MercoPress. South Atlantic News Agency

Argentine industry supports subsidy-elimination policy, but calls for gradualism

UIA Vice-president Sacco: if cuts are not progressive, ‘we’ll have inflation’

Argentine president Cristina Fernandez received strong support from the industrial sector for her latest policy of eliminating subsidies which are widely extended in the economy, but manufacturers also called for prudence and gradualism.

Argentine Industrial Union (UIA) Vice President, Juan Carlos Sacco said that the manufacturers organization has long asked for a change to the subsidies policy but warned that “it shouldn’t be an abrupt change, but rather progressive.”

During the opening on Monday of the UIA annual Industrial Conference, Sacco considered that “subsidies must exist as far as they are granted to small or medium companies as well as to poor families, but it’s not fair when they are granted to residents of wealthy areas”.

Furthermore Sacco remarked that “it is absurd to have utilities’ subsidies granted to the wealthy areas of Buenos Aires such as Barrio Parque and Puerto Madero, or to private residential neighbourhoods in Greater Buenos Aires and the rest of the country”.

But Sacco cautioned that “the cuts must be done progressively, they can’t be put in effect from one day to another. Otherwise, the measure would be totally absurd as it would bring inflation, hence workers will automatically claim for a salary raise.”

But before taking any action, there must be “an economic and social agreement as well as a thorough discussion on prices and salaries” so that we can contain turbulences.

Likewise the UIA president José De Mendiguren said that the economic situation of Argentina is ‘solid’ and there are not reasons for the recent alterations and tremors in the foreign exchange market.

Argentina is undergoing a “very solid macroeconomic situation, so we can’t see the US dollar jumping abruptly” said the UIA chief. He added there is no real cause for the exchange rate to be so volatile. Since the end of October there has been a strong demand for the greenback in the local money exchange market.

Nevertheless De Mendiguren admitted Argentina needs greater investment to address expanding demand and to help contain inflation. “We have to warm up to investment, without it no model or economic process is sustainable”, sad the UIA chief.