MercoPress. South Atlantic News Agency

Argentina cuts electricity supply to Uruguay

Argentina suspended this Thursday an electricity supply contract with neighbouring Uruguay forcing the local public utility company to turn on fossil fuel turbines with an additional monthly cost estimated in 10 million US dollars.

"We were anticipating the situation but we expected it to happen in another two months time", admitted Ricardo Scaglia president of the Uruguayan government electricity company UTE. Mr. Scaglia also revealed that as winter approaches Uruguay will have to resort to more fuel costly generation.

Apparently Argentina cut the export of electricity to Uruguay because of growing problems to satisfy its own domestic market.

The extraordinary rebound of the Argentine economy growing at an estimated 7/8% annually and the fact that public utility companies have hardly invested in new generation plants because rates have been frozen since December 2001 have complicated the overall Argentine energy situation.

At peak hours Argentina supplied 20% of Uruguay's electricity consumption.

Mr. Scaglia said that next April 14 Uruguay will be signing an electricity supply agreement with Electrobras from Brazil, although it won't be sufficient to cover the Argentine generated deficit.

Argentine President Nestor Kirchner has been virtually in permanent confrontation with the public utility companies, mostly privatized, because of his denial to increase rates. Companies have warned that there will be unpleasant surprises in the coming winter in Argentina but the Kirchner administration has been adamant on the issue.

Mr. Kirchner has even ignored most lobbying and requests from Spain, Italy and France, the countries from where the companies running most Argentine privatized public utilities come.

And this in spite of the fact that the Argentine economy is scheduled to keep steam rolling this year according to the latest statistics. An official release from the Economy Ministry indicates that the budget primary surplus for January and February reached 2,520 million pesos, more than doubling the 3% agreed with the IMF for 2004.

Actually the January primary surplus (1,588 million pesos) surpassed the agreed surplus for the whole first quarter of 2004.