Argus Media Limited

09/21/2021 | News release | Distributed by Public on 09/21/2021 09:19

Political row clouds Argentina’s energy plans

Argentina's president Alberto Fernandez has shaken up his cabinet after a public row with his powerful vice president, foreshadowing further political tensions that could derail efforts to rejuvenate hydrocarbons investment and to cut energy subsidies.

Fernandez shifted his close cabinet chief Santiago Cafiero to the foreign ministry and replaced his security, agriculture, education and science ministers as well as his communications secretary, another close ally, a week after a crushing defeat in 12 September nationwide primaries. Tucuman governor Juan Manzur replaced Cafiero.

Economy minister Martin Guzman notably survived the overhaul at a time when Argentina is negotiating repayment of a $46bn IMF loan. Energy secretary Dario Martinez also remains in place.

Nearly all of the new cabinet faces had served in the administration of vice president Cristina Fernandez de Kirchner when she ran the country in 2007-15.

The defeat in the primaries raised the possibility that the ruling Peronist coalition could lose its control over congress in the 14 November legislative elections.

In the days after the electoral blow, numerous ministers and high-ranking officials allied with Fernandez de Kirchner offered their resignation. President Fernandez's initial defiance crumbled after his vice president issued a scathing open letter on 16 September in which she blamed his economic policies for the "political catastrophe". The president announced his cabinet overhaul the next day and the new ministers were sworn in on 20 September.

Pressure to reverse the ruling coalition's dim political fortunes will likely force the administration to prioritize social spending over economic initiatives, including a bill to promote oil and gas investment unveiled last week.

Enduring subsidies

A proposal to slash costly energy-sector subsidies now looks shaky as well. Residential tariffs have largely been frozen during the pandemic.

A 2022 budget bill the government sent to congress last week foresees a decrease in energy subsidies to 1.5pc of GDP from a current 2.2pc.

That reduction would be achieved in part by "segmenting" tariffs, the economy ministry said, reviving a staggered subsidy system. Previous efforts at segmentation have failed amid complications in implementation.

Additional savings will come from the expiry of a 2017 subsidy program in which approved tight and shale gas projects received up to $7.50/mn Btu, falling by $0.50/yr until reaching $6/mn Btu in 2021.

Lawmakers allied with Fernandez de Kirchner are likely to balk at any plans to cut subsidies amid a years-long recession and annual inflation of more than 50pc.

By Daniel Politi