Argentina's construction sector could be forced to shed some 40,000 jobs in the next few months because sky high-interest rates are making it difficult for businesses to finance projects, experts warn.
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Last week, the central bank raised interest rates to 60 percent with the intent to curb high inflation and save the quickly devaluing peso. Construction executives now say they can't even access enough credit to finance the public works promised by President Mauricio Macri's government.
"Banks are withdrawing financing from public works companies; it's concern over the fiscal adjustment that will hit public works," said Chamber of Construction President Gustavo Weiss.
The government has also introduced new austerity measures, including downsizing 10 ministries. Last month, it announced US$99 million in cuts to the public education sector, which was met with major protests in Buenos Aires.
The cost-cutting measures and increasing taxes on certain agro-export commodities were taken to restore investor confidence in the economy. They were also made as part of the International Monetary Fund (IMF) loan conditions to significantly reduce the primary deficit.
However, some investors are concerned the government won't be able to pay back its US$50 billion IMF loan, of which it has already received 30 percent and is now seeking a further advance.
Weiss says the interest rates and weakness of the peso, which has hovered at 40 to the dollar over the past week, makes it hard for local construction companies to complete projects, plan new ones and buy imported materials.
"It's possible there will be 40,000 lay-offs or even more because of cuts to public work," Weiss said. That number would account for around 10 percent of the workers formally employed in construction, according to the chamber's statistical agency.
Such job losses would further damage the economy, which experts say will fall into recession within a month and is expected to contract 1.9 percent this year.
A spokesman for the Labor Ministry downplayed what he said was a seasonal decline: "There has been a slowdown in growth, and a slight monthly decline in jobs due to the winter season and some instability in the industry."
Argentina's Political Economy Center (CEPA) released a July study revealing 76,359 lay-offs between November 2016 and June 2018 in both the private and public sectors.
An anonymous official at Argentina's Construction Workers Union told Reuters the austerity program could reduce public works by 50 percent next year, based on feedback from companies in talks with the government: "If this crisis doesn't ease, it could be many more."
The president of one construction company, who also asked to remain anonymous, said a government decision to stall construction forced him to recently fire 200 workers, about 10 percent of his staff: "Suddenly, the government runs out of money, starts delaying payments and slowing down projects," he said.
Meanwhile, the Transport Ministry is moving ahead with its public-private partnerships (PPP) initiated by Macri's government for more than 3,000 km of road construction that officials say could start as early as next month.
Argentina awarded six road projects to different consortia under its first wave of PPP in June, including to a party of the China State Construction Engineering Corp, in a bid to generate jobs and boost the economy.