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Labor, Employment Challenges Pushing Multinational Companies Out of Argentina

November 17, 2020
by Henry Eickelberg

As the pandemic pushes Argentina’s economy deeper into recession, an unwillingness to compromise by organized labor combined with government policies to limit soaring unemployment have resulted in difficult circumstances for global companies operating in this important Latin American country.  

Government Action to Mitigate Unemployment Consequences Imposed Burden on Employers:  The Argentine Government, facing immense unemployment caused by the pandemic, created new rules preventing employers from terminating employees without cause, and suspending them due to force majeure, lack or reduction of work.  Additionally, the government doubled worker severance packages should a company leave, close or negotiate a resignation.  
Each regulatory change was intended to be temporary for the COVID-19 pandemic and are set to expire later this year.  They could, however, be extended.  Meanwhile, the country is experiencing its worst one-year economic decline on record, with 37% inflation, 13.1% unemployment, and substantially increased work suspensions.  Argentina’s Labor Minister has hinted at more government incentives to encourage employers hiring more workers. However, he did not provide any details and denied the possibility of a major overhaul to improve the country’s labor market.
In the near-term, despite the well-intended policies to protect jobs, the government has inadvertently added more burdens to the already-difficult company operations in Argentina.  
Argentine Unions Unwilling to Back Off Demands in COVID Economy:  Unfortunately, for multinational companies, Argentina’s unions show no concerns about the economic realities of the COVID-19 pandemic. 
For example, the URGARA union representing grain inspectors has been on intermittent strikes since September over salary and bonus negotiations.  The grain sector is the country’s top source of export dollars and has been especially important given the worsening economy.  Despite the importance to the country, the URGARA union has not hesitated to call on its members to go on strike, snarling ports throughout Argentina.  
Besides unannounced and sporadic strikes, another tactic is to work with different unions in the same sector against the negotiating party.  In this case, URGARA union signed an agreement with grain crushers’ union federation, FTCIOD, leaving the industry with little ability to negotiate. In 2014, these tactics almost paralyzed Argentina’s ports across the country for nearly five months. 

Outlook: Numerous global companies have chosen to leave the market, such as Honda, American Airlines, and Starbucks. Just last week, Walmart joined the exodus from Argentina after 25 years operating in the nation. With an extremely powerful sector union system, a workers-friendly government, and an ominous economic forecast, businesses must be cautious when making plans in Argentina.