24 August 2008

Musketeers of redistribution: Julio De Vido

Long time no write, sorry. I resume the translation of the Crítica Digital article titled Los mosqueteros de la redistribución ("The Musketeers of Redistribution"), which shows how the Kirchner administration isn't Robin Hood taking from the rich to give to the poor, as they arrogantly assert all the time.

… [T]he residential natural gas fee in Buenos Aires amounts to 30 cents per cubic metre. However, four million low-income households which have no access to the natural gas supply network are forced to buy [pressurized natural gas] containers at a cost of AR$1.70/m³, that is, almost six times more. Since the devaluation [of the peso, in early 2002] the residential gas fees have been frozen; but the price of the 10-kg gas container has climbed 275%, to an average of AR$30…. [Minister of Federal Planning Julio] De Vido authorized the deregulation of the gas container market, in which [the private company] Repsol YPF is dominant, and in exchange offered the so-called "social container", which is impossible to find at the price of AR$18 suggested by the State. Even if you could get that, the price (AR$1.20/m³) would be four times that of the network gas….
That is, the government forces the natural gas companies to sell their product at ridiculously low prices to a mostly middle-class public (and gives those companies a good excuse not to invest on surveying and expanding their network to less privileged areas) and allows Repsol YPF to charge six times more to the poor who aren't reached by the network, or who can't pay for a connection to it. (Until a few years ago my neighbourhood itself wasn't connected to the NG network — when it was our turn, we had to pay something in the order of AR$700 to get the pipes into our home; the equivalent price today must be three or four times as much.)
With more concern for fiscal health… in the last weeks Cristina's government started giving signs that it will unfreeze the utility fees. The astronomical growth of subsidies would threaten the fiscal balance if tax revenue were to falter in the future. … During the first semester [of 2008] the energy subsidies alone amounted to AR$8.2 billion, 295% than the same period [in 2007]. The announcement of hikes in the power fees will be followed by the slow thawing of residential natural gas fees.

The interesting thing is that the increases follow a segmented criterion: more [percent] increase for those who consume more. According to data provided by the power distribution companies, 7% of the high-income households account for 25% of the consumption. In the case of natural gas the concentration is similar.

If progressive [as in gradual?] adjustments had been applied two or three years ago, the State would have avoided a huge transference of wealth to the pockets of the less needy. Why wasn't it done before? De Vido used to explain it was not easy to identify the bills of the higher-income households, something acknowledged as possible only now.
More about this coming soon...


  1. Why wasn't it done before? You ask?
    Well, at least it is being done now.
    If we asked why every political decision was not done before, we would slow the entire system down even more... The WHY's cannot be helped, but one must welcome the action when it comes.

    I would be curious to know about the consumption rates. You said that 7% of homes are sucking about 25% of the power, which seems entirely accurate. But did you have any factual proof about the gas?

    The reason I ask is that the higher income people will naturally live in more modern houses, with better insulation. They will also, likely have central heating, as opposed to several stationary heaters that must be left a their highest settings to heat the entire house. Just curious.

  2. Jeff - Note that the indented blocks of text correspond to the translation, i.e. those are the reporter's opinions, which may or may not coincide with mine.

    I think "Why not before?" is a valid question. Although of course I believe, as you do, that one must welcome the action when it comes, in this case it's not the same. A gradual increase of utility fees over three years of fast economic growth and political stability with a strongly backed government at the helm is not the same as the swift, sharp increase that has to be effected now, as the economy begins to stagnate and the government doesn't have the massive support of the public. I guess Néstor K got hooked on those fabulous "Chinese growth" figures during his term.

    The figures of NG consumption as given in the article I haven't confirmed independently. Note however that the NG network is probably much less developed than you and I might guess, so many people end up heating their homes using pressurized NG in containers. I think this doesn't count in the calculation made by the article. Moreover, you simply can't afford to have several heaters turned on all the time if you have to buy NG in containers - it's simply unaffordable.

    In the slums of Rosario many people draw electricity directly from the grid to power electric heaters; others employ kerosene heaters or the like.

  3. Ah, I see that now, The last paragraphs are not your words.

    The other thing that I learned, and could hardly believe is that the NG company(s) have to, or simply do to save money, pump air into the lines to mix with the gas during peak heating times.

    The irony is, that the colder it gets, the harder it is to heat your home, as there is less gas and more air.

    The other very scary thing about heating in Argentina is the amount of emissions people allow into their homes, out of necessity, while running their heaters. So few are actually piped with an exhaust going outside and each year you hear of people dying in because of lack of oxygen in their home. It is a terrible cycle.

    Is it even remotely possible that the new president, although married to the previous one literally and figuratively, might try to push in some measures that are more socially friendly than Nestor?

    I know that common opinion is she is just a facade, and admit that it does look like a ploy to give Mr K a four term presidency, however, she has tried to push through several things that may help the poor, but has met widespread opposition and lack of support.


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