21 February 2007

Gimme, gimme!

This is what happens when the economy goes well in a country with people accustomed to ask for more all the time without regard for common sense.

It's not that Argentina is swimming in fresh money. There's just more currency in the streets. The money-making machines are rolling at full speed, as the Central Bank desperately attempts to buy more and more dollars to keep the exchange rate high and encourage exports. Argentinians don't like to save, and they love spending. The national state is collecting a lot in taxes and this is an electoral year — remember, also, that this is a truly, old-fashioned populist Peronist government, so it's throwing money around in projects, subsidies and plain advertising throughout the country.

As a result, we the people have money in our pockets, usually, and we don't restrain ourselves as much as we did in former times, when we had to think twice before choosing the comfort and speed of a taxi over the crowded inside of a public bus. Back then we preferred receiving guests at home, with food and drink bought at the supermarket; now we don't feel guilty going out to dinner in a fancy restaurant every now and then. And so on. We're now spending money, big time, and those who want our money have noticed it.

First it was the taxi drivers, then the bus drivers. Our urban bus fee was AR$0.75 cents, now it's AR$1.20, all because the bus drivers wanted to earn a minimum of AR$2,300 a month. Most semi-qualified full-time workers in Rosario get around AR$1,000, maybe a bit more, and there are many, many people working eight or nine solid hours per day, Monday thru Saturday, for less than that. In general, a person earning more than AR$2,000 per month in Rosario, unless they're a established professional (a doctor, a lawyer, an architect), is doing very well. The bus drivers in Rosario drive badly, and their manners are terrible; the service is erratic, unsafe, and almost inexistent at night; and it hasn't improved. But wait! Just after the last fee raise, which was entirely their fault, the drivers are now asking for a salary raise again. I guess soon medicine and law students will start leaving the universities to become bus drivers; they'll earn more without having to gain experience or look for clients.

But wait (again)! Since the bus is getting a bit expensive, people are choosing to get taxis (three people pay AR$3.60 for a bus trip; for AR$6 they can get a 15-minute taxi trip, give or take). Taxi drivers are enraged by the fact that they're having so much work, and complain that their service should be expensive not only in absolute terms (which it is) but also in comparison to the bus, so they want the taxi fees to raise, too. The fee is made up of two parts: the basic starting fee, called bajada de bandera (i.e. what they charge you just for stopping and turning off their "FREE" red light sign), and the ficha, or time/distance-based fee (i.e. what they charge for every block, plus the waiting times before traffic lights, etc.). The bajada de bandera is now AR$1.80, while the ficha is AR$0.90. The taxi owners want those figures to raise to AR$2.60 and AR$1.30 respectively. That would make the taxi what they want, a more exclusive service, in the literal sense: a service whose cost excludes most of the public from using it.

Not to be left behind, the public employee union of Santa Fe is also asking for a raise. The provincial government has been making a big deal of the fact that we (they) have a fiscal surplus, so why don't they pay us more? The leader of UPCN, the main union, is also a deputy (member of the Lower House). Incompatibility, anyone? He's also a well-known embezzler (nobody has been able to prove anything, but that's not difficult when the judges are all friends of the party). UPCN wants a minimum wage of AR$1,800. For most employees that would mean a 90% salary raise. Naturally, the provincial government is not happy about this ridiculously high request, but can't refuse it outright because it's an electoral year and UPCN is always quick to resort to strikes in sensitive places, such as public hospitals.

The teachers employed by the provincial state are asking for a raise too. They want a minimum of AR$2,200. Bear in mind these are people who work 5 hours a day, 9 months a year. For sure they've studied to get there and they work in a hostile environment (public schools, overcrowded with mostly poor children, often in bad neighbourhoods). But I can have no sympathy for them. They've always used schoolchildren as symbolic human shields in their fight for a higher pay. They always, always go on strike, causing the children to lose class days they'll never recover, and they never try to negotiate and set things straight with the government during the summer vacations. Since I was a child myself, teachers have never, ever, gone to class every day in the year. As March approaches, teachers threaten they won't start classes, thus delaying the educational schedule from the very beginning.

Most labour unions are asking for raises as well. They argue that both private companies and the state are doing financially well and that inflation was 10% last year (most believe it was actually much more). What can we say to that?

Orthodox economics says that higher salaries for everyone will increase costs and will fuel consumer spending, and in turn this will trigger more inflation. Orthodox economists, though, are notorious for favouring companies over consumers. Looking at companies' production costs, it's apparent that the private sector is in fact taking advantage of the public sensation of economic exhuberance to raise prices and reap more profits, since the workers' pay is only a small percentage of the total cost of the product in most cases. This may vary a lot, of course; harvesting corn is not the same as manufacturing cars and definitely not the same as selling vacations in a spa. The service sector in particular is collecting truckloads of money; long-distance bus fares have increased out of all reason, restaurants charge ridiculous prices for drinks (8 pesos for a beer you can get for 2 pesos in the supermarket!), and the cheesiest gyms in town fake a Pilates class and charge old ladies 80 pesos for it.

The argument that salaries cause inflation is the favourite of private companies. If modern economy were based in real life, it would be easy to dismiss it, but since the whole world economy is based in arbitrary factors (such as Ben Bernanke's mood when he wakes up, or the amount of people blown up in Iraq during a given week), it's often enough that the market or the public "feel" something to make it real. Well done!


  1. We have just arrived back in BA to a clean apartment but empty fridge so a trip to the local supermarket was the first thing we did...and I was shocked! I expected a 10-15% increase but no, it was over 30% on eggs, yoghurt, etc. WE had coffee at our local cafe, their "oferta" has gone up more than 20%. Later that same night, we strolled to our local heladeria, prices have gone up by over 20% again. I'm still puzzled as to which are the 8,000 products they use to measure inflation.

    On the other hand, we have noticed the election year effects: they are paving the area around a new public park with fancy pavers, there seem to be less poo on the streets. Ah, such is life in Argentina!

  2. It is amazing to me that a bus driver makes more than a teacher in Argentina. And, from what I can see, the public colectivos are maintained much better than the public schools.


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