Energy Resources in Argentina:
Analysis of Income
Marina Recalde
Considerations Regarding Primary Distribution

Income generated by a certain sector of the economy is distributed among different agents in society by varying processes. In theory, primary distribution of income refers to distribution within the productive system in general, with special attention towards the participation of each agent within the productive process. Secondary distribution refers to a redistribution of income among various agents, the State being one, with part of the income obtained in primary distribution.

Primary income distribution is normally carried out by the main actors that participate in the chain: National or Local State, as owner of the resource (keeping in mind active regulation); producer, State or private companies, as upstream agents; and consumers or purchasers of the resource. For the latter case, we refer primarily to direct buyers of the resource: refinery companies, natural gas treatment plants and/or industries that use crude oil or natural gas in the form in which it is extracted from the well. The extent to which this income is transferred, or not, to the final consumer depends on existing price policies for oil and natural gas derivatives. In other words, if the differences between existing prices produce appropriation of income from the companies that operate the downstream and they transfer said price difference to the product price using lower prices, the final consumers would benefit from the resources income.

In Argentina, appropriation of income by the National State has varied throughout its history. Without counting the portion of the rent withheld by YPF SE before its privatization16, the National State has appropriated oil income using the Earnings Tax (35%).17Beyond these tax measures, there was no other form to appropriate hydrocarbon income, until recently. However, as part of the set of policy measures developed in the wake of the economic crisis at the end of 2001, in 2002, the national executive created the right to export hydrocarbons for a period of five years.18 The laws 310/2002 and 809/2002 established, in principle, the right to export 20%, which was raised to 25% with resolution 337/2004 from the Ministry of Economy and Production. Later, in response to the increases in international oil prices, a scheme of export rights that vary according to international prices was established, known as the withholding scheme. Based on this regulation, the minimum right to export 25% is established if the price is equal to or les than 32US$/bl. If the price were higher than this cut-off point, withholdings would gradually increase until reaching a maximum of 45% when the price is greater than US$45/bl. Finally, in 2007, resolution 394/2007 created a new export rights scheme which sets reference values and cut-off values used to determine the rights. The minimum value for the right to export increases to 45% whenever the international price is greater than US$45/bl, but less than the reference price. Based on this value, set at US60.9/bl, export rights are determined using the following formula:

Equate 5

Where:

d: export right

PI: international price

VC : cut-off value

16 At the end of the 1980s, Argentina implemented a restructuring of their energy system, which implied horizontal and vertical segmentation of their energy chains. This process was a rapid and profound change that required privatization of the principal state energy companies, such as YPF SE and GAS DEL ESTADO. Various authors have analyzed this process, highlighting its implications for the future sustainability of the sector. For an analysis of this topic, please see olade/cepal/gtz (2003); Guzowski and Recalde (2008); Kozulj (2002); Pistonesi (2001); Recalde (2011).

17 As Campodnico points out (2008), indirect taxes (such as the VAT), just like specific taxes, are fiscal political tools and as such, are not counted in this study.

18 The national executive power may establish compensatory measures to avoid imbalances among both established and emerging financial entities as a result of the impact produced by authorized measures in the previous paragraph, which may include the issuance of bonds from the national government in guaranteed foreign currency. In order to make this guarantee, a right to export hydrocarbons is constituted for a period of FIVE (5) years, giving the national executive power the ability to establish the corresponding aliquot. For this same purpose, other resources may be affected, including international loans (Law 25.561; Title IV, Ch. I, Article 6).