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Adjustment, debt, and layoffs: the Milei and Caputo model as seen from the factories Why does the lack of reserves worry the “markets” and the establishment ? The reason is simple: the Central Bank's reserves are the country's foreign currency assets: foreign currency, gold, Special Drawing Rights (SDRs) from the IMF, and swaps (with China and the US). They are used to pay external debt, control the exchange rate, and conduct international trade operations. When analyzing reserve figures, it is crucial to distinguish between gross and net reserves. Gross reserves are the total reported by the Central Bank, currently around US$41.883 billion. However, this number does not reflect the actual availability of dollars. When Caputo says that the government made record purchases, he is surely referring to a specific period, and the reason for the transaction was to pay off dollar-denominated debt. Net reserves are calculated by subtracting from total reserves the reserve requirements on dollar deposits, swaps, and short-term debt. These are the figures that attract the most attention from markets and international organizations because they demonstrate the Central Bank's effective "firepower" and its capacity to meet debt maturities, support the exchange rate, and avoid financial shocks . Therefore, even if gross reserves appear high, negative net reserves reveal the external weakness of the economic program. According to Barclays , “there are no clear signs that the government intends to reverse this external fragility.” Genuine ways to accumulate reserves involve increasing the inflow of dollars through exports and productive foreign investment . However, current policies primarily encourage imports and the inflow of speculative capital for carry trade . The cheap dollar model —contained within a floating exchange rate band system—along with trade liberalization and financial deregulation , also facilitates capital flight . According to the latest Central Bank of Argentina (BCRA) Foreign Exchange Balance report , from the lifting of currency controls in April until August, demand for physical dollars reached US$13.867 billion , while outflows for tourism totaled approximately US$9 billion in the first nine months of the year . Other sources of foreign currency outflows included external debt payments and Central Bank interventions to curb currency runs. The government's economic model relies on constant external borrowing to sustain itself. Caputo is now negotiating a repurchase agreement (repo) with international banks for US$7 billion to cover January's debt payments (US$4.5 billion owed to private bondholders). This increases the chances of returning to international credit markets. However, the downside of this debt spree is the contraction of economic activity , with factory closures and job losses . The recession and the industrial crisis, from the inside Just days shy of its second anniversary, the government is accumulating contradictions not only in the financial sphere. The consequences of this contractionary and open-market economic program are severely impacting domestic production. The wave of announcements of factory closures and layoffs is rising , as is inflation. The number of companies that have initiated Preventive Crisis Procedures (PCPs) this year has already reached 143, a record high. These are snapshots of this austerity-driven and depleting economic model. The slowdown in public works projects hit factories like Acindar , one of the country's largest steel producers after Siderar and Siderca, particularly hard. Luciano Molina, a union representative at the factory located in Villa Constitución, told us that since the current administration took office, steel production destined for construction and the automotive industry has been cut in half. Of the two available production lines, only one is currently operating. Layoffs are still in effect, but fewer due to the large number of voluntary retirements. Molina alleges: "For two years, the factory systematically worked to wear down our colleagues so they would take retirement and leave." The factory's workforce has shrunk from 2,000 to 1,500 workers due to retirements, pensions, and layoffs. The latest data from the Argentine Integrated Pension System (SIPA) revealed that, from November 2023 to August 2025, more than 223,000 registered jobs were lost. During the same period, the number of self-employed workers registered under the simplified tax regime (monotributo), meaning precarious work, increased. The regional impact of these layoffs is significant in the birthplace of the Villazo uprising, a city that “revolves around the metal industry; there are no other job options.” This has an impact on businesses and contributes to the high level of unemployment in the area. “After two years of self-inflicted crisis, business owners continue to applaud the government’s economic plans because they benefit them politically,” Molina concludes. The collapse in mass consumption , a consequence of the loss of purchasing power among the working class due to frozen wages, deregulation of service prices, and tax cuts, is another constant of this economic model. This reality is keenly felt in supermarkets. Jesús works at the Jumbo in Pilar and, in conversation with this publication, says that “the crisis is very clear in the drop in sales. Every year around this time, close to the holidays, the supermarket is usually packed with people shopping, but not this year.” Jesús , a union representative , explains that this situation directly affects young people because there are no overtime hours, something that could "increase their salaries a little." He adds, "There's a real need among our colleagues because the wage increases agreed upon by the Commerce union are very low , only 6% until January of next year. We can't make ends meet. We have colleagues who try to sell things, hold raffles, or turn to Uber." Multiple jobs and precarious employment disproportionately affect young people. The Cencosud group , which owns Jumbo, is implementing a brutal restructuring . Jesús explains that so far several branches of the Vea supermarkets have closed, as well as Easy and Blaisten, which are linked to the construction industry. "In total, we're talking about 18 branches closed and more than 1,000 layoffs in Cencosud's central administration," he says. While the decline in mass consumption directly impacts supermarkets and retail stores, the food industry is also feeling the effects of trade liberalization , which forces it to compete with imported products. The reality in this sector is more complex: on the one hand, there are the closures and bankruptcies in the dairy industry , such as La Suipachense, Sancor, ARSA, and Verónica. On the other hand, there's the situation in large factories like Georgalos and Mondelez (which announced the complete suspension of its staff), where employers, without showing any real crisis, are more openly taking advantage of the recession to impose discipline. “At the beginning of the year, we started noticing that Georgalos was beginning to change working conditions. This meant increasing production rates, reducing staff, and adding tasks. The company wanted to implement a de facto labor reform,” says Maxi, a Georgalos employee who was recently rehired . He adds that outsourcing production was part of this plan by management, “like the Shot, which used to be made in the chocolate section of the Victoria plant and is now made elsewhere. Or the Mantecol in trays, which was moved to Córdoba.” Between April and June, a major conflict arose when the company wanted to "reduce the workforce from six operators to five, increase production rates, and consequently, since we couldn't meet the required production levels, we couldn't receive productivity bonuses, affecting our wages." Faced with this situation, the factory workers organized, went on strike , and then the company fired five of us," he recounts. They are still fighting for the reinstatement of those illegally dismissed workers. “Throughout this year, the company accelerated production, doing in five months what it used to do in six. At the same time, it stopped manufacturing products at the Victoria plant and started doing them at other plants to save more on payroll, since the salary at the Victoria plant is one of the highest in the food industry,” Maxi denounces. Faced with the crisis, the role of the bureaucratic Peronist union leaders, who do not call for a permanent struggle plan, is to let this war plan of the employers and the Government pass. The consensus on adjustment? A central problem with Milei's economic model is that dollars are draining out (through external debt payments, capital flight, tourism, and imports) and not returning. This situation fuels a persistent uncertainty that leads to currency runs, which reached their peak in December due to the IMF loan and the US Treasury bailout. The electoral victory gave the model a boost, but it doesn't resolve the underlying problems , nor the doubts that remain. The Chilean neoliberal model remains, for a mainstream sector, an example of macroeconomic and political stability. This is despite the stark data showing growing social inequality: the wealthiest 1% of the country accumulates 49.8% of the national wealth, placing Chile among the countries with the greatest wealth inequality in the world (Fundación SOL). Its pro-market structural changes were maintained since the Pinochet dictatorship (1973) and deepened during the years of the democratic Concertación. Historian Sebastián Pasquariello observes that the model's "success" lay in building consensus and hegemony around the idea that this was the appropriate regime for everyone, when in reality it benefits a minority, the elites, and foreign capital. Despite the differences in time and structure, Milei and Caputo are seeking to increase debt , seeing this as the only way to keep their economic plan going, but it doesn't solve the underlying structural problems. The dollar bridge of repurchase agreements with banks or regaining access to international credit markets (if the country risk decreases) only strengthens the ties to international financial capital . It also reinforces their demands: for the IMF, the implementation of structural reforms, such as labor reforms, is key. Given the crisis in the industry, a current debate centers on whether there is an attempt at productive restructuring, heavily reliant on extractive and offshore activities , that would benefit foreign capital and continue destroying jobs. The labor reform lacks a "technical" foundation: it is a political attack, as Fernando Rosso pointed out on his radio program. In factories, employers are using the crisis to impose discipline . If they are moving forward with labor reform, it is due to the complicity of the major unions and their bureaucratic leadership , who, along with the traditional political parties, are creating a climate conducive to austerity measures that are by no means consolidated and must be confronted. “The situation is about cutting costs to maintain profitability,” Maxi complains . He adds that “consumption is clearly falling, but what we as workers maintain is that this company, which has been amassing fortunes, growing, making investments, expanding its business, and exporting, cannot tell us that it is in crisis.” Confronting and defeating this "consensus of adjustment" that implies more indebtedness, plunder and exploitation of the working class is fundamental. https://www.laizquierdadiario.com/Ajuste-deuda-y-despidos-el-modelo-Milei-y-Caputo-visto-desde-las-fabricas? Back |
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