As a prelude to winter, the current rate hike and reduction of energy subsidies – the two sides of the same policy proposed by the government of Mauricio Macri at its beginning in 2015 and still to be defined – now become an axis in his management. To understand what happens with energy and prices in Argentina, it is essential to account for the very great dependence that has with natural gas, to such an extent that what must be paid for its consumption is undoubtedly a vector of the economy Nacional level.
And its incidence is even greater in the colder seasons, since it is added to the consumption of electricity, which is generated almost entirely with natural gas, the demand as an industrial input and its use as a vehicular fuel, an important increase in the requirements of residential users. Over all its possible applications, for more than 50 years, natural gas is the preferred energy source for more than half of the population to heat their homes.
This is explained, more than anything, by the infrastructure that has developed over the last half century in Argentina in terms of transport and distribution networks, which is not comparable with the rest of the countries in Latin America. According to the economist Alejandro Einstoss, 60% of the population has access to this hydrocarbon by network and no country in the region has that insertion for its use.
“Comparing ourselves with our neighbors is difficult because we have different consumption habits and different state policies.” Argentina, like no other country in South America, favored the use of natural gas over other inputs, then confront in a photo who is more efficient is debatable, “says the expert, also a consultant of the Argentine Institute of Energy” General Mosconi “, in dialogue with 3Días.
That is why, when attempting a comparison with neighboring countries, the President limited himself to talking about the central cities of neighboring Chile and Uruguay, in order to urge citizens to “consume less”. In Uruguay, for example, only in the city of Montevideo, residential users have the possibility of consuming natural gas through a network and even then it does not reach all households. The rest of the country in terms of energy uses is incomparable with the rest of Argentina.
According to the data that 3Días could collect, a few use gas from carafes and in other cases, wood heating is chosen, but predominantly the use of electricity throughout the year. The generation, meanwhile, comes from the binational hydroelectric plant of Salto Grande and mainly from renewable sources.
In parallel, the Chilean state, in order to prioritize the use of natural gas for the industry and for electricity generation, began to discourage residential consumption at high rates since 2007, when Argentina finally suspended exports. That is why we can only talk about the use of domestic gas in the city of Santiago de Chile, since in the rest of the country, except in isolated cases, the use of this input is not prioritized. Since then, at the same time, increased the use of coal as an input for electricity generation, and little by little, try to reverse this trend and expand the use of Liquefied Natural Gas (LNG).
A box of Pandora When talking about rates, there are more variables that come into play and make a linear comparison impossible. In all countries of South America, residential energy tariffs are calculated according to the users’ consumption in a certain period of time. However, it is not simple to contrast amounts and uses of energy, beyond the wide differences in the economic and financial structures of the nations in question, because the habits are very different and the infrastructure that allows them is totally different, and also the conformation of the energetic matrices that were fomented in each nation through the years is different.
In Argentina, the tariff has three components; the price of the input, which is natural gas, the price of transport and distribution, which is the network infrastructure, and the tax. The public hearings that took place within the framework of the Enargas in February pointed to a comprehensive tariff review, but basically they were to update the transport and distribution segment. Additionally, the price of gas that is going to increase twice per year until 2019 is added.
As for taxes, a Pandora’s box is opened. And there are the biggest differences between the City and the rest of the country. In addition to the freezing of electricity distribution tariffs in the scope of the concessions of Edenor and Edesur – which for Einstoss “generated enormous inequalities” because “although the subsidized electricity generation price was the same for all the territory, a residential user of the Great Good Aires in 2015 paid for the electric service the sixth part that a user in Santa Fe and almost the third part than the national average “-the local taxes were added in many cases in the interior. According to the expert, since the rates were very low, the municipalities and also the provinces took advantage of the electric bills to go up and collect other services because the utility bills are highly collectable. “In some cases, the tax almost comes to represent 40% of the bill and becomes untenable with the increase,” he says.
None of this happened in Uruguay, nor in Chile, which are also countries that adopted a system of unitary government, and not federal as the Argentine, with all the tax implications that this great difference of base can bring. As Macri said, we consume more natural gas and pay less. But it has to do with a difference in access to the input and a wide structural difference in taxes.
“Neither Uruguay nor Chile have the problem of a very high natural gas bill where the middle and lower-middle classes can not pay for it, simply because those sectors of society do not consume it as intensively as we do,” he says. Einstoss.
More variables at play Hand in hand with the development of infrastructure for transport and distribution, the subsidies that were applied in electricity and natural gas tariffs for 15 years further encouraged domestic consumption. According to Einstoss, a residential user paid only 10% of the value of electricity generation and only 15% of the value of natural gas.
“This situation had a fiscal cost so high that in 2015 the total of the energy subsidies explained the total fiscal deficit, everything that was spent more was explained by the energy subsidies, that was the magnitude they reached. have, which is impossible to finance, “he describes.
“The way to reduce these subsidies and increase rates is the right one, but how these increases are going to be applied should be reconsidered or discussed,” he says.
On the other hand, for the chief economist of FIEL, Fernando Navajas, the reduction of subsidies headed by the national government “is not equivalent to a reduction in public spending”.
“It is a fiscal closure, but it is more like a tax increase because the prices paid by demand increase, and this imposes gradualism, since going too fast may not be sustainable, which requires multiple balances and adequate coordination. macroeconomic, “said Navajas in the framework of a talk organized days ago by the Institute” General Mosconi “, which chairs the former Secretary of Energy of the Government of Raul Alfonsin, Jorge Lapeña, and that gained repercussion because the Minister of Energy and Mining, Juan José Aranguren, attended surprisingly as a listener.
On the other hand, beyond the dissimilar consumption habits and the structural characteristics of each country, to check if a tariff is more or less expensive or cheap it is necessary to account for the purchasing power that each user has to face it. What takes away the dream and crushes the pocket of the Argentines today is inflation, which is estimated to be accentuated with the last devaluation of the peso, and in that also the differences with our neighbors in the region are wide.
In Chile, meanwhile, in April of this year, inflation registered a monthly variation of 0.3%, while in the first four months, the accumulated reached 1.0% and in the last 12 months accumulated a level of 1.9%, according to the National Institute of Statistics. For its part, in Uruguay, the inflation index rose slightly in April 0.07% in relation to the previous month, with an accumulated variation in the year of 3.97% and in the last 12 months of 6.49%, of according to the report of the National Institute of Statistics of that country.
On the other hand, in Argentina, April inflation rose by 2.7%, according to the calculations of the Orlando Ferreres & Asociados consultancy, and the increases accumulate 8.9% in the year and in the last 12 months reach 24%. , 6%. In parallel, a report by another private consultancy, Ecolatina, states that “the recent rise in the dollar will affect the local economy, both nominal (inflation) and real (GDP). inflation estimate for 2018 to the area of 24 percent, as long as there are no new surprises exchange. ”
Among large consumers “The closest case that could be assimilated to Argentina is Mexico, and if we expand the entire continent, Canada and the United States, but the latter, in addition, – is the world’s leading producer of natural gas and is expanding” , evaluates Einstoss.
A little further, the economist finds similarities with Russia in terms of the demand behavior of Argentina. “The main consumer of residential gas in the world is Russia, it has the infrastructure and the insertion of natural gas higher in the population, and then we come, globally, we are the second consumers of gas for residential use,” he says.
According to data from the International Energy Agency (IEA), Argentina’s total natural gas consumption in 2015 was the highest in Latin America, even surpassing Mexico; although it was well behind the giant United States, Russia, China or Canada, which positioned themselves in that order from highest to lowest consumer.
When contrasting the employment habits of the energy inputs of the countries, however, it is necessary to evaluate many aspects, such as population density or seasonal variables, among other factors. But at first sight it can be seen in the statistics of the Agency, created after the oil crisis of 1973, that of the total consumption of natural gas registered in 2015, Argentina allocated its highest percentage to residential use (approximately 38%) in detrimental to its industrial use (32%).
The difference is greater than the one that can be calculated for the rest of the countries named, which are the first in the world in terms of consumption of fossil fuel input. And what is even more striking, stood out on Russia and Canada (that of the total, the first gave residential use a share of almost 30% and the second, 31%), which are those that have a larger portion of territory and population affected by much harsher winters. Meanwhile, in the US, Mexico and China, the participation of the industry as a destination for the use of natural gas over the residential prevails.
Tariff without subsidies: is there an alternative? As a result of the claims triggered by the announcements of the increase in tariffs by the national government, to which was added a malaise unleashed by the dollar’s rise against the peso, the opposition presented a draft bill in the national Congress. law that declares the tariff emergency and has already achieved the average sanction. The initiative aims to limit future increases in electricity, gas and water bills and to bring the values of the rates back to November 2017.
In this regard, the Minister of Energy and Mining, Juan José Aranguren, said that bringing back the cost of tariffs at the end of 2017, “without including the impact on provincial electricity distributors, would be 75 billion pesos in 2018 and 95 thousand million pesos in 2019. Nothing is impossible, but everything we do has a cost.If you want to go back, someone has to say where that financing is going to come from at a time when the cost of capital also increases; debate that has to be given in the Congress, “he said after the presentation of the National Glacier Inventory, which was held in La Rosada a day before the opposition project with a half sanction of Members begins to be debated by the Senate.
In parallel, the national government is studying a different proposal prepared by the General Mosconi Institute that tries to give predictability on the amount of gas bills to residential users based on the increases they will have in the winter consumption peaks. The initiative calls for a family to pay similar figures throughout the year, which would reduce the amount of next winter’s bill by a very large proportion. This system called “flat rate” is currently applied in Spain.
The increases in April plus the seasonal peak, added to the inflationary effect of the last period and to the increases of October 2017, generate a snowball effect on the rate. “If a flat rate is applied, that effect will diminish”, esteems Alejandro Einstoss, the author of this work that bears the penance of radicalism.