October 31, 2017 / 6:06 PM / in a year

Employers say reforms could slash Argentina labour costs up to 35 percent

BUENOS AIRES (Reuters) - Labour costs in Argentina could fall as much as 35 percent if government reforms aimed at bolstering the economy and attracting investments go into effect, industry groups predict.

A man works on the construction of a sidewalk in Buenos Aires, Argentina October 26, 2017. REUTERS/Marcos Brindicci

Encouraged by his “Let’s Change” coalition’s strong performance in midterm elections, President Mauricio Macri presented his economic plans, and said a package of labour reforms would be sent to Congress in coming days.

The private sector has long argued for more flexibility in labour regulations, including curbing litigation by workers and lightening the social security burden on employers. Those issues are among 145 reform points mentioned in a draft plan from Macri’s government seen by Reuters on Tuesday.

An employee works on a metal component at the Galileo Technologies plant in Villa Raffo, on the outskirts of Buenos Aires, Argentina October 24, 2017. REUTERS/Marcos Brindicci

The reforms will be negotiated with textile and logistics unions and companies, among others, before they are presented to Congress.

Argentina’s high labour costs have contributed to a decline in investment, an imbalance in foreign trade and a prolonged deficit.

Food industry workers, for example, cost employers on average $20 (15.07 pounds) an hour, compared to neighbouring Brazil where the cost is between $9 and $11, Daniel Funes de Rioja, president of the Chamber of Food Companies, told Reuters.

Sector costs could fall 25 percent with the kinds of reforms Macri has been flagging, he said.

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Ariel Schale, head of textile chamber Pro-Tejer, said costs in the sector could be lowered 35 percent by reducing social security and insurance payments for labour accidents, among the reforms being considered by the government.

Macri’s coalition will need to tread carefully in a country known for its powerful unions and which still does not have a majority in either house of Congress.

It also wants to reform the tax system, but options are limited with a fiscal deficit that will close at 4.2 percent this year. The government will present its tax reform plan at a news conference later on Tuesday.

Trade unions have expressed concern that lowering labour costs will be an excuse for employers to reduce wages and slash benefits.

“We are not talking about conceding ... businesses have to earn a little less and they have to invest more in machinery,” said Antonio Calo, secretary general of the Metallurgical Workers Union, told Reuters.

Writing by Cassandra Garrison; Editing by Caroline Stauffer and Rosalba O'Brien

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