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The government attacks the cost of energy to reduce the exchange rate gap at the border

The government attacks the cost of energy to reduce the exchange rate gap at the border

The government announced new measures targeting the border departments of Uruguay with Argentina, aimed at combating or, at least, alleviating the exchange difference with the neighboring country, which affects trade and employment in the west coast area. Among them, two stand out specifically directed at the cost of services, one of the structural problems behind the price gap.

The measures were expected, although there was not much prior determination about what they would be. The most publicized had been the increase in the discount to Internal Specific Tax (Imesi) in fuels, taking it from the current 30% to 40%. It was no coincidence: the fuel price It is one of the main complaints from coastal merchants and producers; and, likewise, a part of the underlying problem in the difference in prices with Argentina that, thanks to the situation, only increases.

According to the economist and person in charge of the study of border prices of the Economic Observatory of the Catholic University of Uruguay (UCU), María José Medín, the exchange difference and the Argentine blue dollar can only explain the current severity of the price gap between the two countries. Behind it are the structural problems that have historically made Uruguay more expensive than Argentina.

Among them, the “high production costs that make us less competitive, such as energy costs, public services and a certain level of high taxes”.

In this sense, two of the five measures announced by the Executive Branch to reduce costs at the border would seem to be aimed at, and to try to alleviate —because there is still a long way to go to talk about a solution— the problem generated by the price gap.

Measures that target structural problems

One of the initiatives announced is the study to advance with the waiver of fixed charges in the rates of water and energy services provided by SBI and joint venture for businesses included within the benefits of the Border Law.

This is relevant as Uruguay has the most expensive electricity in Latin Americawith a value of 285 dollars per megawatt (MWh) —residential rate— against the 55 dollars per MWh paid in Argentina, according to data from the report of Energy Indicators of SEG Ingeniería (corresponding to March).

In this way, the measure seeks to reduce the difference that is paid for the service on one side and the other of the border, in order to lower the costs that Uruguayan merchants and producers have —and that their Argentine peers do not have.

On the other hand, the second measure is the increase of discount at Imesi for border service stations up to 40%, as long as certain conditions are met —service stations located within a maximum radius of 20 kilometers from land border crossings and for final consumers who pay by means of electronic payment.

Currently, Uruguay also holds first place in terms of having the most expensive fuel in the region. Thus, in the first days of May —based on information from SEG Ingeniería, prepared with data from Global Petrol—, In the country, 1.85 dollars were paid per liter of gasoline and 1.47 dollars per liter of diesel. In Argentina, meanwhile, prices are the lowest in the world. Mercosur: $1.05 a liter for gasoline and $1.11 for diesel.

Source: Ambito

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