The Minister of Economy, Luis Caputodecided that Electricity and gas rates will not experience increases due to inflation starting in July. However, its portfolio is still working on a new monthly indexing mechanism that will be implemented from August. In addition, the increase in the fuel tax (ICL), scheduled for next Monday, will also be deferred, as in May and June, according to sources from the Treasury.
The government is seeking to avoid a pause in the inflation slowdown that could have occurred in June by choosing to postpone increases in sectors sensitive to consumers. However, this decision could put further pressure on retail prices in the future.
In the next few hours, the Executive Branch will issue a decree to defer the increase in the ICL scheduled for Monday, as in the previous two months. From July 1, the tax increase will result in a rise of only 1% in the final prices of gasoline and diesel, significantly lower than the 18% initially planned, according to official sources.
The decision of Caputo not only seeks to maintain the disinflationary path. The fiscal surplus achieved until May and the prospects of approval in Congress of laws that will increase revenue (Ley Bases and fiscal package) provide greater room for maneuver for the Ministry of Economy.
If the ruling party’s legislative projects are delayed or fail, the Ministry of Economy could compensate with greater increases in the ICL, as agreed with the International Monetary Fund (IMF).
The oil companies -YPF, Axion, Shell and Puma- They could pass on to the pumps the 2% corresponding to the monthly devaluation of the peso to stay in line with international prices. Since the arrival of Javier Milei to power, fuels have increased more than 110% on averagerecovering part of the freeze implemented during the management of Alberto Fernandez.
“Companies are collaborating with the Government to increase prices as little as possible because greater macroeconomic stability benefits them more than anything else”commented an official in dialogue with the refiners.
As for public energy services, the increase postponed in July affects the distribution and transportation components, two of the four elements of the bills, in addition to the cost of generation and taxes. The Ministry of Economy planned to implement a monthly update mechanism to avoid delays in real terms.
Initially, the update was going to be based on the variation in the Indec Consumer Price Index (CPI) since May, but Caputo decided not to apply this scheme and is now working on an indexation that takes into account future inflation expectations, expected for the next few years. months. The officials consulted did not provide details about the new system or when it is expected to be implemented.
The cut in subsidies applied by the Ministry of Energy, led by Eduardo Rodriguez Chirilloin June will have a significant impact on bills, especially for middle- and low-income users. Added to this is increased seasonal consumption in winter, which will result in higher bills with increases of more than 400% for electricity and 1,000% for natural gas.
