October 20, 2014
‘Rich get more subsidies’
Wealthiest 20% receive 30% of the total
The wealthiest 20 percent of the population nationwide receives 30 percent of subsidies, while the poorest 20 percent receives just 12 percent, the Buenos Aires province Economy Ministry reported yesterday.
With public utilities subsidies expected to be decreased soon, the national government was yesterday handed a piece of evidence from Buenos Aires province that suggests a change to the current scheme is long-overdue.
“Except in the case of LPG, none of the subsidies helps the poor since most of them end up benefiting middle- and high-income sectors,” economists Manuel Lombardi, Juan Carlos Mongan, Jorge Puig and León Salim affirmed in the report. “This sheds light on the inequity in the distribution of subsidies, the difficulty in directing them to people who need them the most, and the need to change the current subsidies scheme.”
Economists identified the main beneficiaries of subsidies based on the 2004-2005 national survey of household spending, and analyzed subsidies on water, electricity, gas and public transportation, concluding that the current scheme was unbalanced and warranted change.
In the case of gas, 32.7 percent of subsidies are concentrated in the wealthiest 20 percent of the population, while only 8.6 percent goes to the poorest 20 percent. The gap can be explained, according to the economists, by the greater access that middle- and high-income earners have to natural gas, while the poor are forced to buy LPG, or bottled gas.
A surprising gap was also detected in subsidies on water and sanitation, where the wealthiest 20 percent of the population receives 42.5 percent of the subsidies and the poorest 20 percent just 5.8.
The gap in electricity, however, is much lower. The wealthiest 20 percent receives 22.9 percent of electricity subsidies, while the poorest 20 percent, 17.4 percent.
In the area of transportation, the wealthiest 20 percent receive 31.8 percent of the subsidies, while the poorest 20 percent get 9.9 percent.
The economists also divided their assessment into the type of transportation used, detecting the highest differences in aeroplane travel, where 86 percent of the subsidies are concentrated among the wealthiest 20 percent.
Government officials have repeatedly confirmed in the last few months that a cut to public utilities subsidies for high incomes sectors is on the way, but so far no date has been set.
In 2011, shortly after President Cristina Fernández de Kirchner’s re-election, the government pursued a move to decrease public utilities subsidies in some neighborhoods of Buenos Aires’ metropolitan area.
The initiative was later put on hold after pot-banging protests against the government and after only a limited amount of people voluntarily forfeited their subsidies.
State subsidies for public and private companies rose 34.3 percent last year and reached 134.114 billion pesos, leading the government to close the year with a 102.2-billion-peso deficit, according to figures by the Argentine Budget and Public Finance Administration Association (ASAP).