MercoPress. South Atlantic News Agency

Public Utility rates increases “not imminent”.

Argentina's Congress has handed the government sweeping powers to increase privatised utility companies rates and thereby meeting a central demand of the International Monetary Fund.

The law passed last week also extends until December 2004 the deadline President Néstor Kirchner's administration has to renegotiate contracts with the companies, most of which are European. The deadline was due to expire in December this year.

The legislation allows the government to renegotiate the contracts without having to consider existing regulations. Once the contracts have been drawn up, Congress will have two months to approve or reject them, and will not be able to alter their individual clauses.

Utility companies, most of which are owned by European groups and who have been at odds with the Kirchner administration, welcomed the change. "It gets us going in the right direction," said one company representative. "Major surgery is needed and this law at least provides the government with a scalpel and gauze."

Privatized public utility companies have been demanding rate increases since they were frozen in December 2001 when the Argentine economy melted down and the country descended into political chaos. The freeze was part of an emergency law that also converted rates, until then adjusted by the US dollars into, devalued pesos. Several companies with dollar-denominated debts sued the Argentine government for a violation of contracts.

Attempts by the previous government to increase public utility rates as demanded by the IMF and suggested by European governments were frustrated in Court. However analysts believe the Kirchner administration will now look to authorise rate increases in basic services with the gas and electricity sectors coming first. The new legislation is expected to prevent legal appeals.

But the government ever so sensitive to the social factor and in the middle of an electoral process that should ensure it a comfortable majority in Congress, has said that increases are not imminent. The recently approved bill also entitles the Argentine government to review contracts of privatized public utilities, most of them with foreign companies. Apparently sixty contracts are currently being reviewed.

"The law enables the government to assess the quality of services and concession contracts, and so shall we proceed, but we do not anticipate any rate increases", said Cabinet Chief Alberto Fernández who insisted that "client satisfaction, honouring investments and contractual obligations are also part of the public utilities services".