Argentina's Macri to Raise Frozen Utility Bills to Close Deficitby and
Electricity, nat gas tariffs to be increased in coming weeks
`Country must save in energy to reduce deficit,' minister says
Argentina’s energy tariffs, which have been frozen for more than a decade, will be allowed to increase as new President Mauricio Macri’s government attempts to close the largest fiscal deficit in more than 30 years.
Tariffs on electricity and natural gas will be raised after mandatory public hearings in the next few weeks, Energy & Mining Minister Juan Jose Aranguren told reporters at an oil industry event in Buenos Aires on Monday. Utility company Edenor’s shares in New York jumped 3.2 percent after the announcement.
“Those who can pay the real price of energy must start paying it,” Aranguren said. “For those who can’t, we will open a registry so they can keep paying a subsidized bill.”
Utility tariffs have been largely frozen since the country’s economic crisis of 2002 after the previous administration prohibited companies from raising prices, saying that lower bills benefited the economy by boosting consumption. Tariffs in Argentina are about a 10th of the average in Latin America, Livio Gallo, a director of Enel SpA, which runs Edesur electricity distributor in Buenos Aires, said at a conference on Dec. 3. Macri took office on Dec. 10.
Subsidies on utility bills are the main contributor to the country’s budget shortfall, which the Auditor General’s office expects to widen to 7.2 percent of gross domestic product, the largest since 1982. Electricity bills in upper-middle class homes in Buenos Aires are as low as 40 pesos ($4.09) every two months. A monthly electricity bill in Buenos Aires costs about the equivalent of a coffee and croissant.
Utilities have operated in a zombie-like state for years, with Cristina Fernandez de Kirchner’s government propping them up just enough to continue providing services while controlling how they use funds for investment. Fernandez limited power companies losses by subsidizing electricity prices charged by wholesale electricity seller Cammesa SA, which is controlled by the state, and by forgiving debt and fines owed to the government.
Aranguren said Argentina’s current $75 a barrel oil price will be “reviewed to favor consumers.” Since August 2012, state-run oil company YPF SA’s fuel prices have been boosted 131 percent. Argentina motorists pay about 42 percent more to fill their gas tanks than their Brazilian neighbors.
For oil producers, a price higher than the international price of crude will be maintained to keep domestic output at current levels until the two prices converge some time in the future. Argentina’s $75 a barrel is more than 50 percent higher than WTI, which dropped below $35 in New York earlier Monday for the first time since 2009.
Faced with a $6-billion energy trade deficit in 2014, Fernandez’s government kept the price of oil high as international prices collapsed in order to boost domestic production.