The “Tariff segmentation” that the Government plans to implement in the coming months represents a remove subsidies on electricity and gas bills for certain sectors. to get started, to those with higher incomes, according to expressions of officials. However, several analysts consulted doubt that the measure will be effective or will not be legally resisted.
Experts consulted by Clarion coincide in pointing out that the segmentation could have implementation problems. And that, if the rate freeze is maintained, the economic subsidies would go to US $ 10,500 million annually (planned for this year) to about US $ 16,000 million.
“Segmentation is nothing more than the application of a cross subsidy discriminating users by some parameter: consumption, place of residence, ability to pay ”, according to Alejandro Einstoss -Head Economist of the Argentine Institute of Energy Gral. Mosconi and Julian Red, director of the Technical Department of that institution.
Its implementation “would imply increases well above inflation for a smaller percentage of residential customers (between 15% and 25% of households), while the rest of the users would not have increases or should face minor increases, according to these specialists. They calculate rate increases of 72% in electricity and 60% in gas, according to the numbers of the 2022 budget bill.
The risk of rising to the middle class
“Increases of 200% are required in households that are going to be segmented. And when they do that, they won’t be able to avoid ‘leaks’ of the scheme to middle class households. In other words, they are going to have a problem inclusion error in the scheme, ”he says Fernando Navajas, Chief Economist of Faithful.
“The segmentation scheme has many flaws that can make it falter in practice, even though it is an idea that may work in theory. For instance, It does not have international validation, nobody has done it”, Breaks down Navajas.
“We do not know how it will be implemented administratively, there is no pilot experience, and also is vulnerable to prosecution for being incompatible with the legal prohibition of having cross subsidies”, He says.
“It is an unprecedented system that does not fit into the good practices in the matter, which distorts prices and that collides with the current normative and regulatory framework which constitutes an additional legal barrier. Even with rate increases above inflation, subsidies will increase in 2022. The level will depend on the social acceptance of the increases but simulations allow estimating a floor of US $ 11,300 million”, According to EInstoss and Rojo, under the assumption that there are increases in rates ..
“They have no other way. It is segment rates or touch social spending”, define Claudio Caprarulo, director of the consulting firm Analytica. ”We established a scheme increasing on average 155% rates for 50% of the highest-income households. Thus, the weight of economic subsidies would return to percentages of 2020, even much more than in 2019”, He details. Calculate that spending on these items would be around US $ 10 billion.
But if in 2022 the Government maintains the rate freeze “the problems of the sector will possibly deepen to unsustainable limits not only because of the speed of inflation, which eats away the value of tariffs, but also because of growing restrictions of a fiscal, social and industrial nature, ”according to EInstoss and Rojo. There, subsidies would skyrocket to US $ 15.6 billion, with a 56% growth over subsidies in 2021.
The consultant Daniel Gerold He warned, more than a month ago, that energy subsidies would reach US $ 16,000 million. It was at an exhibition before the Amcham (the chamber of commerce of American companies in the country).
“A discrete jump in the exchange rate would have a direct impact on the level of energy subsidies from high dollarized component of oil and natural gas prices. And therefore, to keep the level of subsidies constant, it would imply rate increases above devaluation, the greater the greater the gap between prices and costs, ”according to Rojo and Einstoss.
“They have no other way. Without changes, the subsidies will reach US $ 15.9 billion, ”according to Caprarulo.
“The Argentine government has decided to invent the wheel again and propose ‘from the mouth out’ (until now) a mechanism that is conceptually wrong, has no history of successful application in other countries and is impractical for the current state of available information, that is to say, it is an administrative impossibility ”; Observe Navajas.