Argentine electricity sector in state of emergency

Subject

Argentina's electricity sector is in urgent need of reform.

Significance

One of President Mauricio Macri's first acts after assuming office last month was to declare a state of emergency for the electricity system. This status grants the authorities ample powers to push through reforms and will be in place through December 31, 2017.

Impacts

• The price of electricity dropped 73% in real terms since 2001 owing to tariff freezes, pushing companies into the risk of bankruptcy.
• At 2.7% of GDP in 2015 - some four times the world average -- energy subsidies will be key to reducing public spending.
• Targeting of subsidies will also be key; currently 22.9% benefit the richest 20% of the population, while only 17.4% for the poorest 20%.