A Supreme Court ruling in Argentina yesterday thrust that country back into unpredictable territory.
Ratifying a lower court decision, the justices ordered the government to repeal increases in natural gas rates for residential customers until it holds public hearings. The court said wellhead gas prices set by the government require hearings as well. The landmark ruling suggests electricity rate hikes will be subject to the same criteria.
President Mauricio Macri swept into office last December pledging to dismantle huge subsidies that blew out the fiscal deficit under his predecessor and nemesis Cristina Fernandez de Kirchner. Now he and his self-described technocrats are back to square one.
One can only imagine how the hearings planned for next month will play out in Argentina’s politically charged climate. Explaining the country’s deep price distortions from the wellhead to the pump does not lend itself to popular discourse. In the meantime, his opponents, some allied with Cristina, have coalesced. It’s hardly surprising given the cumbersome way the rate hikes were rolled out at a time of more than 40pc annual inflation.
Expect plenty of distracting headlines over the next few weeks, in the form of further judicial action against Cristina and her cronies accused of stashing loot in a convent and running phantom hotels.
The botched tariff hikes have extinguished some of the initial enthusiasm from the business community that greeted Macri’s victory in November 2015 elections. Although the new government has made progress in lifting Argentina out of its financial hole, investors are still waiting for the country to get onto a steady and predictable course.