Festival of profits and sky-high ticket sales in 2024

The government has just promoted a tariff increase of more than 150% in May, which came with June consumption. In addition, the increased use of gas by users with the arrival of winter impacted bills that reached increases of up to 1000%.

Following this increase, Minister Caputo decided to postpone the July increases until August. The May rate hike had not been well received and, expecting a resurgence of inflation, the government could not pour more fuel on the fire of the only number it boasts about, that of the fall in inflation, despite, of course, having put the economy on the road to depression.

Winners

Milei’s economic plan had big winners and the energy sector was one of them. The Metrogas company, according to its financial statements for the first quarter of 2024, showed a year-on-year increase in its net profit of 1,418%that is, with respect to the same period last year, the company multiplied its profits by more than 15 times.

Metrogas had already made profits in 2023. $96.355 millionan increase of 432.2% compared to the previous year without increasing its gas sales, as reported in its annual report to its shareholders. At the same time, the value of its shares, with the largest market liberalization since Milei’s DNU, tripled.

Meanwhile, two other major hydrocarbon magnates also showed exorbitant increases in their profits, according to their balance sheets filed with the National Securities Commission. Eduardo Eurnekian (who was godfather of the current president), owner of CGC, showed an increase of 1398% in its earnings, more than $271 billion for the first quarter. While for Tecpetrol, Paul Rock (contributor to Milei’s campaign), the increase was 2731% with more than $201 billion for the same period.

On the other hand, according to a study by the Institute for Thought and Public Policies (IPPyP) headed by Claudio Lozano, based on data from the National Securities Commission, it can be seen that privatized companies obtained an increase in their net profits of up to 21.217% year-on-year in the first quarter of the year, as in the case of Central Puertoa de 3220% as in the case of CT Ensenada Barragán (belonging to Pampa Energía, the Mindlin family, and YPF).

Adjustment at the request of the IMF

The government aims to reduce energy subsidies in order to achieve the fiscal balance required by the International Monetary Fund. According to the Observatory of Tariffs and Subsidies of the Interdisciplinary Institute of Political Economy (IIEP) dependent on the UBA and CONICET, by June subsidies to public services had been reduced by 34% in real terms. As for energy subsidies, for the first quarter of 2024 they were reduced by 67.4% in real terms, according to the IIEP.

The postponement of the July increase implies new disbursements by the government in subsidies to compensate companies. The comings and goings of Minister Caputo show the weak situation of the economy and the disagreements in the cabinet with Rodríguez Chirillo, Secretary of Energy. However, the profits to companies are not touched.

What is striking in this case is that while the Government eliminated subsidies intended to contain the rates paid by users, it recognized as “acquired rights” the subsidies to supply, such as those contemplated in the framework of the Gas Plan. Thanks to this, private companies received and will receive billions of pesos. Among the beneficiaries are foreign companies, such as Wintershall, Shell, Total Energies, Equinor, and even the International Finance Corporation (IFC), an international organization belonging to the World Bank Group. Among the local players that have benefited most from the subsidy in recent years are Tecpetrol, owned by Paolo Roca, who today controls the board of YPF through his trusted men; and CGC, Eurnekian’s oil company, which, as we have seen, both saw their profits grow exponentially with the government.

More benefits with RIGI

With the Ley Bases approved by the Senate last week, obscene benefits were given to the oil/energy sector. The most important has to do with Liquefied Natural Gas (LNG), which is of such interest to Milei’s friend and partner, Paolo Rocca.

The text includes an article to govern LNG exports that complements the content of the Large Investment Incentive Regime (RIGI), whose current version includes the category of “Strategic Export Projects,” tailored to oil companies.

In short, the law would guarantee all the benefits contemplated in the LNG Promotion Regime proposed by the Frente de Todos in 2023, with partial sanction in the House of Representatives. A project that was already more than generous with the companies, drafted by YPF (and Petronas).

The law would guarantee them, from the second year of joining the RIGI, total exemption from export duties, i.e. 0% withholdings, and free availability of 100% of the foreign currency obtained. Something similar happens with Profits and VAT.

The minimum powers that the State reserved for itself under the FdT Regime are eliminated by the project. This is the case of the possibility of requiring that 10% of the LNG produced be destined for the domestic market in the winter months, that is, those in which there is a gas shortage. In other words, the obligation to comply with local supply is removed.

LNG export permits for 30 years would imply “the right to export all authorized volumes continuously and without interruptions or restrictions, reductions or redirections for any reason.” Almost a promotion of shortages.

This, in line with the total liberalization of foreign trade in hydrocarbons, can lead to the ridiculousness of a company exporting LNG and creating a shortage in the domestic market at the same time as importing LNG, which is charged up to 10 times more than natural gas produced in the country.

Send gas to the needs of the people

Energy companies have benefited greatly from Milei’s policies. DNU 70/23 empowered the Energy Secretariat to redetermine the structure of current subsidies. At the same time that it recognized increases in the prices of energy generation, processing, transportation and distribution, it withdrew subsidies for the majority of the population, but maintained them for companies with the Gas.Ar Plan.

The new Ley Bases deepens the plunder, the surrender and the dependence, which will lead to further hindering the access to energy as a right for the population, increasing the so-called “energy poverty”, and will further protect the fossil nature of the country’s energy matrix.

At the same time, Milei’s government demonstrated its ineptitude in planning the gas needed for the arrival of winter and had to run in search of ships for which it paid up to three times their value, while some industries and CNG stations were left without gas. The “chainsaw on public works” also implied the non-completion of the Néstor Kirchner Gas Pipeline, which could transport up to 11 million cubic meters per day (MMm³/d) in the first section Neuquén – Salliqueló. The specialist Nicolás Gandini had pointed out that the 12 shipments of imported gas oil had an approximate cost of 500 million dollars, while finishing the works on the gas pipeline would cost at most 100 million dollars.

The solution is not to grant more concessions to privatized companies or to national and foreign companies that have proven to be true plunderers of common natural resources. Market deregulation threatens self-sufficiency in a gas-producing country, in addition to giving a free rein to environmental matters in a highly polluting sector.

The comprehensive nationalisation of the entire energy industry under the management of its workers, professionals and experts from public universities, and affected communities in the different territories, would be a first step towards rationally planning a truly fair energy transition from below.

This measure would allow a democratic decision to be made on which sources of energy generation will be used. Centralized planning in a single state-owned company, and obtaining financing through non-payment of the external debt, the removal of subsidies to oil companies and the nationalization of the banking system, should be combined with decentralized deliberation in each region. In this way, the convenience of using different sources of generation in each case could be evaluated, taking advantage of the climatic conditions of each area, and rationally planning the use of natural common goods necessary for the use of intermittent renewable sources in their generation.

At the same time, we must end the waste and energy subsidies to the big capitalists, imposing energy efficiency measures in industries. In this area, workers’ organizations such as Madygraf and FASINPAT (formerly Zanon) are one step ahead, and have designed plans that combine the knowledge of the workers themselves with supportive professionals. Workers’ control in industries would not only allow for improved energy efficiency but also for problematizing what is produced and why.

There are alternatives to energy shortages, plundering and environmental destruction. Greater democratic planning is needed against the lobby of the usual plunderers.