BUENOS AIRES, Argentina – In the midst of one of the colder winters in recent memory in South America, Argentine President Mauricio has settled on a 400 percent increase in the price of gas after seeing his earlier initiative of a 1,000 percent increase shot down by a federal court.
Macri, a wealthy businessman and politician born to an Italian billionaire construction tycoon who arrived in Argentina in 1949, has hit the ground running in his first seven full months in office by removing currency regulation (which has led to a 30 percent depreciation in the Argentine Peso), laying off over 150,000 public workers and agreeing to pay the New York-based vulture funds that have refused to accept restructured loan payments.
Furthermore, Macri has removed the subsidies instituted by his predecessor, Cristina Fernández de Kirchner (2007-2015), and went a step further by adding higher taxes on vital services like public transport fares, electricity and water. The costs of these services increased between 200 percent and 700 percent and Macri has warned of even higher prices and more layoffs.
Earlier this week, Macri’s government sought to raise the price of gas by 1,000 percent in the middle of a cold snap, which led thousands of Argentines out onto the streets to protest against this measure with their new gas bills in hand.
In La Plata, the capital of Buenos Aires Province, the Federal Court declared null the increases demanded by Macri’s Ministry of Energy and Mining. In doing so, the court rolled back the prices to those before the 1,000 percent increase for all the residents in the province, where over 16 million people live (or about 4 of every 10 Argentines).
Given the importance of the ruling and the number of people affected, courts in other provinces were expected to follow suit and nullify the price increases just as judges César Alvarez, Olga Calitri and Leopoldo Schiffrin did in La Plata because the cost increase was “not preceded by any public hearings.” The Supreme Court was then due to make the final decision.
At least for now, there will not be a need for the highest court’s input because Macri’s Energy Minister Juan José Aranguren, who was the head of energy giant Shell’s Argentina branch, has backed down against the demands of the people.
Aranguren announced that the 1,000 percent increase has been rolled back to “only” 400 percent, and he added that the price of gas will remain frozen after the 400 percent increase until 2017.
“We want to announce that from listening and conversing with the opposition and society-at-large, this government has decided that there needs to be a balance and more day-to-day stability so we are instituting a cap on increases on the price of gas that is set at 400 percent,” added Chief of Cabinet Marcos Peña, speaking for a government that was apparently shocked that people would disagree with a 1,000 percent increase in the cost of a necessity.
The government has chalked up the increases on gas due to a desire to cut consumption: Aranguren said that high domestic demand is not keeping up with domestic production.
“The previous government lowered prices so more people consumed energy, whether it was gas or electricity, and so demand rose. The local production did not rise, however, and so we are having energy shortages that will be regulated by a rise in cost and attempts to conserve more energy,” Aranguren said.
In April, Aranguren said that the price of gas will increase by 300 percent but as winter neared, he floated a figure of 400 percent. Then, in the middle of the winter’s cold snap, the 1,000 percent figure suddenly appeared.
With the 400 percent cap, Macri’s government settled the worries of some but given that the revised increase is still quite dramatic, the public remains on the streets while opposition lawmakers continue to push against Macri in Congress. Citizens and opposition politicians alike recognize the need to save energy but they reject Macri’s “shock and awe” tactics in dramatically raising the prices of services used by everyone.
Macri’s government insists that “painful but necessary” cuts to public spending, mass layoffs, curbed wages and hikes on taxes and vital services are needed to foster a more stable economy and attract foreign investment, but his measures to date have only led to a worsening economic picture marked mainly by growing inflation.
The issue of high inflation is a very touchy one in Argentina.
Amid a struggling, neoliberal-oriented economy, then-leader Fernando de la Rúa (who served as president from December of 1999 to December of 2001 and eventually left the Casa Rosada amid riots and unrest) restricted many workers’ rights (like Macri plans to do) while de la Rúa’s other bills simultaneously cut public spending drastically in order to placate the IMF’s demands in exchange for more loan funds.
The austerity measures took their toll economically and that same issue of inflation reared its ugly head as the numbers continued to grow out of control. Unrest ensued with riots taking place across the country and a state of emergency was declared to try to curb the protests; 26 people were killed in the chaos and hundreds more were injured. De la Rúa, meanwhile, was forced to flee from the rooftop of the presidential palace by helicopter as protestors encircled the Casa Rosada.
De la Rúa’s conservative economic policies and austerity measures eventually failed even with the IMF loans as inflation soared and foreign investment practically disappeared. Argentina was forced to default on its debt several days after de la Rúa stepped down on December 21, 2001 and its economy experienced a national collapse.
Given this history, it makes sense that Argentines are preoccupied with the issue of inflation. With Macri’s policies in place, the Central Bank of Argentina revealed that inflation in April had reached its highest month-to-month increase since 2002 when the country was in the midst of crisis. Specifically, inflation rose from March to April by a rate of 6.7 percent, a number last seen 14 years ago.
Thus, when added to the other months of 2016, this meant that inflation has risen by 19.4 percent from January to May. In comparison, during the same period in 2015 under Macri’s predecessor Cristina Fernández de Kirchner (2007-2015), the figure was 8.0 percent. The year-on-year inflation rate was 41.7 percent.
To be fair, Macri did say earlier in the year when he instituted the changes that the nation would not see the benefits of his measures until the second part of year, i.e. July, but positive numbers are yet to be seen and members of the government have already begun saying that improvements will now not be seen until next year.