MercoPress. South Atlantic News Agency

Argentina cuts utilities subsidies to large companies and high-income households

Vice-president elect Boudou and Planning minister De Vido make the announcement

Argentina announced Wednesday a further adjustment to its extended public utilities (electricity, water and gas) subsidies policy and this time the cuts will apply to large companies and high income households.

The move is expected to save the Treasury about 3.978 million Pesos a year (approximately 925 million dollars), adding to the 600 million Pesos (140m dollars) announced previously.

The announcement in a press conference was done by Economy minister and Vice-President elect Amado Boudou and Planning Minister Julio de Vido who is tipped to become the next cabinet chief when President Cristina Fernandez inaugurates her second consecutive mandate next 10 December.

“The subsidy cuts will extend to the highest grossing companies in the fuel sector, natural gas production, bio-fuels, oil and agricultural chemicals; four sectors which will made an impact of 3.468 million Pesos in subsidy cuts for the State” said Boudou.

With regard to high-income homes, the government announced that Puerto Madero, Barrio Parque neighbourhoods and the gated communities of the country will have subsidies removed, a measure to be put in to place by January 1, 2012, which is expected to save around 500 million Pesos (120m dollars).

This means that an estimated 232.000 high income homes will have to pay higher public utility rates. In addition, a register is to be created for high-earning families to voluntarily renounce subsidies.

“None of the measures affect or will affect Pymes (small and medium sized companies), who rank as one of the most dynamic companies in terms of creating jobs” assured Boudou.

At the beginning of the month, Boudou and De Vido announced the removal of subsidies to utilities such as electricity, water and gas to the companies which demonstrate high profitability and that don’t need them.

Included within this group are financial groups, casino houses, international airports, ports and mobile phone companies under national jurisdiction, mining companies and hydrocarbon extraction companies.

In 2011 subsidies totalled 70 billion Pesos (approx 16 billion dollars) which is estimated to represent 6% of GDP.

According to primary estimates high income homes monthly bills for electricity, gas and water are expected to at least double as of next January.