Following a government default in July, Argentine labor unions have now organized nationwide protests in an effort to demand better working conditions as the recent bond default threatens economic stagnation and renewed inflation.
As transportation and service sector workers take to the streets this week, President Cristina Fernandez Kirchners administration has come face-to-face with the consequences of its disastrous default earlier this summer.
Spurred on by a growing wave of social discontent, major union leaders staged a 24-hour strike on Tuesday to voice their disapproval of the governments handling of the situation, while also demanding better working conditions and increased salaries.
As Charlie Devereux of Bloomberg Businessweek explains, Truckers, train conductors, port workers and waiters walked off their jobs today in a 24-hour strike to demand higher wages and in protest at dismissals. While strikers blocked some of the main entrances to Buenos Aires, most bus and metro services worked as normal.
The labor walk-outs come on the heels of last months government default, which came into effect as the Argentine government failed to meet its dues to U.S. foreign creditors by an end-of-the-month deadline set by U.S. courts.
Overall, the crisis stems from a June 16th decision in which two separate Supreme Court decisions ruled that Argentina was responsible for paying back nearly $1.5 billion in debts that date back to the countrys financial crisis of 2001-2002.
Specifically, following the countrys massive debt crisis at the turn of the millennium, the Argentine government worked to restructure its public debt with foreign creditors in order to begin to dig itself out of the fiscal hole it was in at the time.
However, as Katy Barnato of CNBC explains, [several] so-called holdout creditors snapped up junk bonds around the time of its massive $82-billion default in 2001 and refused to accept the debt restructurings that followed.
Consequently, while over 90% of creditors would go on to accept the restructured deals, several vulture fundsso-called for their propensity to scavenge for and take advantage of vulnerable governments for their own profitstood out as key exceptions to the new agreement.
Throughout the dispute, President Kirchner remained adamant in her belief that the U.S. courts decisions violated Argentinas sovereignty and consequently didnt hold legitimate judicial power.
Ultimately, her stance resulted in the countrys default and a renewed threat of stagflation, with increased prices and little economic growth. And while not enough time has transpired in order to fully quantify the effects of the default, Charlie Devereux of Bloomberg Businessweek goes on to explain that, The default is delaying Argentinas ability to access dollars as borrowing costs rise and legal restrictions increase.
That will probably widen the fiscal deficit this year to about 3 percent of GDP, or $19 billion, according to Luciano Cohan, chief economist at Elypsis.
As the economy weakens and prices rise, tension has been mounting in Argentina since late 2013. And with no clear solution in sight, this weeks protests seem indicative of further tumult to come in the South American nation.