- Local courts objected to gas rate increases above 400%
- Some protests have been held against cut in subsidies
Argentina has an unusual recommendation: Don’t pay your gas bill.
President Mauricio Macri’s drive to narrow the country’s budget deficit by cutting subsidies is being challenged by courts and political opponents after the move resulted in price hikes to consumers and companies of as much as 1,000 percent. As courts deliberate on whether the tariff increases were legal or not, Cabinet Chief Marcos Pena said it’s best for people to just not pay the bills for the time being.
“You don’t have to pay them until the court case is resolved,” Pena told reporters in Buenos Aires on Tuesday. “We want this to be resolved as soon as possible.”
An Argentine court on Tuesday agreed to hear the case during its winter recess as the natural gas tariff tussle becomes a headache for Macri and his ministers after already having to put a cap of 400 percent for increases in June. Disgruntled business owners, unions and residential users held their first pot-and-pan banging protest known as a “cacerolazo” against the 57-year-old leader last week. The unwinding of years of state controls and subsidies has caused annual inflation to accelerate to about 40 percent and estimates for an economic rebound for the second half of this year are being dialed back.
The delay in implementing tariff increases as well as new plans to pay pensioners may make it harder for Macri’s government to meet its stated fiscal deficit goals. While the deficit target of 4.8 percent of gross domestic product may be met or exceeded this year, Argentina will probably fall short of reaching targets for the next three years of his term, Bank of America Merrill Lynch said in a report last week.
For now, the majority of polls still show approval ratings for Macri at or above 50 percent as he pushes forward his economic agenda to fix macroeconomic imbalances and regain international credit market access. The economy is forecast to contract 0.8 percent this year before rebounding to post 3.1 percent growth in 2017, according to the median estimate of 23 economists surveyed by Bloomberg.
While Macri has reduced subsidies on water and electricity bills as well, an unusually cold winter is leading to higher gas consumption and large increases in the bills at residences and businesses and factories. A monthly gas bill for a three-bedroom apartment in the Palermo neighborhood of Buenos Aires rose to about 250 pesos ($16.41) this year compared with about 45 pesos last year, or an increase of about 455 percent.
"The government clearly underestimated the magnitude of the increases, which hit in a context of high inflation and economic contraction, and even more the popular uproar," Daniel Kerner, head of the Latin America at consultancy Eurasia Group, wrote in a note July 12.