Argentina Likely to Reimpose Gas Hikes Quickly, Lawyer Says

  • Government may have to make concessions to remove subsidies
  • Price hike ban sends poor signal to foreign investors: analyst

Argentine President Mauricio Macri will look to quickly sidestep a court-ordered re-imposition of gas subsidies, said a lawyer specializing in public utility regulations, limiting the cost to a government struggling to narrow the biggest fiscal deficit in almost two decades.

A Buenos Aires province court on July 7 banned Macri from raising gas prices, saying that the government skipped procedural requirements such as holding public hearings on the increase. The Supreme Court will probably overturn the court ruling by the end of July if it is offered some concessions, said Maximo Fonrouge, a partner at Estudio Cassagne & Asociados in Buenos Aires.

"This is a problem caused by rushing things," Fonrouge said by phone from Buenos Aires. "The government will have to make some type of modifications in order to give the court reasons to lift the suspension."

Government-controlled natural gas prices were raised in April in a bid to save $4 billion. While the ruling will probably be resolved, it still sends out a negative message about Argentina’s regulatory risks as Macri seeks to attract foreign investment, said Ignacio Labaqui, a political analyst at Medley Global Advisors.

"This can be damaging not only from a fiscal point of view, but it also sends out a poor signal from the point of view of attracting investment," Labaqui said by phone from Buenos Aires.

A colder than usual winter in Argentina has aggravated the impact on consumers of the jump in gas prices. While the government will still seek to raise prices, it may offer to regularize them so that there aren’t spikes during the colder months, Fonrouge said. It may also allow companies or individuals to pay their bills in installments, he said.

A decision may be pushed back a month if the government is unable to persuade the court to suspend a two-week judicial holiday that’s scheduled to begin July 18, Fonrouge said.

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