ARGENTINA: Argentina hacks at some of its billions of dollars in energy and other subsidies days after President Cristina Fernandez wins her second term

Record ID: 446724

  • Title: ARGENTINA: Argentina hacks at some of its billions of dollars in energy and other subsidies days after President Cristina Fernandez wins her second term
  • Date: 3rd November 2011
  • Summary: BUENOS AIRES, ARGENTINA (NOVEMBER 02, 2011) (REUTERS) THE OBELISK IN DOWNTOWN BUENOS AIRES THE HEADQUARTERS OF LOCAL BANK, BANCO PATAGONIA SIGN FOR INSURANCE COMPANY, PROVINCIA SEGUROS
  • Embargoed: 18th November 2011 12:00
  • Keywords:
  • Location: Argentina, Argentina
  • Country: Argentina
  • Topics: Politics
  • Reuters ID: LVA7SL1UO6GM9KTNUCL3GIIS4ZTI
  • Story Text: Argentina said on Wednesday (November 02) it will reduce or scrap a wide swath of popular energy and social subsidies to help the commodities-exporting country prepare for a tougher global economic situation in the months ahead.
    Subsides for banks; finance companies; insurance companies; casino and gaming outfits; ports and airports; mobile phone companies; oil, gas and mining companies will be completely eliminated while other subsidies including popular transportation subsides are under review.
    Economy Minister Amado Boudou made the announcement which concerns billions of dollars in water, natural gas and electricity subsidies adding that other programs are being examined for further cuts.
    "It will affect the redirecting of the subsidies system. What does redirect mean? In some cases they will be eliminated while others will be partially reduced or continued fully where the impact they have over a chain of values, over the bloodline of a group of citizens and is therefore necessary," Boudou explained.
    The cuts come on the heels of President Cristina Fernandez's landslide re-election on October 23.
    Analysts had forecast that the government would target energy subsidies to rein in public spending that has been growing at an annual rate of around 35 percent this year.
    This week the government, in a typically unorthodox move, clamped down on access to U.S. dollars in a new bid to halt capital flight and the bleeding of central bank reserves.
    The rates of most public services paid by companies and average Argentines which have been frozen since 2002 will remain the same under the new policy.
    "At no time did the minister or I use the word 'rate.' Because rates aren't modified. What will change is the range of subsidies for sectors that no longer need them. We are talking about subsidies, rates will not change," Planning Minister Julio De Vido said.
    However, prices paid by users will go up, increasing inflation in a country where private economists say consumer prices are already rising more than 20 percent annually.
    Fernandez has promised to "deepen the model" of her policies during a second term. But cutting subsidies would be a more orthodox approach to fiscal management than her supporters are used to.
    Years of double-digit inflation, which have boosted wages, have highlighted the oddity of bus and rail tickets, gas and power bills, that have barely changed and cost a fraction of what is charged in neighbouring countries.
    The growing subway system in capital Buenos Aires will also be transferred from the central government to the city government which is controlled by an opposition party.
    According to De Vid, last year the government forked over $706 million pesos ($166 million dollars) for the network which is completely within the borders of the autonomous capital.
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