International focus: Argentina

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Benefits in Argentina appear to have been restored to the same level as before the economic crisis and currency devaluation.

Luncheon vouchers and healthcare remain popular, but company cars are less common than elsewhere in South America.

Confusion surrounds the future of pensions, with some employers opting to introduce their own plans.

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When Argentina was plunged into an economic crisis three years ago, many employers sought to reduce their costs by pruning benefits. But they also knew that employees were already struggling to make ends meet and could not afford to see their spending power cut further. Measures included paying employees with food vouchers in place of salary and offering emergency loans to staff in need. Company cars were also replaced less frequently, typically every five years instead of four.

But Patricio Benegas, Hewitt’s manager in Argentina, says that the benefits menu changed very little considering the major problems caused by devaluation in January 2002 and any cuts were restored last year. "At this point, you can say that the level of benefits is the same as before," he explains. Natalia Piris, data information manager for consultancy Hay, points out that benefits were only retained at a price. "Costs increased because of the price of cars, medical insurance and meals.

Companies kept the same package of benefits but it cost them more." Popular benefits have always included luncheon tickets that provide staff with a free midday meal. Senior employees may also be offered a company car, although Argentinian employers are generally not as generous as their South American neighbours. According to research by Hay, 20% of executives in Argentina have a company car, compared with 90% in Brazil and 83% in Chile.

And 57% of Argentinian executives receive free fuel, which is slightly below the Latin American average of 64%. Middle managers are more likely to receive a low-interest loan and an allowance that helps to cover running costs. "Employees buy the car in their own name and then return the loan in three to four years. It’s what we call a soft loan," explains Hewitt’s Benegas.

Pensions bore the greatest impact of the economic crisis and, three years later, it is still not certain how the government intends to reform the industry, which is made up of a mixture of private and state pensions. A white paper published in 2003, however, suggested that the dual system should be replaced and all employees should be covered by the state, with part of their contributions passed to privately managed funds, known as AFJPs. While employers wait to see whether the changes go ahead, some have introduced their own occupational pension schemes.

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Jorge Vazquez, human capital director at Watson Wyatt, says the changes will only be felt in the long-term. "It will not impact on anyone who retires during the next five years," he explains. Compared with pensions, medical insurance is in much better shape. Most employers offer staff and their families some sort of health plan, funded through a combination of employer and employee contributions. Last year, the economy grew by 8% and further growth is predicted in 2005.

But unemployment remains high at 12%-15%. Jorge Vazquez predicts that it will take another three to four years for the situation to improve. "We are recovering, but very slowly."