LABOR PROTEST TURNS VIOLENT IN PRESIDENT'S HOME

UNCLAS BUENOS AIRES 000346

SIPDIS

SIPDIS
HQ USSOUTHCOM FOR POLAD

E.O. 12958: N/A
TAGS: ELAB PGOV PINS ECON AR
SUBJECT: LABOR PROTEST TURNS VIOLENT IN PRESIDENT'S HOME
PROVINCE
REFTEL: (05) BA 2518


1. SUMMARY: A two-week protest by dissident elements of the
oil and gas workers union in President Nestor Kirchner's home
province of Santa Cruz turned deadly on February 8 when a
police officer was killed in the town of Las Heras, Santa Cruz
and 15 others were wounded. This is the first death in a
social demonstration under President Kirchner, leading critics
to call into question once again his administration's laissez-
faire policy toward piquetero and union protests. Three years
of vigorous economic growth, rising inflation and a tightening
labor market have fueled union demands for higher wages and
lower taxes and would seem to presage a turbulent year in
labor relations. If, however, authorities are seen as
responding effectively to the events in Las Heras, the public
shock of the police officer's death at the hands of labor
protesters could serve to temper more extreme negotiating
tactics. END SUMMARY.


LOWER TAXES
--------------


2. Following the February 6 arrest of a dissident union
leader, a confrontation between oil and gas workers in Santa
Cruz Province and provincial security forces turned violent,
leaving one police officer dead and 15 others wounded. Since
January 23, dissident members of the provincial branch of the
Private Oil and Gas Union had been blocking key roads to one
of the San Jorge Basin's main oil fields. The principal
demand of the workers for Repsol-YPF, Vintage Oil (a small
U.S.-owned oil firm soon to be taken over by U.S. Oil Company
Occidental Petroleum) and Pan American Energy was that the
government raise the floor for the taxable portion of their
wages. This is actually an issue being pushed at the national
level by the CGT (General Confederation of Workers -
Argentina's umbrella labor federation). Since the peso
devaluation in 2002, the government has not raised the floor
at which salaries begin to be taxed. The de facto effect in
the relatively high-wage paying sectors such as the oil and
gas industry is that many of their minimum wage earners,
formerly exempt from paying taxes, have now been pushed above
the taxation threshold. The increased tax base has been one
of the reasons for the treasury's burgeoning coffers and
explains some of the government's reluctance to tamper with
existing tax rates raise. The Casa Rosada is further torn,
cognizant of the unwanted stimulatory effect that increased
disposable income would have on demand and inflation.
(Comment: Oil workers are among the highest paid workers in
Argentina. For example, the average salary for Santa Cruz oil
workers is several times the average salary for Santa Cruz
Province government workers. End Comment.)

WORKERS OR PROTESTERS?
--------------


3. On February 6, provincial police acting on the orders of a
local judge attempting to clear the area's roads of the two-
week blockade, arrested the dissident faction leader Mario
Navarro. Upon learning of his arrest, some 700 fellow workers
converged on the municipal building where Navarro was being
held. According to media reports, the protest escalated when
protesters began to throw rocks and pieces of pavement at the
building. The police responded with tear gas and rubber
bullets to repel the crowd. Other versions of the story put
the protesters on the defensive, saying they did not become
aggressive until the police began to use the tear gas. The
deceased officer was killed by a blow to the head with an iron
bar. He did, however, receive a gunshot to the back and at
least five othe officers also were wounded by gunfire. The
judge ordered Navarro released shortly after the incident.
Both sides blame the other for initiating the violence, though
no one denies that there were armed protesters present.
Navarro blames "infiltrators" and says he advocates only
peaceful protest.

GOVERNMENT RESPONSE
--------------


4. Federal authorities were quick to respond. President
Kirchner sent 250 Gendarmeria officers to Santa Cruz under the
supervision of the Secretary for Security. The Gendarmeria,
along with provincial security forces, have reopened and are


protecting the highways that were blockaded for more than two
weeks. The investigation is under way, but the President and
senior officials were quick to denounce the protesters'
violence and voice their support for the police. Conspiracy
theories abound. In a public event February 8, Kirchner said
that he did not believe it a coincidence that the first death
to occur at a civil protest during his presidency happened in
his home province. He accused "radical sectors" that were
unable to gain support during elections of using social
protests against the government as a last ditch effort to gain
support. Kirchner has said he blames in-fighting between
various factions of the oil workers union and believes that
provincial police acted appropriately. He further stated that
he supported the order that was given to the local police to
not use lethal force. Critics say this left the police
vulnerable and gave the protesters an opportunity.


5. Comment: The death of the Santa Cruz police officer has
shocked the country and has caused some to again question the
Kirchner administration's overall approach to handling social
protests. Kirchner has received criticism for his perceived
indulgence towards protesters and for doing little to resolve
disruptive piqueteros, but he has been determined not to risk
a repeat of violent protests that led to the premature ends of
the presidencies of Fernando de la Rua in 2001 and Eduardo
Duhalde in 2002. This time, though, as Kirchner is quick to
emphasize, the casualty was not a piquetero but a police
officer. In a year where labor relations and wage demands are
predicted to be a major issue, especially in light of growing
inflation, the violent events in Santa Cruz do not mark a very
promising start. If, however, the government is perceived as
addressing the Santa Cruz issue quickly and effectively, the
events could have the unintended effect of mitigating some of
the more aggressive union tactics in the coming year.


6. Meanwhile, oil companies operating in the San Jorge Basin
have lost tens of millions of dollars in lost revenues and the
province has lost millions in retentions as a result of the
workers' blockage of the oil fields. This is part of a series
of increasingly violent piquetero/government employee/oil
worker protests that have occurred since President Kirchner
took office (REFTEL). The most recent previous protest was
the seizure of the TERMAP oil tank farm and export facility in
Caleta, Cordoba in October when a TERMAP security guard
received permanent brain damage due to an ax blow to the head.
Were it not for the high price of oil and the shortage of
exploration/production opportunities elsewhere in the world,
at least some of these oil companies would be looking for a
friendlier place to invest. End Comment

To see more Buenos Aires reporting, visit our classified
website at: http://www.state.sgov.gov/p/wha/buenosaires.< /a>

GUTIERREZ