Argentina to cap gas, power rates for up to 6 months

Argentina's new center-left government plans to freeze electricity and natural gas rates for up to six months while it overhauls the price structure of the basic services.

The measure falls under a broad emergency bill that the executive branch presented to the congress today. Among the bill's key provisions are tax increases on exports and foreign currency purchases. The government's objective is to boost revenue earmarked for social spending to combat poverty.

"This bill is the first step to resolve the economic and social crisis that Argentina is undergoing," said economy minister Martin Guzman, a key member of the new cabinet of President Alberto Fernandez.

The bill is expected to sail through the congress, where the governing Peronist coalition has a majority in both chambers.

The measures are reminiscent of the economic intervention that characterized the 2007-15 tenure of former president Cristina Fernandez de Kirchner, who is the current vice president. With the exception of powerful agricultural groups that are vowing protests, the business community in Argentina has so far shown a subdued response toward the new government's initial policy initiatives.

Guzman said the structure of the increase in consumer energy prices ushered in by the previous government "worsened the situation that had to be resolved and contributed to the productive deterioration that Argentina is living through today."

Pro-business former president Mauricio Macri, whose four-year term ended on 10 December, sought to dismantle a web of consumer energy subsidies that discouraged investment. The process catapulted rates for electricity, gas and municipal water, contributing to a rise in poverty.

On the campaign trail, Alberto Fernandez often criticized increased power and gas rates, characterizing the Macri administration as callously disregarding middle and lower-class Argentinians.

The emergency bill now before Argentina's lawmakers would also authorize the executive branch to place electricity regulator Enre and gas regulator Enargas under government trusteeship for one year.

Under the bill's provisions, the export tax for soybeans — Argentina's main agricultural commodity — would rise to 33pc from a current 30pc, while corn and wheat would pay 15pc, up from 12pc.

Exports of agro-industrial products would be limited to a tax of 5pc, which would also be the maximum rate for industrial goods and services as a whole.

Among other measures, the bill would also increase taxes on assets held by wealthy Argentinians and impose a 30pc tax on domestic and overseas purchases of foreign currency while maintaining a monthly limit of $200 per person.

Last week, the government approved a measure that grants any worker who is fired for the next 180 days without cause the right to receive double severance pay.

By Daniel Politi