MercoPress. South Atlantic News Agency

Collision course with privatized public utilities

Argentine president Nestor Kirchner and privatized public utility companies seem to be in a collision course following the latest exchange of warnings.

During a formal act in Casa Rosada (Government House) this Tuesday Mr. Kirchner claimed that the privatized electricity services want "to crack us" and their objective is "to cover with a rate increase the investments they haven't done since 1998".

President Kirchner warned that the companies involved are responsible for ensuring the service and if not "they will have to face public opinion".

Instead of investing since 1998 they concentrated in transferring profits overseas, and "now they are telling us that if we don't increase rates they can't deliver the service".

Over the last few days and following several blackouts in Buenos Aires and other metropolitan areas, managers from the privatized electrical service companies have publicly alerted that with out an increase in rates or some mix (higher rates for industries involved in export businesses for example), further disruptions would be inevitable since they lack the funds for basic maintenance.

Public utility rates in Argentina have been frozen since the country defaulted and devalued the currency in December 2001. Most public utility services were privatized or given in concession during the Carlos Menem years and President Kirchner has ordered a review of all contracts before deciding on any "rates adjustments".

This position has caused diplomatic rifts with some of the countries whose companies have been trapped in the freeze (mainly Spain, France and Italy).

On Monday during the signing of the contract for the upgrading of Argentina's patron saint cathedral Our Lady of Luján, President Kirchner warned that "I will not negotiate (with the public utilities companies) under pressure and much less under these conditions", adding that "I would like to hear first hand what investments these companies have done and are doing".

Nevertheless Silvio Resnich, CEO of Transner, one of Argentina's main transporters and distributors of electricity insisted that "in the short term we run a serious risk of an important grid collapse and not because of the privatized companies but simply because the expansion of networks has not been done".

"The government received all the information two months ago and they shouldn't talk nonsense, in my opinion they are playing to please spectators. The Argentine grid system is no longer sustainable", underlined Mr. Resnich.

Further on Mr. Resnich said that the Kirchner administration addresses negotiations with the electricity industry as if it were a "political problem" and "we're not putting any pressure on the government, we're just anticipating what will happen". Argentine Minister of Interior Anibal Fernandez pointed out that with the meltdown of the economy (in 2001) "we all suffered in Argentina, not only foreign investors and businessmen" adding that any possible rate adjustment will only be considered after the review of contracts.

"The normal growth of the economy will help solve the problem and the recovery of legitimate profits for these companies and their investments".

Given the apparent risk of potential collapses in electricity and water services this coming summer, the Consumer Defence Committee of Congress will hold hearings next Tuesday with electricity and water supplying companies.