ARGENTINA: Consumer Defence Groups Rebel Against Planned Gas Hikes

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, May 6 2004 (IPS) - A public hearing called to discuss an increase in the price of natural gas in Argentina, already agreed by the government and private energy companies, was abruptly cut short Thursday under pressure from consumer defence activists and lawmakers, who said President Néstor Kirchner was ”extorted” by oil companies demanding a price hike.

The hearing was organised in Buenos Aires by the government regulatory body on natural gas (ENARGAS) to ”consider the normalisation” of domestic prices, for large consumers and, eventually, households and small users.

Government officials, representatives of the companies that produce and distribute natural gas in Argentina since the energy companies were privatised in the 1990s, lawmakers, and consumer defence organisations were invited to take part in the meeting and express their positions.

”We don’t want to be part of a circus. If the government is under pressure, it should call off the hearing,” Gimena Bruna, with the Union of Users and Consumers, remarked to IPS before the meeting was finally postponed.

The consumer defence groups and legislators based their arguments on statements made by Kirchner Wednesday during a visit to the United States.

Referring to the private companies producing natural gas in Argentina, he said ”they tried to extort us, saying ‘give us a price (hike) and we’ll give you greater volumes’ of fuel.”

He added that they ”covered up wells that were functioning” in order to create shortages and achieve their goal of a price hike. ”They admit this to me in private, and laugh,” said an indignant Kirchner.

”Repsol (Spain’s oil company, which acquired Argentina’s former state oil monopoly YPF) earned 2.6 billion pesos (905 million dollars) in profits in the last business year. And they claim they didn’t have the money to make the investments? That is a lack of respect,” said the president.

He was referring to the investments in infrastructure and exploration needed to expand natural gas supplies to meet both growing domestic demand as well as export agreements. In the privatisation contracts they signed, the companies committed themselves to making the investments.

The Argentine government has blamed the companies’ failure to live up to their contractual investment obligations for the shortfall in domestic supplies of natural gas and the government’s subsequent decision to cut exports to neighbouring countries.

The companies, on the other hand, hold the Kirchner administration responsible for Argentina’s energy crisis, because it froze utility rates despite the devaluation of the Argentine peso.

Kirchner’s remarks led the Federation of Associations of Consumers and Users of Argentina, an umbrella group of 15 consumer defence organisations, to file a lawsuit over the extortion of which the president was allegedly the target.

”Our president was the object of a clearly extortionist maneuvre (by the private companies) aimed at achieving an increase in gas prices”, says the legal complaint, to which are attached Thursday’s editions of newspapers quoting Kirchner.

The consumer defence umbrella group also called for an investigation of who was responsible for the alleged extortionist pressure, and demanded that they be arrested.

Socialist parliamentary Deputy Hector Polino pointed out that the constitution stipulates that public hearings must be held before utility rate hikes are agreed, which made Thursday’s hearing a ”farce” aimed at giving a veneer of legitimacy to the price increases, which are to go into effect next Monday.

Polino also said Repsol-YPF’s net profits were 300 percent higher than what was reported by the parent company in Spain, while he added that there are pipelines that are pumping gas at 15 percent below capacity.

”It isn’t true that they’re overloaded,” said the legislator, who argued that ”the government should insist that the companies live up to their commitments, or else cancel the contracts.”

In the end, Minister of Federal Planning, Public Investment and Services Julio de Vido, in agreement with Kirchner, decided to postpone the hearing and hold a meeting Friday in the seat of government, with a view to setting up a task force to search for solutions.

The hearing had begun on Thursday morning after the courts threw out a petition filed by the consumer defence umbrella group demanding that the price hikes that had already been agreed on by the government and the energy companies be cancelled.

The consumer group stated in its petition that the agreement on a price increase ran counter to Argentina’s laws, because it would allow utility rates to gradually increase until they were in line with export prices, which are three times higher than domestic prices.

The group also argued that the hearing called by ENERGAS did not serve the stated purpose, because the price rise had already been decided.

Consumer defence activists said the hearing was held merely to meet the letter of the law, which says public meetings must be called to authorise utility hikes. But, they maintained, since the resolutions reached by such hearings are not binding, they would simply be ignored.

The hearing, in which some 300 people took part, began in a tense climate because the courts had thrown out the consumer defence group’s petition. The tension continued to grow after Deputy Mario Cafiero suggested that the meeting should be suspended due to the ”extremely serious denunciation” made by Kirchner.

”They are kidnapping our gas, and they are demanding a price hike as ransom,” said Cafiero, who represents the small centre-left Alternative for a Republic of Equals party.

In the lawmaker’s view, the president’s statements were ”very brave”, but ”must be accompanied by an admission of the facts”: that ”in Argentina there is no shortage of gas, nor any restrictions on the capacity to pump and transport the fuel, but merely pressure to increase prices.”

Early this year, Argentina cut gas exports in order to ease the shortfall in domestic supplies, triggering an ongoing dispute with Chile and protests from Uruguay.

Cafiero was applauded by representatives of consumer groups, who demanded that the hearing be postponed. One activist even dumped a bottle of mineral water on representatives of the companies, who were waiting for their turn to speak.

Ombudsman Eduardo Mondino also suggested that the meeting be suspended, but the heads of ENARGAS said it should continue, amidst shouting and insults from consumer defence activists. Finally, recess was called, which will continue until the task force to be created by Kirchner proposes a solution.

The president also said Wednesday in New York that the oil companies had decided to export ”20 million cubic metres a day” of natural gas to Chile, ”rather than supplying the domestic market,” which would contravene national laws that state that internal demand must be met before surplus gas can be exported.

He said the companies only continue operating in Argentina ”because of their high levels of profitability.”

In Buenos Aires, meanwhile, Sandra González, spokeswoman for the Association of Defence of Argentine Consumers and Users, said that if what Kirchner said is true, he should back out of decisions that have been reached ”behind closed doors”.

The price of natural gas in Argentina has remained steady since December 2001, when the peso was still pegged to the dollar, despite the fact that the value of the local currency has plunged to 2.89 to the dollar since the January 2002 devaluation.

The privatised public utility companies, in particular the firms that pump and distribute natural gas, have been pressuring the government to allow them to increase prices, while they have kept charging for exports to Brazil, Chile and Uruguay in dollars. Thus, export prices are now three times higher than what is charged for internal consumption.

Due to the energy shortages brought about partly by the rise in industrial demand for fuel that has accompanied Argentina’s recovery from a severe economic crisis, gas exports were reduced this year, and measures were recently announced to encourage energy saving practices.

The government also criticised the energy companies for failing to invest in exploration activities, which has led to a downwards correction in the country’s reserves from 40 to just nine years.

The agreement reached by the government would double prices for large consumers by late 2005. Although utility rates would not go up immediately for households and small consumers, they would eventually begin to rise, in order to bring all prices to the same level by late 2006.