31 July 2008

Power fees going up in Buenos Aires

The national government is giving the power companies a raise, through an increase in the power fees, that will fall on those who consume more than 650 kWh every two months. The increase will range from 10% to about 30% and, while Minister Julio De Vido says it'll only affect 24% of the population, others claim the middle class will be hit hard. And it seems a further raise is due next February.

The above is the news as reported everywhere in Argentina, and many people are genuinely concerned or outraged for the wrong reasons. Why? Well, despite the big headlines and the alarming newsflashes broadcast by the media, the raise is only for Buenos Aires, its metropolitan area and the city of La Plata only. Granted, that's 40% of the consumer base and Buenos Aires is the center of the universe for the porteño and for the "national" media, but you'd think they should at least qualify their statements.

I didn't say we hinterlanders* shouldn't be concerned or outraged. We have reason to be concerned since the same inflation and the companies' lack of investments that prompted the national government to grant the raise for the Buenos Aires area utility companies is having serious effects on those that supply the provinces; many had adjusted their fees up or were considering raises before this, and now it's only a matter of time before they align themselves with the capital's companies. Our own EPE (the Santa Fe Provincial Power Company) is checking its numbers right now.

* "El interior del país" ("the interior of the country") is what they call everything but Buenos Aires. That's how Argentina was structured to begin with: a colony with a big port to interface with the world, plus a broad expanse of land ripe for primary exploitation. It's customary and it doesn't sound alright. In fact, it reminds me of the ridiculous conception of Bender's robot apartment in Futurama — Bender sleeps standing up in a 1×1-metre room with no furniture, and the place where he lets Fry live is a huge room in itself... which Bender calls "the closet".

The reason for the outrage is, partly, the outrage of the porteños at this raise, because they've been enjoying ridiculously low prices for power, natural gas and public transportation at our expense since... well, ever. Time and time again I've written about the subsidized fuel for buses. As Rosario's city council is about to take the bus ticket to AR$1.60, a bus or subway ticket in Buenos Aires still costs about AR$1.

Well, as it turns out, the average residential power fee in Buenos Aires is vastly lower than the average in the rest of the country. No wonder the system has problems — you can't expect that the power grid won't collapse when you charge the lowest fee in the place with the largest and densest population, the highest per-capita income, and the highest concentration of installed top-notch air conditioners and refrigerators. According to the article in Crítica Digital, in the capital area a home that consumes 1,700 kWh will get a bill for about 88 pesos. Checking EPE's website and doing a quick calculation, we learn that the same amount of power, in Santa Fe, will punish the wasteful ways of the unfortunate consumer with a bill for 194 pesos. (The guy who writes the Crítica article obviously has math issues. He reports that fees in Buenos Aires are "194% cheaper" than in Santa Fe. Things can't be more than 100% less anything, unless you allow for negative values. Back in 2002 journalists noted that the dollar-peso parity had gone from 1 to a rate of almost 4 pesos per dollar, and reported that the peso had therefore "devalued by 400%". I recall only one news source giving the correct figure of 75%.)

Why did the porteños get this lucky all this time? Well, first of all, no-one likes being charged more, and when you have a metropolitan area with 12 million people surrounding the government seat, you don't want to make them angry. Especially when outside the capital proper you have several huge concentric rings of increasingly impoverished areas. If you control the money, you can use it to favour those near you, while the rest of the country gets indebted. Second, if you measure inflation only in the metropolitan area, it's in your best interest (image-wise and in the short term, i.e. the Argentine way) to concentrate your anti-inflation tactics there and leave "the interior" to its own devices. When the system starts to buckle under pressure (because you subsidize the demand but do not force the companies to invest and increase the offer), you deny it for as long as you can. And then you do something. You can imagine how close to the brink we've come if you consider the government is taking this step now, after the president's image has plunged and with a cooling economy on the horizon.

So, porteños and platenses, welcome to the rest of the country. Don't complain; you're still getting lucky.


  1. Anonymous13:56

    Hi, Pablo.

    As a potential denizen of the country, I find this post interesting. I am one who consumes a lot of electricity.

    I still admire your having learned to write in English so well, even though I notice some British spelling mixed in with an American style. I wonder what the pronunciation is like for those who learn the language there. I found a blog by somebody in Funes who is an instructor at ARICANA, but it seems she does not check her blog that often. What is your background as far as having learned the language? I wish I had studied some while growing up there.

    You can leave this out:
    You should replace the word remembers with reminds in your current post. Also, it might help to revise a manual of style for some punctuation issues related to American English.

    Take care.

  2. Anonymous19:43

    Hey Pablo,

    Curious to know if you have any sources for your statement that says BA has the highest per capita incomes? It was just shocking for me to read, as there are overwhelming numbers of poor in and around the capital. I would have guessed that cities like Rosario, Cordoba and Mendoza would have had higher per capita incomes....

    As for the idea that the largest center having the most demand and the lowest prices, that is the eventuality of any open market. I am not saying it is right, but buying power and infrastructure costs insure that the prices are lower than in other areas.

    Has Argentina always been built around the Capital and the "interior"? Latin-America, in general, is known for its mass migration to the capitals from the countryside in hopes of landing jobs. The shanty towns throughout Latin America are so large compared to other regions because the higher salaries rarely cover the higher cost of living. Is BA different then cities like Santiago, Rio, Sao Paolo, Lima, etc in this idea?

  3. Jeff,

    I just found this report about per capita GDP by province. I believe income is also highest in Buenos Aires, though that's more like common knowledge, based on what you hear from people who work and live there. AFAIK the only places where people consistently earn more than in Buenos Aires are in Patagonia (where the cost of living is considerably higher as well).

    In my opinion, in this case the state should regulate the utility fees to match the income level of the place. The capital proper should be charged at least double its current fees. Problems arise because the Autonomous City and the Greater Buenos Aires are interdependent, so for example, if you charge the BA-based companies more for power, that'll hurt their ability to hire and keep employees and pay them higher salaries, and many of those employees could come from the poorer areas around the city. The same goes for buses: for a middle-class porteño, a 1-peso ticket is ridiculously cheap, but not for the people from the Conurbano who must ride on the same bus. In the end, it all results from economic inequality, which the national government claims it's fighting against, though it really doesn't look like it.

    Regarding the urban structure of Argentina: the first wave of colonization came from the north, and gave us cities like Salta, Santiago del Estero and Córdoba. But then Buenos Aires started to dominate. Rosario grew because it became a major port, just as Buenos Aires. People did migrate to the countryside, but the whole structure was designed to obtain primary products and ship them towards the ports. Our extensive railway system was built for the interests of British export companies, and it was designed so that products could get quickly to overseas ports and from there to the British Empire, which is why a railway map of Argentina looks like a half spider web centered in Buenos Aires, instead of the rectangular grid it should be.

  4. Anonymous04:55

    You do realize, unless my Spanish is failing me in this reading, that BA is ranked below the GDP of Santa Fe and Mendoza in the article you gave as your source???

    If I am correct, this would merely show that BA, with a huge buying power and population - which comes hand in hand with decreased infrastructure costs - would actually require lower costs for necessary items than the richer provinces???

    I know the percentage might not justify the extreme dollar value, but it is something significant to realize that Santa Fe, Cordoba and Mendoza, all of which benefit from cheaper accommodation and food costs, would naturally have higher prices for some nationally subsidized amenities???

  5. Anonymous05:02

    I guess I failed in asking whether you refer to BA as simply the capital city, or the entire province???

    If you are refering simply to the capital's center, then I would ask about the cost of living their compared to else where in the province.

    While I have only ever been a tourist, I do know that rental costs are, at least, double in BA compared to the relatively rich Mendoza province. This would lead me to believe living expenses are also much higher in BA???

    And, although I do know that you believe that the poor are poor for more reasons that the rich making them poor, I would question whether or not the official figures count the nearly countless amount of people living in the poor "shanty towns" that surround the capital city?

    That wall, on the way to the airport, was not built to support graffiti artists but rather to hide the poor communities behind it!

  6. Jeff: By "Buenos Aires", unless stated otherwise, I mean the Autonomous City of Buenos Aires. There are shanty towns inside the city, but most of the poverty in the metro area is around, not inside, the city itself.

    All that poverty, by the way, has stayed the same for quite a while now, despite the huge subsidies granted to utility companies and public transportation, which suggests that those subsidies (money mostly taken from the "interior") aren't the appropriate tool to fight poverty. The federal funds granted by the government to local Greater BA administrations (at the whim of the president, and based on partisan loyalty considerations) suffer from the same "problem".

    The federal state breaks tax collection records every month and yet there seems to never have enough money to "help the poor" (sarcasm intended). Note I don't advocate for less taxes -- I'm only saying they must be doing something wrong with them.


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