February 2, 2011

Argentina Labor Unrest Disrupts Grain Marketing

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Labor unrest was the big news in Argentina last week. The truckers, the dock workers, and workers in the soybean crushing plants along the Parana River were all on strike in Argentina late last week demanding wage increases. Union leaders say they need higher wages to keep up with the spiraling inflation, which is unofficially estimated at 25% or more.

Inflation is a legitimate concern of course, but the workers may also be worried about a potential change in the Argentine political landscape. A look at some of the recent history in Argentina could shed some light on the current situation.

When Mr. Kirchner was president, and later when his wife became president, it was Mr. Kirchner who was the chief negotiator with the unions and the workers when it came to wage concessions. He was tough at the negotiation table, but he was also respected. The workers knew they could work with him and after all, the unions are some of the Kirchners's biggest supporters. The unions and Mr. Kirchner were actually on the same side of the political divide.

Now that Mr. Kirchner is gone, Mrs. Kirchner commands very little respect from the same unions. In fact, her approval ratings are extremely low and the prospect of her being re-elected to a second term in October is in serious doubt. The unions know this of course and they may be looking past Mrs. Kirchner at the possibility that the opposition may take control of the Casa Rosada. If the opposition would win, the unions would lose much of their clout with the federal government. Therefore the strikers may be more willing to "push the envelope" with these wage demands in the hope of getting a better deal now than what they might get later on.

For her part, Mrs. Kirchner does not want to be seen as weak and caving into the union demands. If she is seen as capitulating to the workers demands, it may be even more difficult to get re-elected. As a result, both sides are viewing this dispute as being something larger than just a wage dispute and it would not be surprising if these strikes carry on for a longer period than normal.

The current protests are playing right into the hands of the farmers who ended their one week hold on grain marketing. Even if they now wanted to sell grain, the processing plants are shut down and the exporters are not loading vessels. The farmers have said that they retain the right to resume their protests if the government does not bargain in good faith concerning the government's interference in the grain markets. It is entirely possible that when the current labor dispute gets resolved, the farmers will once again declare that they will again hold their grain off the market. As a result, this disruption of the grain markets in Argentina could go on for a while longer.