The government encourages unions to manage their investment portfolios

Now yes. The time has come. “Political time,” as one of the ministers in Javier Milei’s cabinet likes to define it. The government wants to advance one of the most revolutionary and obviously controversial ideas in the labor and union reform project. An initiative that is (far from) original, but if implemented would change the way the function of unions in the Argentine financial system is carried out.

Javier Milei wants “capitalist unions” that “invest” in public securities, stocks listed on the Buenos Aires Stock Exchange, negotiable bonds and other products of the Creole capital market. Hand in hand, even and even, with the country’s most important businessmen and, of course, the participating banks of the local system. And why not some other top-notch international investment funds too.

The proposal that the government wants to accelerate, which will be part of the final labor reform project submitted to Congress, is to convert unions into shareholders in future investment funds fed with money from voluntary contributions to future systems linked to the “work termination fund” or, more popularly, “layoff fund.” The intention arises at a time of very bad relations between the libertarian national government and the classic and inevitably “combative” leadership of the General Confederation of Labor (CGT); at a time when there is talk of “ultra-activity”, “pre-emption” and all the initiatives that the unions see – quite rightly, by the way – as a threat to their impressive royal power.

However, the official view is that they are basically men (and occasionally women) who know where to do business. Such as creating money and managing it in a society that can be productive for everyone involved and also contribute to the business world. And that is the case. The idea comes from the laboratories of the Ministry of Deregulation of Federico Rumpfenegger and aims to transform the relationship between the government, the trade union world and workers in a relationship of dependence from the vision in which the executive sees the point of contact between the parties: money. And the way to solve one of the most complex problems that private companies always point to at the root: how to solve an extremely costly layoff system that becomes a significant obstacle in evaluating the hiring of new employees in a dependent relationship? That is, empty. In a country where an estimated 40% (or more) of workers have a wholly or partially informal employment relationship with private companies – and also with the state in all its variants.

This new redundancy fund, originally enshrined in the Basic Law II of June 12, 2024 (but which has since practically no application), aims to replicate a seemingly successful experience of the forces of the Construction Workers’ Union (UOCRA) and the Argentine Chamber of Construction (Camarco): the mechanism that flexibly regulates the moment in which a union worker remains unemployed due to the completion of a job. This legally protected “work termination fund” replaces long-service compensation and is financed by monthly contributions from the employer. The percentage is 12% in the first year of employment and 8% from the second year onwards. In the event of dismissal or termination of work, the employee can withdraw the accumulated money. To do this, you must have worked for at least eight months with contributions in the last two years.

With nuances, it is the system to be implemented with the brand new work termination system provided for in Annex II of Decree 847/2024, as an “alternative” regime to remuneration for seniority. According to the standard, the system is voluntary (through the consent of the unions) and is determined by the relevant collective agreement.

And here comes the capitalist novelty: it is managed through Open Common Investment Funds (FCI) or Financial Trusts (FF), with direct participation in the decisions of the unions that compose it. In other words, the unions will be able to include members in society who will make financial or real investment decisions to manage the money that workers and individuals pay into the trust from which the money will come to pay future compensation. For example, you can decide whether these funds will flow into infrastructure projects, companies with growth potential and private ventures with a future; or, failing that, in financial bets such as fixed terms, stocks, bonds, negotiable notes, public bills or, why not, a “carry trade” if the financial moment warrants it. Everything runs in a trust guaranteed and monitored by the CNV, especially in libertarian times. And in an open country even with traditional unions and “fat people” as shareholders. And why not also left-wing.

The CNV defends the measure. Introducing the plan, the head of the body that controls the Argentine capital market, Roberto E. Silva, stated: “We have once again worked with Minister Rumpfenegger and the national government team on this proposal, which has the potential to revolutionize the way remuneration is implemented and agreed, while integrating long-term institutional investors into the capital market.” He also assured that “it is a measure that promotes the values ​​of freedom in Argentina while promoting the development of the capital market.”

Among the main points, the regime proposes the following:

• The stock or trust values ​​can be at the individual, company or industry level.
• The parties are free to determine the percentage of wages or fixed amount that the employer contributes and the frequency.
• The work termination fund will not be confiscated.
• The instruments may only receive contributions from employers and/or employees.
• In the case of a donation from the employer, the shares are transferred with a condition precedent in favor of the employee, the company or the industry.
• In the case of FCIs, their committees can freely determine the investment policy and objectives within the framework of the diversification rules.
• The employee may dispose of the shares when they become his property, but may not make any new subscriptions.
• Regarding the FF, the CNV points out that:
• There is no obligation to publish a prospectus.
• The investment policy must be consistent with the objective of the regime.
• It is permitted to include trustees.
• Additional trust securities may be issued.

This termination fund or redundancy fund is a voluntary membership of the union itself, so the government will now adopt a policy of persuasion towards the leaders of the main unions, given the size of its membership. By default, oil workers, oil producers, mining companies and some booming sectors could be the first to join. In the crosshairs are truck drivers, trade and industry in general (including the UOM), where compensation can become a memorable source of donations for the funds.

The idea is to turn union bosses – especially the fattest ones with a capitalist character – into investment fund managers. Let them immerse themselves in the world of trading and learn about its benefits. Above all, the increase in money from the capital market. Even better, they rank above the banks and fund management professionals, a job that is always profitable.