Argentina government, unions agree on deal to boost car production

BUENOS AIRES, March 15 (Reuters) – Argentina has reached a deal with labor unions aimed at increasing car production to one million per year by 2023, President Mauricio Macri said on Wednesday, as part of his drive to increase investment by reducing high labor costs.

The pact took months to negotiate and should create 30,000 jobs between now and the expiration of the deal in 2023, Macri said in a press conference.

“We want our auto parts industry to become part of the global added-value chain,” he said.

Auto production in Argentina hit a record 828,771 vehicles in 2011. Since then it has fallen steadily to 472,776 last year, due mainly to economic problems in Brazil, the top importer of Argentine automobiles and parts.

In February, production fell 29.7 percent from the previous year, according to the local auto producers association.

Businesses say Argentine labor costs must come down before they make investments seen as necessary to restore economic growth.

But trying to make labor cheaper has brought the center-right president eye-to-eye with tough union bosses allied with the opposition Peronist party.

Macri had some early success, clinching a deal in January to reduce benefits for workers in the vast but barely tapped Vaca Muerta shale formation in Patagonia.

Reuters reported in February the auto industry deal would be next.

Unions in Argentina are used to tough negotiations and they are not shy about picketing, blocking roads or going on strike in the pursuit of pay packages that workers rely on to keep up with inflation clocked at around 40 percent last year.

(Reporting by Hugh Bronstein; Editing by Paul Simao)

Article Courtesy of CNBC

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