Argentina News Roundup: 27th March 2014

The senate debate the government's agreement with Repsol (photo: Fernando Sturla/Telam/ddc)

The senate debate the government’s agreement with Repsol (photo: Fernando Sturla/Telam/ddc)

Senate Ratifies Agreement with Repsol: Last night, Argentina’s senate approved the agreement met between the government and Repsol over 2012′s expropriation of 51% of YPF‘s shares from the Spanish oil giant. After 11 hours of debate, the senate passed the bill with 42 votes in favour, 18 against and 8 abstentions, paving the way for the ratification of the law. Repsol and the government of Cristina Fernández de Kirchner signed the settlement on 27th February, which consists of a fixed package of three types of sovereign bonds with a nominal value of US$5bn, and a complementary package of three other bonds worth a maximum of US$1bn, to cover any reductions in the market value of the first package. The agreement will allow the government to move forward with investments in YPF, bringing the two-year quarrel with Spain to an end. 

Reduction in Gas and Water Subsidies: Economy Minister Axel Kicillof has announced that the government is rolling back gas and water subsidies for households and businesses, with the money re-diverted to government social programmes Asignación Universal por Hijo and Progresar. Industries will be exempt from the new plan, which aims to promote “responsible consumerism”. In general terms, the cuts will of be around 20%, but in the cases of the highest consumers, the subsidy reduction for gas could reach 80%. For water, around 65% of households will have their subsidies reduced by $1-2 pesos per day, with the other 35% seeing an increase of $2.60 per day, based on neighbourhood. The partial removal will be rolled out over the coming months, with the full subsidy reduction in place by 1st August. Kicillof confirmed that those who already receive government benefits, such as social programmes, will continue to have their utilities bills subsidised.

FAO: “Zero Hunger Targets Met”: According to a report released by the UN’s Food and Agriculture Organisation (FAO), Argentina has met its target of ‘zero hunger’. The report, entitled ‘Hunger in Latin America and the Caribbean: Approaching the Millenium Targets’, data shows that the country, along with Venezuela and Chile, have met their goal of lower than 5% hunger. The government programme Asignación Universal por Hijo, a government allowance for low-income families whose children go to school, which was last year extended to include an allowance for pregnant women, is highlighted as being a fundamental pars of the reduction in hunger. Such policies are commended as being a more “complete” approach to tackling hunger, as they act as a compliment to other household incomes, allowing for the basic levels of food consumption to be met. The programme covered 3.5m people in 2012, costing the country almost US$2m.

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One Response to “Argentina News Roundup: 27th March 2014”

  1. Werner Almesberger says:

    The whole subsidies reduction sounds quite reasonable – even if it is a hidden tax increase – as it will remove some of the distortions that plague the public services sector. I wish they had done it already two years ago, as originally planned, instead of wasting all the political goodwill of the people on the “cepo” (the currency restrictions that were finally loosened this year.)

    One thing that strikes me as odd in the reduction is an inconsistency in the incentives for lowering consumption. The plan (*) is as follows: anyone who, over the usual billing period of two months, uses 20% less than one year ago, still gets the subsidies. For a reduction between 5 and 20%, it’s still half the subsidies.

    All this sounds nice and good, with one exception: it’s only for water and gas but not for electricity. Water is cheap and thus nearly irrelevant, but gas is expensive and winter is coming. Since electricity will still be subsidized for now, it may therefore be tempting to switch to heating with electricity, at least to realize that 20% saving and thus keep the full subsidies.

    Even without the incentive, it will be cheaper to burn electricity than gas. (In fact, this may already be the case since there is also a surcharge for imported gas that nearly doubles the price but there is not such thing on electricity.)

    If enough people reach this kind of conclusion, the results may not be all that desirable.

    (*) For the incentive plan, go to the Scribd document at the bottom of [1], then scroll to roughly the middle for the slide that says “USO EFICIENTE”.


    - Werner


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