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Argentina braces for labor strike, electoral shift

  • Market: Crude oil, Natural gas, Oil products
  • 29/04/19

A national strike will halt much of shale-rich Argentina's economy tomorrow amid growing investor concern that market-oriented president Mauricio Macri will lose a bid for re-election in October, swinging Argentina back toward state intervention.

"Tuesday's strike will be one of the largest in the last few years because people are really tired," said Pablo Moyano, one of the leaders of the truckers' union that has called the strike to protest against the president's economic policies.

The strike comes less than two weeks after the government started freezing prices on basic goods and services, pre-election measures aimed at winning over frustrated voters.

The price freezes were accompanied by a sell-off in Argentinian stocks and a depreciation of the peso, reflecting concern that Macri's government will not be able to dig itself out of a current recession.

Leftist former president Cristina Fernandez de Kirchner published a surprise memoir last week that was largely seen as confirmation that she will run against Macri.

Despite lingering corruption cases against Fernandez, polls are showing it could be a tight race between her and Macri, but a viable third option could yet emerge.

Although Macri's administration had vowed that inflation would begin to decelerate this year, it rose 11.8pc in the first three months ending in March, totaling 54.7pc on the year, meaning wages across the board have lost purchasing power.

Divisions among unions means the one-day strike tomorrow will not paralyze the country. Many train and bus lines will continue to operate, but much of the country's ports and airports will be closed as unions hold what is expected to be a massive march in downtown Buenos Aires.

Adherence to the strike by oil workers around the country is expected to be disparate with some unions in southern Santa Cruz, Tierra del Fuego and Chubut province pledging to take part. Oil and natural gas production should not be affected.

Oil workers in Neuquen province, where the Vaca Muerta shale formation is located, are threatening a large strike of their own amid wage negotiations.

The strikes serve as a reminder of the persistent above-ground risks for energy companies that are seeking to gain a foothold in Vaca Muerta, which has helped push up Argentina's oil and gas production in one of the few bright spots for the economy.

Those risks are bound to increase in the coming months if the electoral prospects for Fernandez continue to improve. Investors fear she would once again impose heavy government control on the economy as she did during her two terms as head of state.

There is also concern among investors that a Fernandez administration could choose to default on at least some of the approximately $100bn in bonds issued by the Macri administration and the $57bn standby credit line it negotiated with the IMF last year.

Argentina's gas production increased by 5pc last year to 128.8mn m3/d (4.5bn cf/d) while crude output rose by 2pc to 489,000 b/d, according to data from the country's energy secretariat.


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