10% of Argentine small businesses have either closed or become inactive since Macri took office.
Last edited Wed May 18, 2016, 11:57 PM - Edit history (1)
The Economic Federation of the City of Buenos Aires (FECIBA) has released a report indicating that so far this year over 10% of small and medium businesses in Argentina have either closed or become inactive.
Among the 10% of businesses under severe distress, 4.4% have become inactive and 5.6% have ceased operations altogether. This segment of Argentine business has shed over 8% of its employees over the same period of time according to the report. The data come from an internal survey conducted by FECIBA and its associated business chambers, from January 1 to May 10.
The report explained that higher inflation, indexing of invoices by large firms, sharp increases in public utilities rates and fuel charges, a high tax burden, and a decrease in sales, rank among the top causes behind the recent deterioration of small business balance sheets. Among those that have closed, up to 93% listed these issues as a factor.
The first three problems are directly attributable to austerity policies enacted by the right-wing Mauricio Macri administration, including a 40% devaluation that led to a sharp jump in prices and deep cuts in subsidies that raised utility rates by an average of 300%.
Other small business challenges that, per the report, have worsened during 2016 include free trade policies that have increased imports, judicial uncertainty triggered by poor labor laws that enrich lawyers and consultants, unfair competition from larger firms, and the increase in interest rates in recent months to no less than 40%. Up to 73% of affected businesses mentioned one or more of these issues.
Raúl Zylberzstein, president of FECIBA, welcomed recent announcements by the Macri administration that enhance tax incentives and roll back austerity to some degree as a "major advance" package; but he acknowledged that "that alone is not enough."
He noted as well that "the situation is further exacerbated by "upcoming wage hikes that companies will face, as well as the payment of June bonuses."
Zylberzstein stressed that in this context, "the immediate enactment of an emergency small business bill is needed." Such a bill must be "an emergency law that protects small businesses by easing payroll and value-added tax burdens, and introduces a simplified and progressive tax rate scale for small businesses." This, he pointed out, "would be the best way to guarantee comprehensive protection for workers, their jobs, and the companies that generate them."
The Argentine Congress is currently debating a Layoff Prevention Law that would mandate that all employers pay a double indemnity to those laid off. President Macri, however, has indicated he would veto the bill, which is currently being delayed in the Senate as a result of legislative maneuvers from Macri's right-wing PRO party and their junior coalition partners, the centrist UCR. The bill has 64% approval according to most polls.
Zylberzstein supports the bill in principle, with the caveat that it "pertain only against the layoffs of large companies, as these already employ a disproportionately high percentage of the overall labor force." Such limits, he hopes, might persuade President Macri to sign the bill.
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