October’s midterm elections are slowly starting to loom large, and the Macri administration still doesn’t have favorable numbers to show in the economic front — key at the time of captivating voters. As a result, President Mauricio Macri has announced a series of updated public spending goals in order to mitigate Argentina’s inflation and increase support for the Cambiemos coalition in the coming election.
Macri still plans to move forward with reduced public spending by decreasing government subsidies for utilities and public transportation, as well as reducing government overhead by streamlining organizations. However, the timeline for the tax increases on utilities will be strategically spread out across this year and the next to allow for more gradual adjustment, which his administration hopes will turn into less inflation, and, hopefully, happier voters on October 22nd.
The new plan is as follows:
- Gas bills are set to increase gradually by 67 percent, over three dates: April 1, 2017; November 1, 2017; and April 1, 2018.
- Electricity bills are set increase twice over this year.
- Water bills will increase too, but it will happen gradually, rather than all at once, as it was initially planned.
- Public Transportation fares were set to increase in April but will do so after the elections in the end, as announced by Transportation minister Guillermo Dietrich.
According to an INDEC report from yesterday, inflation last February clocked in at 2.5 percent. So in order to reach the government’s goal of an annual inflation of 17 percent or less, the average rate for each month shouldn’t be higher than 1.3 percent. February’s increase in electricity bills was partially responsible for February’s inflation, so the new, distributed taxation plan will likely create less inflation impact for consumers. Or at least it will spread it out in a way that will be easier for them to digest.
While Macri ultimately approved the new timeline, the plan to spread out utility bill increases originally came from Buenos Aires Governor María Eugenia Vidal. If successful, the results would help increase voter support for candidates in the Cambiemos coalition, as inflation is a top concern for most voters.
The Cambiemos platform’s basis is economic “normalization,” achieved through the reduction of fiscal deficit and an lowering annual inflation rates, which were consistently high during the last years of the Fernández de Kirchner administration. Projected fiscal deficit goals, according to Finance minister Nicolás Dujovne, are 4.2 percent of the country’s GDP in 2017, 3.2 percent in 2018 and 2.2 percent in 2019.