Monday, February 26, 2024

ARGENTINA | 08-02-2024 17:02

Milei squeezes governors, eliminates transport subsidies to inland provinces

In the midst of the war with governors after the failure of his reform bill, president moves to eliminate subsidies overnight; Fares set to soar as provinces face funding shortfall.

President Javier Milei’s government on Thursday announced the elimination of public transport subsidy fund for provincial governments and the deregulation of fare rates, squeezing regional governors and authorising severe price hikes.

In a statement issued by the Economy Ministry, Milei’s government announced that it would eliminate the so-called ‘Compensation Fund for the Interior,’ which pays subsidies to firms providing transport services in Argentina’s provinces.

It said subsidies would also be cut in the Buenos Aires Metropolitan Area (AMBA). Prices in the region have soared this week following the authorisation of new price hikes by the government.

The ‘Compensation Fund for the Interior’ is used to subsidise urban and suburban passenger transportation by bus outside the Buenos Aires Metropolitan Area through transfers made by the National Government to "guarantee the population's access to the services," as detailed in Resolution No. 82/2022, dated February 2022, signed by former president Alberto Fernández.

In the September-December period of 2023, the national government shelled out more than 42 billion pesos via the fund.

Without the cash, provincial governments will have to authorise a sharp increase in ticket prices or subsidise fares with their own funds.

The move comes with tensions running high between the Executive and provincial governors as a result of the defeat of Milei’s sweeping omnibus reform bill. In a series of posts on social media, the president has indicated that he blames regional leaders for not ensuring their lawmakers backed the bill and will, as a consequence, hit them with greater austerity.

A communiqué issued by the President's Office directly blamed the governors, accusing them of seeking to “destroy” the bill and “turning their backs” on Argentines.

Industry representatives said the move would definitely lead to sharp increases in fares. 

"This is an important change. The compensation fund, which is the subsidy item paid to bus lines in the interior, is eliminated. It does not affect the Buenos Aires Metropolitan Area at all, but in the provinces it will imply a fare increase or higher contributions from the [provincial] governments," said José Troilo, president of the Cámara Empresaria de Autotransporte de Pasajeros (Business Chamber of Passenger Transportation, CEAP).

Trolio said that those in the sector only learned of the news when the government published its communiqué.

“We will see if it is applied as from this month because they are monthly allocations that the Nation [national government] used to transfer to the provinces, according to the number of buses,” he added.

"We saw this coming. It is a substantial change because between 20 and 25 percent of the income are national subsidies. It completely imbalances us," said Saúl Isaacson, representative of the Cámara Empresaria del Transporte Multimodal (“Multimodal Transport Business Chamber,” CETRAM), in an interview with Cadena 3 Rosario.

Presidential Spokesperson Manuel Adorni claimed at a press conference on Tuesday that “98 percent of discretionary transfers” to provincial governors had been stopped, adding that such payments had been “historically” used to “do politics.”

"We are making transparent a system that was working only in favour of politics itself," commented the spokesperson. 

"The resources that correspond to each jurisdiction are being sent through automatic transfers, just as it always happened,” he concluded.



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