Energy Resources in Argentina:
Analysis of Income
Marina Recalde
Considerations Regarding Primary Distribution ( ...continuation )

The results obtained from this estimate appear to show that the majority of participation for combined income stays in the hands of the producers. This situation can most clearly be seen in the period from 2002-2003, following the convertibility regime crisis20 in Argentina, during which time the difference between prices in local and international dollars for the resources in question manifested itself as an income transfer from consumers and the National State to the producers. However, since 2004, a decrease in income participation from the producers has been observed. This agrees with results obtained by Scheimberg (2007: 23-24), and is mainly due to price controls established by the State. Moreover, ad hoc regulations imposed on prices in the country decreased unitary income obtained by the producers in a period of increasing oil prices. Finally, a transfer of earned income from the Local State to the National State and consumers is observed beginning in 2004, despite the fact that they own the resource according to legislation and as such, they are theoretically the main landowners. A large part of this shift is due to the fact that the royalties that the local entities receive are set over the price following the deduction of the corresponding amount for export withholdings (Abram and Scheimberg, 2008: 27). On the other hand, we note that unlike other countries in the region, Argentina does not have a state oil company that operates on the production side, and as such, the State can only earn income on this process through the tax instruments mentioned above. According to Campodónico (2008: 21-23), for Brazil and Mexico, for example, 100% of oil income is kept directly in the hands of state companies, although for Petrobras, part of this income ends up with its private stockholders. Venezuela takes 74% and Ecuador 59%, and this income is collected mainly through income taxes and royalties.

Finally, regarding the income earned by consumers, the same situation is seen, as there is incongruity between domestic and international prices. As discussed at the beginning of this section, we define consumers as resource consumers, not final consumers. In other words, these would be the oil refiners or treatment plants and natural gas distributors. To the extent that the price differential is transferred along, reducing the relative price of the derivatives, this percentage of the income would end up in the hands of final consumers. To the extent that 100% of the transference of said differential is not carried out, the owners of the refineries and treatment plants would appropriate all or part of the percentage of this income. In this sense, vertical reintegration of the oil and natural gas chain in Argentina is of vital importance. As seen in Table 1, companies like ypy s.a., Petrobras s.a. and Pluspetrol participate not only in income collection in the upstream rung, but also in the refining sector as well as in other rungs of the electricity chain (Recalde, 2011: 3864:3866). In these cases, this vertical reintegration strategy implemented by agents of the energy chain would also be a strategy to re-collect income. Still, the existence of a price differential between derivatives at the national and international level has been a controversial topic among various authors in the past years. Altomonte (2009: 15-22), for example, presents a comparative analysis of derivatives in various Latin American countries and the oecd, which shows that Argentina is one of the countries in the region with the lowest prices (only Bolivia and Ecuador have lower prices). Similarly, the consulting firm Montamat & Associates emphasizes that energy prices in Argentina are among the lowest in the region. The analysts present their Energy Prices Monitoring Index (epmi), which measures average price distortion in the Argentinean energy basket, compared to the average price of a comparable basket that follows international and regional references. In March 2011, the value of this index was 0.62, indicating that if the comparable energy basket of average prices that follows international and regional references had a standardized value of 1 peso, the Argentinean one would only cost 38 cents.21

20 This time period, initiated on January 1, 1992, beginning with the approval of the Convertibility Law of 1991 (Law 23.928), implied the establishment of a fixed exchange rate regimen, which established exchange equality for the Argentinean peso, which from that time until January 7, 2002, had a monetary value equal to 1 United States dollar.

21 Information available at