Argentina ends electricity subsidies to save $4 billion

BUENOS AIRES, Argentina – Argentina announced an end to subsidies on electricity bills Friday, and officials said the move will save the government $4 billion this year.

Authorities declined to estimate how much consumers’ power costs would increase as a result, though some Argentina news media predicted bills could jump as much as 500 per cent for some users.

The government said it spent a total of $51 billion over the past 13 years to keep consumers’ power bills down.

Energy Minister Juan Aranguren said at a news conference that a new “social tariff” is being introduced on wealthier users that will provide money to help reduce the impact on poorer households from the end to subsidies.

The social tariff will benefit 20 per cent of the 4.6 million electricity users in the Buenos Aires area, he said.

Consumers in the Buenos Aires region have benefited most from the subsidies, paying about one-fifth of the costs faced by users in the interior. But there was a cost in the form of poorer services, with Buenos Aires households facing on average 40 hours of power cuts each year.

President Mauricio Macri, a conservative who campaigned on a free-market platform, took office in December promising to liberalize Argentina’s economy, which had become heavily regulated and saw big increases in government spending on social welfare programs for the poor.

Last month, Macri ended widely unpopular restrictions on buying U.S. dollars, which had made it difficult for businesses to operate and spawned a booming black market in currency trading. That led to a sharp drop in the value of the Argentine peso and big jumps in consumer prices.