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UPDATE 1-Argentina reinstates higher heating gas prices after hearings
October 7, 2016 / 3:47 PM / in a year

UPDATE 1-Argentina reinstates higher heating gas prices after hearings

(Adds quote from energy minister, context)

By Caroline Stauffer and Hernan Nessi

BUENOS AIRES, Oct 7 (Reuters) - Argentina’s austerity-minded government announced a sharp increase in home heating gas prices on Friday after previous efforts to cut consumer subsidies that kept prices low were criticized and challenged in court.

Prices will increase between 300 and 400 percent for home heating gas and up to 500 percent for companies, according to an announcement in Argentina’s official gazette.

“This will decrease imports and subsidize only those in need,” Energy Minister Juan José Aranguren said at a news conference, explaining the subsidy cuts would be gradual.

President Mauricio Macri, who took office in December, is trying to fulfill campaign promises of undoing the previous administration’s heavy market controls without sacrificing public support ahead of congressional elections next year.

Macri slashed natural gas subsidies early in his term in a bid to rein in the budget deficit and attract investment.

Heating bills then soared during a particularly cold Southern Hemisphere winter, prompting public protests. Macri then told Argentines to wear warmer clothes rather than turn up the heat to support austerity measures, which spurred widespread mocking on social media.

The president later promised to cap home heating gas hikes at 400 percent but the Supreme Court ruled in August that consumers must have the opportunity to weigh in before price increases were applied.

The hearings were held last month. Government supporters say Argentines became accustomed to generous subsidies that made gas prices lower than elsewhere in Latin America.

A reversal of the price increase led to lower consumer prices in August, with inflation that had been seen around 40 percent on an annual basis slowing to just a 0.2 percent monthly rise. Raising gas prices will likely spur inflation again.

Finance Minister Alfonso Prat-Gay said last month the delayed subsidy cuts were one reason the government announced a higher-than promised budget deficit of 4.2 percent of gross domestic product for 2017, rather than 3.3 percent as previously promised. (Reporting by Hernán Nessi; Writing by Caroline Stauffer; Editing by W Simon and Bernadette Baum)

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