To a distracted spectator, President Cristina Fernández de Kirchner and Buenos Aires Mayor Mauricio Macri fighting over the subte looks like two children passing each other the hot potato.
While the debate over who the subte really belongs to continues, its workers went on strike to demand better working conditions and pushed the city to the brink of collapse for 36 hours. It was the eleventh strike since the beginning of the year, and the above-mentioned distracted spectator was forced to wait endless hours in line to catch a bus crammed with people, trying to make their way around the jam-packed roads of the city.
A twelfth strike that threatened to last 72 hours was avoided at the last minute when the subte workers’ unions and operator Metrovias S.A. came to an agreement over a 10-15% salary increase, still far from the 28% one demanded.
More than one journalist, however, has defined it “a precarious truce”.
Grupo Roggio, the company controlling Metrovias and holding the concession to run the subte since its privatisation in 1994, “promised money [to its workers], and no one knows where it will come from,” La Nación reported last week, meaning that it is still not clear whether it will be up to the national state or to the city of Buenos Aires to help Metrovias pay the promised salary adjustment.
“The demand is still on. The patching is temporary,” said Roberto Pianelli, representative of one of the two subte workers’ associations, Trade Union for Subte and Premetro (AGTSyP). The deal will last until 1st August, when the parties will meet again to discuss a new agreement.
At the moment, the subte situation is at a legislative no man’s land, and this is not good to anyone. What is there really at stake in the subte dispute?
The Story So Far
The salary dispute of these last days is an indirect consequence of the delayed transition of the subte from national to city control.
The subte belonged to the city for decades, even before Buenos Aires gained autonomous status through a constitutional reform in 1994. In that year, the underground network was also privatised, and a 20-year concession to run it was granted to Grupo Roggio.
Buenos Aires mayor Mauricio Macri had long demanded the return of the subte to the hands of the city government. Then, at the end of the last year, he agreed with the national government to sign a deal for the handover of the subte on the 3rd January 2012.
The contract stated that the central government, formal owner of the concession granted to Grupo Roggio, transferred “only four of the 16 obligations that the state had with Grupo Roggio,” explains Rafael Gentili, lawyer and representative for the opposition Proyecto Sur party at the Buenos Aires legislature.
“Amongst them, that of checking that the company running the subte fulfils the terms of the licence, and the most important one: the power of setting the fares.”
The city accepted the transfer and the responsibility to have the last say on economic matters – a way to compensate the drastic cut of subsidies that came with the agreement. The state was in fact taking back half of the $740m per year given in subsidies to Metrovias, offering to pay only $360m for the first year and not a single peso from January 2013.
Thanks to state subsidies, fares have remained mostly unchanged since the 2001 crisis, despite the increases in general prices and wages. The day after the deal for the subte transition was sealed, the Buenos Aires government announced a 127% increase in the fares, from $1.10 to $2.50.
The following month, Metrovías informed that it was having ”serious difficulties” paying salaries, due to the cut in subsidies.
During a speech, President Fernández noted that with the 127% price increase in the price of subte tickets, ridership fell by 30%.
The Impact of the Once Train Crash
Almost two months into the 90-day transition window established to regulate the legal framework of the transfer, a train on the Sarmiento line crashed on a track bumper at Once station killing 51 people and leaving nearly 700 injured.
“After the tragedy at Once station […] the landscape changed radically. Macri, without money and with audits at hand, was scared that something similar could happen to the subte network,” explains La Nacion’s journalist Pablo Tomino.
“So he launched an escape plan. […] The ending is known: the subte does not belong to anyone. The destiny of an illegitimate child.”
Ever since the tragedy happened, the subte has lied in a sort of limbo, with Macri handing it back to the national government.
For analysts and law experts close to Macri’s party, PRO, the deal signed on the 3rd January was only a pre-agreement that did not get ratified, carrying therefore no legal obligation for Macri; a big majority of commentators argue instead that the document is binding as it clearly states that the City accepts the transfer of the subte concession.
Macri also used the security vacuum caused by the withdrawal of the Federal Police from the platforms as a pretext to reject the transfer, even though Security Minister Nilda Garré said that it had been agreed upon “on the 20th January and ratified on the 27th January” with the Minister of Security for the City of Buenos Aires, Guillermo Montenegro.
The quarrel soon made it to the courts and to the national congress, where a law was passed on 28th March transferring the subte and a number of bus lines to the jurisdiction of the city. Macri, however, has so far refused to accept responsibility for these services. It is in this context that the subte workers’ wage negotiations took place.
The Russian Roulette: ‘The Subte is just like the Sarmiento Trains’
Those were Macri’s exact words on the 25th May, also adding: “they [the national government] may play Russian roulette with people, I won’t.”
Juan Pablo Piccardo, president of the Buenos Aires Underground State Society (SBASE), a state-owned company responsible for the subte, was sent by Macri to negotiate at the last meeting with trade unions. There, he complained that the lack of investments in the past 10 years have led to a “faulty service, with too-small a network, 100-year old trains and saturated subte lines.”
The subte transports between 1.2 and 1.6 million passengers per day. After the 2001 economic crisis, Metrovías was exempted from the responsibility of investing in the expansion of the network and its trains, an obligation that was dumped on the national and local governments. “The company only cared about running the trains,” La Nación wrote in January.
Federal Planification Minister Julio de Vido accused Grupo Roggio and Metrovias of mismanaging the subte concession and subsidies for personal gain at the detriment of commuters.
Recently, the centre-left Proyecto Sur party presented a report on the twisted business model of Grupo Roggio.
“The scheme is summarised in a poor concessioner [running the trains] and an owner gaining a lot of money from this concession,” Gentili points out. “Metrovias is left with the loss-making part of the business, while the owner with the profit-making part of it.”
Gentili’s words are exemplified by the way the publicity business is handled in the underground network.
“Commuters spend 15-20 min in the subte, and throughout this period they are sold ads while they wander around. Also, the underground network is a space up for sale to install high-speed Internet cables or mobile phones network antennas,” Gentili analyses.
Since 2000, the commercial exploitation of advertisement spaces is in the hands of a third-party entity called Metronec SA, also wholly owned by Grupo Roggio.
Metronec paid a monthly canon of US$125,000 plus VAT for 2000-08, and US$166,000 plus VAT for 2008-17 to Metrovias. The business, however, is worth millions and the contract was never updated to current times: Metrovias still receives the same amount of money.
According to Gentili, net losses for Metrovias due to the lack of income related to publicity are around $27 million per year, while the total damage for the company resulting from this “parasitic attitude” could be around $100 million per year all considered. “Metrovias could use this money to improve and finance its service,” Gentili adds.
Despite Macri’s promises (“are we so stupid that we can’t build 10km of subte per year?”), the underground network of Buenos Aires is still considered inadequate for the capital’s needs, being only 47km long, while other large cities like London and Mexico City have 400km and 202km respectively. As data revealed by the blog Apuntes Urbanos show, in the last 15 years investments worth millions extended the network by an average of only 1.36km per year.
Gentili and various journalists analysing the state of the subte calculate that the underground network needs at least US$100m in investments for network updates, security and expansion.
“Conditions of the service now are worse than they were in 1994 – after 18 years of private management. It is impossible to think about a private investor doing enough investments to run a business [that affects the public],” Gentili points out.
“[The subte] needs long-term investments, while private companies only seek to maximise short-term profits. The state has to intervene. There is no chance for the service to be better if the contract with Metrovias is not terminated”
Gentili also argues that making investments worth US$100m is not a problem for a city like Buenos Aires, “The volume of income in the city is linked to the favourable economic cycle. But a lot of money is lost in corruption,” he says. “Public works are one of the corruption tools in politics. Works are made to last longer, therefore generating more costs for the company.”
On the 4th May, three months after the Once tragedy, minister De Vido announced the termination of the contract with TBA, the company responsible for the management of the Sarmiento and Mitre train lines.
The problematic train lines have been temporarily handed over to a consortium made up of railway management heavyweights Metrovías and Ferrovías.
In 2013 the government is supposed to stop subsidising the subte once and for all, and analysts reckon that by then the cost of the ticket should increase up to $3.70 to avoid a deficient service – or to $4.20, in order for Metrovias to have enough money to make investments.
“Macri will end up taking responsibility for it. In August it shall all be fixed, but this country is really changing,” Gentili says. “However, it seems to me that the government is getting ready to terminate the contract with Metrovias [valid until 2017]. This is the only way to end the litigation without waiting for Macri’s signature of approval.”
“It is a tactical war on the shoulders of the citizens,” he concludes. “It is not clear who benefits from it. […] Clearly it’s not the citizens.”