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November 27, 2014
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Kicillof: cut in subsidies to continue

Economy Minister Axel Kicillof announces a cut in water and natural gas subsidies on Thursday.

Economy Minister hints at further reduction in other areas

One day after announcing a reduction on subsidies for natural gas and running water, Economy Minister Axel Kicillof left a door open for more cuts on other public services currently subsidized by the national government such as electricity and public transportation. At the same time, Kicillof refused to characterize the measure as a whopping tariff hike designed to obtain more funds for the government.
“The government will continue to work to reallocate all subsidies. This will allow people who still need the subsidies to keep them, while those who don’t need them won’t have them any more,” Kicillof said yesterday. “This is not a price hike and we are not doing it to obtain more funds.”

The government is moving ahead with the long-expected reduction in subsidies of public utilities by announcing on Thursday that the cut for natural gas and municipal water subsidies was 17 percent to 80 percent for residential and commercial users.

The industrial sector will be exempt from the cuts in subsidies that will ultimately increase final water bills between 70 and 400 percent, while gas prices will rise between 100 and 284 percent. But consumers will be able to avoid hikes, at least for now, if they manage to significantly decrease consumption as part of a broad anti-waste measure.

“We are starting to look closely at all subsidies but we are doing it with calm and with a serious analysis. There’s no rush in reducing them,” Kicillof said. “Our objective since 2008 has always been to move forward to achieve responsible consumption.”

Asked about additional subsidy cuts, the Economy minister said he did not have “anything to announce,” but he did not rule out the possibility by saying the subsidies policy of the federal government is “very dynamic” and has led to the creation of programmes like the Universal Child Benefit.

“Subsidies are important because they create jobs and reduce people’s expenses, who can use that money to consume more and boost the economy and the domestic market,” Kicillof said. “This is not a price hike or a total cut of subsidies.”

At the same time, Kicillof highlighted the characteristics of the scheme implemented by the government to reduce the subsidies, which encourages people to reduce consumption. Those who reduce their consumption by 20 percent in their bi-monthly bill compared to the same period last year won’t be paying higher bills, while those who reduce their consumption between five and 20 percent will see their subsidies increase by a lower rate, with a discount of up to 50 percent on the planned subsidy cuts.

“Everybody can take the decision to have a more responsible behaviour in their consumption and if they spend 20 percent less no cuts will be applied. There won’t be any changes for the people who consume less,” Kicillof said. “Argentines spend five or six times more gas compared to other Latin American countries. There’s currently an excess of consumption.”

Kicillof criticized opposition economists and analysts, who described the measure as a price hike after having previously highlighted the need to change the subsidies scheme.

“The same people who previously urged the government to change the subsidies scheme are now describing the changes as a price hike. The opposition press doesn’t want to report, they just want to create an unstable economic scenario for the country,” Kicillof said. “It’s a measure that annoys some people.”

‘No effect on wage negotiations’

In his usual morning conference, Cabinet Chief Jorge Capitanich meanwhile rejected the notion that shift in the subsidy policy could have an impact on collective wqage bargaining since the cuts “are absolutely insignificant in the price index.”

“There’s no possible relation between the subsidies cut and wage negotiations. It’s a measure that encourages people to consume less gas and water and excludes those who are currently on welfare,” Capitanich said. “The Trade Secretariat has the tools it needs to control any price increases.”

At the same time, the head of the Industrial Union (UIA) Héctor Méndez described the measure as accurate and said the decision not to include the industrial sector in the subsidies reduction “increases the responsibility for business people.”

“It was a brave decision by the government that needed to be taken,” Méndez said.

Herald with DyN,Télam

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