Inching Closer to the Cliff: New Pressure on Argentine Utilities
Argentine utility companies are feeling renewed pressure from the Argentine government on their business operations. Owing to rampant inflation and the Argentine peso devaluation, the government is once again capping tariffs by utility companies, further squeezing the utilities' profit margins. More troubling still, the recent decision to repay its International Monetary Fund debt frees the Argentine government from the international institution's oversight, thereby eliminating one of the few supporters for tariff renegotiation and energy sector reforms.
* In the short term, these changes are likely to further constrain new energy sector investment and result in declining system reliability.
* Little improvement is expected during this presidential election year, and only under CERA's more promarket scenario does a window of opportunity appear for the private sector to negotiate a comprehensive reform with the government.
