Govt slashes further US$933mn in subsidies

- Wednesday, November 16, 2011

Govt slashes further US$933mn in subsidies

Argentina's government has announced a further 3.98bn pesos (US$933mn) in annual utility subsidy cuts additional to the 600mn pesos announced on November 2.

"These cuts will be implemented rapidly," planning and investment minister Julio de Vido said at a televised press conference.

Of the total gas, power and water subsidies to be cut, 3.48bn pesos will come from the industrial sector and around 500mn pesos from domestic users.

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Big business will see subsidy cuts rolled out from December 1, when 40 of the country's highest grossing companies will have 100% of subsidies cut.

Fuel refining companies will see some 462mn pesos in subsidy cuts, gas processing firms will see a 1.49bn-peso cut, the biofuel and oil for export sector will lose 745mn pesos and agrochemical businesses 758mn pesos.

These cuts will have no effect on the price for products produced by these companies to the customer, finance minister Amado Boudou said at the conference.

Domestic users will initially be able to opt out of subsidies, with a register to be opened next week, while the second phase will be a personalization of subsides where users will have to make a declaration of necessity, Boudou said.

Cuts will initially be introduced in the Puerto Madero and Barrio Parque areas of capital Buenos Aires and in all of the gated communities of the country, affecting some 232,000 customers.

"This is not a rise in tariffs, it's a reduction in subsidies," de Vido said.

If provincial authorities take this opportunity to raise utility tariffs, their subsidies will be cut by an equal amount as the increase, undersecretary of the planning and investment ministry (Minplan) Roberto Baratta said in a statement.