In a key ruling, the Supreme Court has ordered the government to pay a debt of 15 billion pesos to the province of San Luis, dealing a blow to President Mauricio Macri's aim of enforcing austerity and achieving fiscal balance this year.
The situation could yet get worse too – Santa Fe province could be next in line, with decision a pending debt of 45 billion pesos waiting to be resolved.
Tuesday's ruling in favour of the western province of San Luis, which refers to a suit filed in 2015, was published by the Judicial Information Centre (CIJ).
The case is related to an longstanding litigation from some provinces addressing what the regional governments perceive as undue retention of so-called "co-participation" taxes. In Argentina, provincial governments rely on intergovernmental transfers from the federal state that arrive via monetary transfers, which make up a substantial part of their overall revenue.
At the end of 2015, when the Supreme Court first declared the retention of funds unconstitutional, the justices allowed a period of negotiation between the provinces and the government in a bid to solve the dispute. Though Córdoba reached an agreement with the Macri administration, Santa Fe has not. If the court rules in favour of the latter, the state could be forced to pay a further 45 billion pesos (approx. US$1.1 billion).
According to the court, which based its ruling on figures from 2006 to 2015, the ANSES social security agency must now pay 11.5 billion pesos and the AFIP tax collection agency 3.5 billion pesos to San Luis, complicating the Macri administration's attempts to cut spending. Those figures refer to 15-percent and 1.9-percent retentions from the 'co-participation' taxes which were used to finance the two institutions.
The decision was signed by judges Juan Carlos Maqueda, Ricardo Lorenzetti and Horacio Rosatti, the trio of justices some have branded the so-called "Peronist majority" of the court.On Tuesday, the nation's highest tribunal ruled in favour of San Luis, ordering the government to pay up. In addition to San Luis, the provincial governments of Santa Fe and Córdoba have also sued the government.
San Luis Prosecutor Eduardo Allende celebrated the ruling in an interview with Radio Mitre, saying he hoped the national government had "institutional responsibility and respect for federalism" and was willing to address how retribution should be paid.
"It is a very important moment for the province, after 10 years of litigation, finally the Supreme Court has defined the amount owed by the national government," he said.