Subsidies in the Argentine economy totaled an estimated 4.9% of GDP in 2013

11th Tuesday, February 2014 - 08:18 UTC Full article

Cheap prices for energy and transport continue to absorb Argentine budget resources

Economic subsidies for Argentine public and private companies last year totaled an estimated 143 billion pesos, or 4.9% of GDP, the highest level in eight years, according to a joint report by the Professional Council of Economic Sciences (CPCE) and the Argentine Institute of Fiscal Analysis (IARAF) released this week, and which was summarized by the Buenos Aires Herald.

“According to the seasonal figures observed in the last two years,” the institutions anticipated that approximately 32.92 billion pesos were injected into public and private companies’ coffers by the government in the final month of 2013.

The CPCE and IARAF’s estimate for December remains just that, however, calculated based on inflation and spending patterns, with official and conclusive data on state spending during the month yet to be published.

The 4.9% of GDP is 0.6 percentage point higher than the 4.3% registered in 2012 and 2011, and almost four times higher than the 1.2% seen in 2006.

Up to November, the last month for which the Cristina Fernández administration has released official data, subsidies for the sector had clocked in at 110.082 billion pesos, already surpassing the level reached in 2012. Such spending weighed in 43.6% higher than the first 11 months of 2012.

The report points to the “growing importance of economic subsidies” in the last few years compared to real direct investment.

“Real direct investment... has systematically come in below spending executed in current transfers to companies since 2006,” the document reads, specifying further that “as of 2009, spending on public works has lost importance with regard to subsidies, going from representing half of the latter to 30% in 2012.”

The institutions estimate that 41.264 billion pesos were spent on public works during 2013.

According to the CPCE and IARAF, the recent growth in subsidies has been largely driven by the energy sector, whose state funding was boosted 58% in the first 11 months of 2013, significantly higher than 2012’s hike of 23% on 2011’s figures.

Energy spending accounted for 64% of all economic subsidies up to November 30 at 70.375 billion pesos, with the need to import fuel seemingly felt more than in 2012.

The transport sector 26.104 billion pesos from the government during the same period, or 24% of all economic subsidies and 21% more than in 2012. Together, energy and transport subsidies accounted for 88% of the total spent by the Argentine government to boost companies.