Rates: strong increases until mid-year, in search of the “equilibrium value”

THE Energy and public transport tariffs, water and fuel prices tend to reach an “equilibrium value” by the middle of this yearafter a rapid correction in relative prices that began after the elections which confirmed Javier Milei as President of the Nation.

Precisely these prospects of higher earnings have translated into a strong jump in the shares of listed companies.

Power

Behind the removal of subsidies to high-income families (level 1 of segmentation), this segment is also paying the entire cost of electricity, as was the case until 2001 and as was the case between May and August 2023 and in November last year. An AMBA residential user classified as “N1” saw an average increase of 183% in February and will pay an average bill of $29,637 per month, according to numbers from Consultant in Economy and Energywith monthly adjustments starting from May based on the evolution of wages and inflation.

In the meantime, low- and middle-income families (N3 and N2) still bear more than 90% of the cost of electricity with state help, but saw an increase in the margin of transporters and distributors, as well as the N1. For these segments, which represent over 70% of residential users at a national level, The elimination of subsidies would come in May, with the implementation of the Basic Energy Basket.

The national state will only subsidize those who allocate more than 10% of their income to energy, as long as it is “reasonable” consumption. and who meet asset criteria such as not owning a car or motorbike less than 5 years old, not having purchased dollars or other foreign currency in the last 3 months and not having advance payments not related to employment in a dependent relationship. , among many other reasons.

At the end of 2024 there will be a Comprehensive Tariff Review (RTI) for all companies that provide public transport and distribution services of electricity and also natural gas through networks, in which income levels and update mechanisms for tariffs will be studied. concessionaire companies, as well as a investment plan which they must perform in return to improve the quality of the service and expand their networks.

On the gas front, the Government has not yet defined how it will transfer the real costs of supply (around 4 dollars per million Btu) to users, who in December paid 0.70 dollars, 17%. The increases are expected to be notable in winter, precisely in the period of greatest consumption. If all subsidies were eliminated and the lagging margins of companies were recognized, the jump could be more than 500% in the next quarter.

Fuels

Even fuel prices, a legally deregulated market but with YPF as the leader to follow due to its market share (60%), are close to their “equilibrium”. After the shortage in November, in the midst of the electoral campaign in view of the second round, an accelerated recomposition occurred.

At constant values ​​for January 2024, the average prices of petrol and diesel were equal to 596 dollars per liter in November, rising to 867 dollars in January, and falling to 803 dollars in February. The historical average since January 2010 is $827, according to calculations by the consultancy firm headed by Nicolás Arceo.

YPF executives told their investors this week that the gap with import parity has narrowed from the 28% it reached in early October last year, but is still at 10%. However, industry sources also suggest that in the medium term super petrol should tend towards 1.20 or 1.23 dollars per litre, when today in the city of Buenos Aires it is around 0.90,0.95 dollars.

Water, trains and buses

Returning to regulated services, water and sewerage under the jurisdiction of Agua y Saneamientos Argentina (Aysa) would have an increase of 209%, if the Government approves the proposal which will be presented in a public hearing this Wednesday 27 March. The company expects it will no longer need state subsidies in October, so it will also be crucial to index its rates to wages and inflation starting in May. In times of high inflation, indexation is here to stay.

As for public transport, trains have reached a minimum of 130 dollars in the Buenos Aires metropolitan area (AMBA) and buses at 270 dollars, in this case the increases will be bimonthly. The price recognized by the Government without fare compensation is around $850 for city buses, while companies claim the real cost was $1,000 in February. Closing this gap will be more traumatic, as travel expense values ​​have a high social impact.

The IMF and salaries

The objective that the government has for this year with the International Monetary Fund (IMF) is reduce subsidies from the equivalent of 2.1% of gross domestic product (GDP) to 1.3%, of which energy subsidies should rise from 1.6 percentage points to 1.1 ppan adjustment of between $2.5 and $3 billion.

This program has the other side of the coin growing weight that services will have in relation to family income.

According to the Interdisciplinary Institute of Political Economy (IIEP) of UBA and Conicet, the weight of electricity and gas on the average salary indicates that for high-income families they represent 5.6% of the total; while for the rest between 1.6% and 1.7%.

“Domestic energy spending in Argentina is one of the lowest in Latin America and the Caribbean. Argentines allocate 3% of their budget, while the region’s average is 9.5%. In comparison, per capita consumption of electricity in Argentine homes is one higher, and it is the country where energy is cheapest,” the Energy Ministry recently said at a public hearing to implement a new way of channeling subsidies to users.