Thousands of Argentine builders laid off as Milei slashes state spending

By Lucinda Elliott

LA PLATA, Argentina (Reuters) -Argentine laborer Pablo Vazquez was finishing a day's shift laying track for a train line near La Plata on the outskirts of Buenos Aires when the foremen called a dozen members of the team together to share bad news. The workers were all being let go.

In a shed at the site entrance, the managers said the project had been put on ice as part of a crackdown on public-funded construction works under new libertarian President Javier Milei, who took office just months before in December.

Vazquez's story is being repeated around Argentina since Milei, a right-wing economist, came into power pledging to "chainsaw" through over-spending by the state, which he blames for the country's worst economic crisis in decades. Tens of thousands of jobs have been cut in construction alone.

It's a major shift and gamble by Milei in a country where protecting jobs has been paramount under left-leaning Peronist governments for decades, despite low salaries and high inflation. Milei wants to slash spending to erase an entrenched fiscal deficit and loosen labor protections to spur investment.

That though risks sparking anger on the streets which Milei has so far avoided despite his austerity campaign, helped by a still robust safety net for workers like Vazquez. Social unrest is one of the biggest threats to Milei's tough medicine reforms.

"This man has to realize what's happening, many people are unemployed. People are going hungry," Vazquez, 48, said at his kitchen table in the working class district of Florencio Varela, surrounded by soccer trophies and family photos.

Vazquez said he had never been without a job for more than a month in the 28 years he has worked in the railway sector. He rolled up his shirt to show a tattoo of a steam train on his upper torso in honor of his life's work building tracks.

Now he is struggling.

Milei has halted most public infrastructure works around the South American country, helping improve the state's finances but battering construction activity, which plunged 42% in March official data show. At least 50,000 construction workers have lost their jobs between November and February, with industry bodies saying it could now be closer to 100,000.

"We knew that if this government came in, they wouldn't invest money in civil works," said Vazquez who did not vote for Milei. "But we never imagined it would be so abrupt."

The family has taken small luxuries like yogurt and biscuits off the shopping list. Last month Vazquez couldn't afford his car insurance. He's getting by with 200,000 peso ($226) monthly unemployment benefit and money from the construction union, but that will only see him through June, he said.

"My son is turning two, and in all honesty I don't have enough to buy a birthday cake or decorations," he said, adding he had considered taking out a high-interest loan to afford a cake, but decided against taking the risk.

'THE MARKET HAS COLLAPSED'

Argentina's economic activity and construction plunge is nearly unprecedented, with the recent slide on par with the depths of the COVID-19 pandemic when the government shut down large parts of the economy to halt the virus' spread.

"The market has basically collapsed," Javier Gimeno, Latin America CEO for French construction materials firm Saint-Gobain said at an event in Buenos Aires, adding that while he supported Milei's pro-market reforms the industry was in a tough spot.

"The question is whether this drop is something which is going to last for some months and then we are going to recover quickly, or this drop is going to become structural."

Economists said the halt to public works was a key part of rebalancing the state purse, but came with a steep cost to the economy and workers.

"You need to understand he (Milei) is trying to eliminate the fiscal deficit, stabilize the currency and lower inflation," said Fernando Marengo, chief economist at investment firm BlackTORO Global in Buenos Aires. "That is the logic."

In a written response to Reuters, the secretariat of public works said it had audited over 2,700 projects, some of which would be scrapped and others transferred to provincial or municipal control. It pointed to delays and cost overruns that made restarting some projects "unfeasible".

It added that it would prioritize certain works, including building federal prisons, road safety projects, flood control, or maintenance of key systems such as radar. It said there was a constructive dialogue with unions and industry leaders.

Meanwhile, jobs losses are mounting. Of the 2,417 projects that received public funds at the end of last year, only 300 were still being financed in February, according to official data. Construction makes up some 10% of total employment.

"We're losing around 10,000 jobs a month," Gustavo Weiss, president of construction industry business chamber Camarco, told Reuters. "We can only hope things get going again."

'THERE'S NO REAL WORK'

At the stalled La Plata railway construction site, tall weeds have grown through the metal girders where 60 workers once busily welded rails and laid stone track beds.

Instead of technical work, engineer Agustin Pecora, 33, has found himself in charge of protecting the idled machinery and building materials from theft while workers wait for an answer about the project's future.

Each morning Pecora said he receives a stream of WhatsApp messages from former colleagues sat at home desperate to know when work might resume.

"Maybe a few have found the odd job, some informal work painting, clearing a neighbor's garden. But there's no real work," he told Reuters at the site of the halted railway.

Funding cuts to infrastructure are already affecting small and medium-sized business along the construction supply chains. Reuters spoke with asphalt manufacturers, cement producers and companies that rent heavy machinery who all said business had collapsed in recent months.

Businessman Pablo Quantin, who runs Buenos Aires-based construction firm Vial Agro that was working on the La Plata rail project, said he had been forced to lay off 600 of his 1,000 employees so far this year because almost all the firm's 24 public works projects were halted.

"They turned the lights off on us, contracts don't work, the payments don't come through," Quantin said.

To avoid outright insolvency, companies have first opted to reduce staff, but industry body Camarco warned firms' survival depended on the state paying up for works already done and coming up with a plan to protect jobs going forward.

Milei, who has shut or downgraded ministries including the Transport Ministry and Public Works Ministry to cut costs, has repeatedly presented the private sector as a solution, but Camarco counters that it cannot replace state investment.

Back in the outskirts of Buenos Aires, meanwhile, Vazquez said he would need to request a financial extension from the construction union to get through winter, though he wasn't confident given the number of workers seeking the same.

In local shops, prices are also rising fast, with monthly inflation near 10% despite slowing this year and the annual rate at 290%, with the government pledging to raise utilities prices too after years of steep discounts via subsidies.

"Maybe I'll be forced to sell the car that I worked so hard to buy," Vazquez said. "This is our reality."

($1 = 886.0000 Argentine pesos)

(Reporting by Lucinda Elliot; Editing by Adam Jourdan and Alistair Bell)