Companies in Argentina would be required to distribute 10 per cent of profits their employees if a legislation bill passed. The Labour committee of the Lower House of Argentina’s government will take up the legislation in the coming week.
Hector Recalde, the lawmaker for President Cristina Fernandez de Kirchner’s Victory Front alliance, suggested that his bill would benefit employees from the increasing profits of banking and other industries.
Business leaders opposed and said it would violate property rights and may undermine investment in the country.
“Argentina urgently needs more investments and this is going to generate a totally negative effect on jobs,” said Diego Perez Santisteban, the president of Argentina’s Importers Chamber.
“It can inhibit those who have plans to invest.” he added.
According to the Argentina Central bank, the economy is expected to grow by 9 per cent this year, which is the highest increase since 2005. The economic growth was 0.9 per cent in 2009.
Political analyst said the proposal may boost trade union support for Fernandez ahead of presidential elections next year.
Recalde also cited similar legislation in other countries in his proposal, such as Mexico, Peru, Chile and Brazil, where companies have to share 10 per cent of profits.
Opponents said it risk investment. According to the Santiago-based United Nations Economic Commission for Latin America, foreign direct investment of Argentina is among the lowest in South America’s major economies. Nine years after the record in debt, the country now have $2.2 billion foreign direct investment in the first six months of 2010. While those in other South American economies, are much higher, with $17.1 billion in Brazil, $8 billion in Chile.
Bertrand Delgado, an economist at Roubini Global Economics LLC, suggested that companies may be discouraged from investing more money if the bill passes.