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Argentina to Reduce Utility Subsidies

As part of a plan to improve the state of the country’s finances, the Argentine government announced yesterday that it will cut over $800 million in utility subsidies that homes and businesses receive. The subsidies for water, natural gas and electricity would be removed only for high-income families, and the natural gas and power subsidy reduction would only affect large companies  that produce fuels and agrochemicals, according to Economy Minister Amado Boudou.

Two weeks ago officials made a similar decision to end 100 percent of government assistance to oil, gas and mining companies as well as banks and insurance entities. The government expects to save almost $1 billion. Before the October 23 presidential election, Argentina’s budget deficit doubled to $450 million as a result of government spending on public works and salary increases.

Households—accounting for 232,000 users—in Puerto Madero, Barrio Parque and other porteño neighborhoods will be the first utility customers to be affected by the measure, which will go into effect in January 2012. Users, nevertheless, will have the option to give up the subsidy voluntarily or request to keep it under an affidavit that will be crosschecked with the Administración Nacional de la Seguridad Social (ANSES), the Administración Federal de los Ingresos Públicos (AFIP) and other regulatory entities. This plan is expected to result in a personalized subsidy where the cost savings are reserved for those who truly need the extra assistance.

As part of a comprehensive budget deficit plan, the government will create a Subsidy Commission to analyze other changes to the subsidy regimen. In response to fears about inflation increases, Planning Minister Julio de Vido encouraged companies that have benefitted from reduced prices to not transfer their added costs on to consumers.

Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.
Tags: Argentina, Cristina Fernandez de Kirchner, Debt, Subsidies

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