The End Of The Subsidies... with an Argentine Twist

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The End Of The Subsidies... with an Argentine Twist

Governments around the world subsidize the essentials of modern life, water, electricity, and gas. Argentina historically has as well--until November 2011, when the government decided, as a cost savings measure, to end them.

The ending, however, has an Argentine Twist. Not all subsidies are treated equally, and the subsidies are being ended slowly, with the rich blocks and neighborhoods getting their subsidies ended, one by one, before the middle class neighborhoods, before the poor neighborhoods. And the definition of rich is determined on a block-by-block basis, with rich streets circled out to have their subsidies removed, one by one, in what seems to be the most haphazard ways. You just don't know when your neighborhood will have its subsidies removed.

What does this mean in practical terms? Bad and good news.

The bad news: expect the price of electricity and gas to go up approximately by 3x -- a drastic increase. The neighborhoods foreign businesses operate will be among the first to have the subsidies lifted, without a doubt.

The good news: the starting level is low so that, from a foreign corporate point of view, the amount paid for these essentials is still miniscule, and a fraction of the comparable cost in the USA. Comparatively smaller offices often pay dozens of pesos (single digits of dollars) monthly for electricity; this will likely increase to the dozens of dollars. Of course, this varies based on many factors, such as the size and location of the office, and the electricity consumption, of course.

Also noteworthy is a regulation, as of 2009, declaring that companies or individuals that consume more electricity than they did the previous year pay at a higher rate, as a penalty. The intention of this law is to punish those who are less green-friendly; in effect, it disincentivizes growth.

By | 2013-09-05T18:45:35+00:00 July 14th, 2012|Argentine Government Policies, English @en, Learnings @en|0 Comments

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