers grew more than 10 percent annually in 2013 and 2014. They grew less than 2 percent through the first half of last year.
Multinationals operating in China’s big cities are trying to control labor costs. About one-third of such companies in an October survey said they planned to add staff in 2016. That was the lowest rate recorded since early 2009, during the global financial crisis, says Elley Cao, a principal at human resources consultants Mercer in Shanghai. Foreign companies said they plan to raise salaries on average by 6.9 percent this year, the smallest increase since 2009. Says Cao: “This will be the trend for the next few years.”
Layoffs in China’s resource and heavy industries, suffering from overcapacity and red ink, are expected to be particularly large. Officials have said cutting excess production is a priority, in part to help reduce hazardous smog. “China should put unyielding effort into restructuring by eliminating outdated capacity and forbidding the construction of new capacity,” Premier Li Keqiang said on Jan. 4 in Shanxi, one of the top coal-producing provinces, the official Xinhua News Agency reported. The government should take “a combination of measures” to deal with overcapacity and ensure the “well-being of laid-off workers,” Li said, without specifying how.
The downsizing in heavy industry
“I am not satisfied with my salary. But everywhere’s pretty much the same.” ——anonymous 30-year-old Chinese toy factory employee