Rising inflation added a new problem for the current government to solve or, most likely, the one that will succeed it. The unfreezing agreed with the IMF as part of the fiscal control package must take place in an election year and in a year of high inflation. Only from the moment it was formalized (March 2022) was it 120%not counting the previous one that denatured the planned adjustment scheme.
The origin. The convertibility debacle in 2002 undermined the development of public services, many of which had been concessioned over the previous decade, with a great leap forward in infrastructure and modernization. Unintentionally, the protagonists of this wave of privatization paved their own subsequent ordeal: Being framed in long-term contracts and semi-annual updating of prices (dollarized) according to wholesale inflation in the United States, the scheme did not resist the 200% mega devaluation and neither did the rise in subsequent domestic costs..
In the 20 years that have elapsed since the end of the “privatized” model to the decision to start updating rates, the sector has been losing dynamism and, in some cases, such as the gas sector, it has gone from being a natural exporter to the paradox of having empty international gas pipelines. due to lack of fluid. Specialists estimate that in 2022 the red of the sector reached 3.5% between energy services and urban transport subsidies.
paula szenkmanDirector of Economic Development of CIPPEC, points out that, since the termination of the contracts in 2002, a regulatory intervention process began under which prices and tariffs for the sector began to be defined discretionally. “The fact of suspending the ‘Comprehensive Rate Reviews’ led to a freezing of rates that, in contexts of high inflation, implies distortions between the costs and prices of the sector and the relative prices of the economy”underline.
Red alert. From 2003 onwards there were attempts to return to rationality in the tariff scheme, seeking balance within the sector: limiting the rise in prices, trying to break the link with the dollar and ensuring supply. Santiago Urbiztondochief economist of FAITHFUL and a specialist in public sector regulations, marks this date as a milestone: from then on the service begins to show signs of fatigue that was visible in 2007, measured, for example, through cuts in electricity supply per year. “Until the end of the 1980s, the demand came because there were no blackouts or that the telephone was not a scarce commodity, but then the quality of service achieved in the 1990s continued, worsened from 2008 to 2016, then improved with the recomposition of rates and now the impact of the freeze since 2019 has not yet finished impacting because there is always a ‘delay’ between the drop in investment and the drop in service”, he remarks.
In the segmentation plan implemented there are two dimensions: quantitative and qualitative. In the first, Urbiztondo explains that by dividing into three groups: for the first, it eliminates subsidies, for a second group there will be a tariff adjustment as a percentage of inflation (40%) and for the third, a higher subsidy according to a ceiling of surplus consumption. “There are even low nominal increases and less than inflation; there is no real recovery in tariffs quantitatively, perhaps hoping for lower inflation, but without a technical basis”, he highlights. On the other hand, the inflation adjustment of transport prices currently in force is something positive because it prevents a deterioration in real income.
However, in the opinion of the FIEL economist, there is a qualitative break in the price system of public services (they will be applied only to 30% of the total), associating the values with income and not with costs. “It’s like charging differently at a pump depending on the type of car that refuels,” he ironized. “In Argentina, he clarifies, the social rate is a construction that does not obey a logic that facilitates access, but rather subsidizes consumption.”
The production. Perhaps the most visible case of connection between the signals set by tariffs and the long-term equilibrium is the gas sector.
Roberto Butcher, director of Austral University Energy Institute and president of Energy Hub, points out that the current home rates: are not an incentive to consume less or link it to the price. The sector is divided into three differentiated links: production, transportation (through gas pipelines) and distribution (which reaches end users). The price of transportation is a regulated value, it was updated late and that is why there were works that took longer than necessary, such as the Néstor Kirchner gas pipeline, which is expected to inaugurate a first section next month and which would save 15% on imports of the current demand. “The investment in this project, for example, will require a total of US$4.5 billion, which is needed to fund the necessary infrastructure to become an energy exporter,” he clarifies, citing the case of Australia as an example, which spent US$100 billion just for the construction of gasification plants and pipelines in recent years. For its part, production also suffered the ravages of discretionary prices, which since last year have been readjusted and for this reason the great reservoir of Vaca Muerta saw its activity increase.
Finally, back rates will begin to rise as the impact of higher costs due to updating transportation and production rates is reflected. All this price linking mechanism should be framed in norms with predictability within the framework of a regulatory authority (in this case the ENARGAS) that ensures compliance with the committed investments and the guaranteed supply, necessarily of an autarchic nature and far from manipulation. political. A great unknown remains to be resolved, not only how much will be the gap between the (updated) costs and the average rates with subsidy, but also how the investment necessary to recover the lost ground will be financed.
The future. “For all this, something very simple is needed, but one that seems difficult: a macroeconomic balance with predictability, free access to the foreign exchange market and availability of the gas produced to sell it freely. It is not necessary to change the gas law, but to comply with it”, concludes Carnicer. For his part, Szenkman also attends to a comprehensive vision of the problem. “The redefinition of tariffs and energy subsidies must be an element within a stabilization plan that contributes to reducing macroeconomic imbalances in order, in this context, to be able to achieve a sustainable energy sector”. An extremely complicated company for trying to convince that the balance of the entire system crosses the antipodes of the free system as a citizen’s right. But there is no worse management than the one that is not done.
