MercoPress. South Atlantic News Agency

Argentina hikes fuel export taxes to ease domestic prices

Argentina's government announced Thursday it will raise taxes on the country's gasoline and petroleum exports and their derivatives in an effort to contain domestic fuel prices.

The move, which sets a formula to increase export taxes as international petroleum prices climb, was announced by Economy Minister Miguel Peirano and Planning Minister Julio De Vido. De Vido said the government was implementing the measure because of high petroleum prices. "Earnings (for oil companies) are increasing and, obviously, since we're dealing with a nonrenewable resource that belongs to the state, we're taking this step," he said. The formula includes reference prices, and export prices, which "will reserve profit margins for the oil companies". In practical terms this means that when the evolution of international oil prices is equal or above the reference price, a certain equation will be applied. However when the international price is below reference, the tax will be equivalent to 45% A tacit agreement between oil companies and the government reached during the 2001-02 default and melting of the Argentine economy has kept gasoline and diesel prices below international values. Worried about inflation, the Argentine government has resisted energy company calls for price increases. But service stations have increased prices for fuel in recent months in some areas of the country. The increase in fuel export taxes will also help bolster state coffers and elected President Cristina Fernandez de Kirchner pledge to preserve the country's fiscal surplus. The announcement came days after the government raised export taxes on corn, wheat, soy and soy products, handing the state a bigger share of agricultural profits at a time of high global food prices. "With international petroleum prices and their derivatives registering strong increases in recent months, it is necessary to shield the local economy and protect consumers" stated an Economy Ministry release outlining the move. Major oil companies operating in Argentina include Spain's Repsol-YPF; Brazil's government controlled Petrobras; Royal Dutch Shell and Esso, an affiliate of Exxon Mobil Corp which is in the process of liquidating its assets in Argentina. Elected president Cristina Fernandez will be taking office from her husband President Nestor Kirchner, next December 10.