December 6, 2013
Energy subsidies up 70.2% this year
Slashed transport funding not enough as total up 46.2 percent from 2012
Government spending tends to intensify in electoral years to capture the attention of voters, and the Fernández de Kirchner administration’s build-up to the October midterms has been no exception.
Subsidies toward economic sectors from the state grew by 46.2 percent during the first seven months of the year in comparison with the same period last year, according to the Argentine Association of Budget and Public Finance Administration (ASAP).
Through an emergency decree (DNU) last week, the government increased public spending by 23.16 billion pesos, which accounts for 3.6 percent of the total budget for the year.
“It is important to emphasize that energy subsidies have used almost 90 percent of their assigned credits, implying that budgetary readjustments and expansion will continue,” ASAP stated in the report.
Up to July 31 this year, the government increased spending on subsidies by 21.6 billion pesos, taking it to 68.265 billion pesos.
The stagnating energy sector was the chief recipient of state funds with 43.3 billion pesos, representing a 70.2 percent hike compared to 2012, which implies 18.7 billion more pesos. Electricity market wholesaler CAMMESA and state-owned energy company ENARSA accounted for 51.6 and 33.5 percent of the total, respectively, with the stated goal of “importing fuel to meet the demand of the domestic market and applying the subsidies on energy for consumers within the metropolitan area” of Buenos Aires.
If the trend of rising energy subsidies is maintained, a total of 140 billion pesos will have been directed to the sector by the end of the year.
State-controlled oil firm YPF is seeking to lure further investors following its recent deal with US oil giant Chevron for shale recovery at the Vaca Muerta site, but has thus far been unable to revert a bleak scenario as energy imports rise.
Third in line was state nuclear energy company Nucleoeléctrica S.A, which was assigned 2.3 billion pesos, representing a 24.2 percent hike from the first seven months of 2012.
Transportation also rises
An attempt to balance accounts through slashed transport subsidies were insufficient to cut down spending toward the sector in general, which saw a 3.6 percent hike in the January - July period. Currently caught up in the controversy over the eviction order against Chilean airline LAN, Aerolíneas Argentinas has received 16.2 percent less funding so far this year in comparison with 2012, down from 2.38 to 1.99 billion pesos.
The Transport Infrastructure System Trust Fund, another avenue for urban public transport funding, marked a 26.5 percent drop in state backing with 6.2 billion pesos.
With a total of 15.194 billion pesos assigned to the sector, financing for train and subway licencees rose by 30.8 percent up to 2.351 billion pesos.
In the face of Interior and Transport Minister Florencio Randazzo’s announced bid to re-nationalize train lines, the General Belgrano Railway (Ferrocarril General Manuel Belgrano) company received a separate 2.65 billion pesos, thus registering a 72.2 percent hike from the first seven months of 2012.
The only other category to exceed one billion pesos in subsidies was “other companies,” which included water company AySA at the top of the list with a 35.1 percent increase in funding (3.5 billion pesos).
The report states that from January to July this year, there was a financial result deficit of 8.53 billion pesos compared to the 2.14- billion-peso surplus of the same period in 2012.
Last month specifically, a “level of spending accrued inferior to revenue” was registered, “amounting to a 8.06 -billion-peso surplus.”
“July’s surplus is explained by the positive rhythm of growth in tax collection, higher remittances of profits of the Central Bank to the Treasury, the effect of the thirteenth month half-bonus on Social Security payments and the lower rate of variation seen seasonally in the spending in the first month of each quarter,” ASAP said.