Amid the controversy over the so-called Employment Emergency bill, which in its present state would ban both the public and private sectors from laying off workers for 180 days as well as compel employers to give out double severance packages to workers they do fire, The Bubble spoke with the spokesperson of the Argentine Chamber of Small and Medium-Sized Businesses (CAME), Vicente Lourenzo, to see if he thought the bill would actually help these businesses.
According to its website, CAME is a union of business leaders that represents 1,544 organizations from different production branches around the country, which altogether group over 520,000 small and medium-sized companies (known as PYMEs) and employ 5,300,000 people. This number represents 99 percent of all companies in the country and 70 percent of employment.
Resolution 11/2016 from the government’s PYME Secretariat determines companies are considered micro, small or medium-sized depending on their annual billings within their respective sectors in the economy. The categories are the following:
- Micro: a company bills more than AR $2 million in the farming sector and AR $9 million in the commercial sector.
- Small: a company bills over AR$ 13 in farming and AR $55 in commercial.
- Medium, category 1: a company bills AR $100 in farming and AR $450 in commercial.
- Medium, category 2: a company bills AR $160 in farming and AR $650 in commercial.
Before we dive into what Lourenzo said, let’s recap what the bill is all about. The opposition wants to pass it due to the delicate employment situation the country currently faces: a study this week found that layoffs have totaled approximately 140,000 in 2016 to date. The bill has already been approved by the Senate and is pending a vote in the Chamber of Deputies.
Although the bill originally enjoyed unanimous opposition support, this week Renewal Front (FR) leader Sergio Massa — whose FR legislators will be key at tipping the final decision — said his party wouldn’t back up the bill unless it underwent certain modifications such as guaranteeing protection to PYMEs. He believes the measure is “hypocritical,” since, as it stands, it merely freezes employment instead of creating it.
President Mauricio Macri’s administration, on its end, also believes PYMEs must be protected but strongly opposes the layoff prohibition. In fact, several officials have warned Macri will veto the bill should it reach his desk. In what was undoubtedly an attempt to bypass the bill, on Monday he signed and agreement with large companies’ representatives committing to holding off on layoffs for 90 days and announced a series of measures aimed at protecting PYMEs on Tuesday.
From the very outset of our conversation, Lourenzo made it clear that PYMEs should be left out of the bill’s reach, since its measures would do nothing but hurt them. How? He said PYMEs aren’t generally laying off workers (debatable), but the double severance packages they would have to give out in order to fire workers would be a critical hit to their finances that could put them out of business.
“Right now, given the economic situation, PYMEs are cutting costs to save their businesses. For example, if I have three shops, I will shut one down and keep two. Now, if the cost of making this decision [downsizing, which can lead to firing employees] gets more expensive, companies will go bankrupt, and if they do, neither the employee, the business’s supplier or the State [by raising taxes.] it’s money PYMEs don’t have. We understand it’s a law that has to exclude us because it causes us more problems than it solves at a time when Argentina is in a critical situation,” Lourenzo began.
He went on to say that they wouldn’t be able to face those expenses because the general economic situation has been through several rough patches for a while now, and it got worse during the first months of this year: “Before, costs increased but so did sales. Now, costs are explosively increasing but sales are going down. This equation keeps PYMEs in negative profitability. If you keep losing money for a long period of time you end up having to close down.”
The cause, he argued, is a mixture of decisions from the government and large companies, the latter of which, in his opinion, has a great deal of influence on exacerbating inflation.
“Gas price increases and decisions from large companies that influence prices generated increases that go way beyond logical inflation. The government is not the only entity to blame. Big companies that haven’t behaved appropriately since currency controls were lifted are also to blame,” he said.
Lourenzo is one of many who believe that large companies took advantage of the peso’s devaluation that began in December in order to unreasonably hike prices for personal gain. As an example, we could point out that in December, the market price for meat fell from AR $31.09 to around AR $25.90, or 17 percent, but supermarket prices for meat rose between 14 and 16 percent and haven’t budged since.
For this reason some government officials, upset about these companies’ actions, have called people several times to boycott supermarkets as a way of protesting against unreasonable prices. This week, Production Minister Francisco Cabrera even said he feels “disappointed” and “mad” at businessmen.
Despite the tumultuous nature of these past few months, Lourenzo was optimistic about the potential positive outcome for PYMEs following the government’s decision to provide special credit lines and benefits and emphasized this is the road to follow: “[Production Minister Francisco] Cabrera announced a series of measures favoring PYMEs that we fully support. This fiscal relief will be key for these companies, which are the country’s largest source of employment,” he said.
- Read more: Massa Says Unless Employment Emergency Bill Is Modified, He Will Not Allow Bill To Be Debated
Lourenzo said he he believes the situation his sector is going through could be reverted in the near future with “low inflation and the recovery of purchasing power.” But will this translate into more jobs? I asked. Lourenzo said that when it comes to PYMEs, it does.
“Companies are downsizing due to the rough economic situation, but the moment they see the market starts growing again, they will hire personnel to supply the market’s needs. I believe that when it comes to PYMEs, there’s an almost direct relation between economic growth and employment raise that will be seen as of this year’s second semester.”
Lourenzo concluded that if the government’s measures aimed at helping PYMEs are approved, added to others such as the ones aimed at inserting the youth into the job market, the Employment Emergency bill would be unnecessary: “[The bill] spurs the creation of quality jobs through economic measures. Today you can apply State policies favoring large companies but it doesn’t mean it will directly favor employment. In contrast, the aforementioned ones will,” he finished.
Now it’s up to the Lower House to decide whether to listen to their pleas.