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The Economies of Argentina and Brazil

The Economies of Argentina and Brazil

A Comparative Perspective

Edited by Werner Baer and David Fleischer

This book compares the successes and failures of the development and growth processes of Argentina and Brazil. It provides important insights into the different performances of these economies through a series of comparative essays written by Argentinian and Brazilian economists.

Chapter 13: Argentina’s Gas and Electricity Reform

Esteban Manuel Greco, Diego Petrecolla and Carlos Adrián Romero

Subjects: development studies, development economics, economics and finance, development economics


Esteban Manuel Greco, Diego Petrecolla and Carlos Adrián Romero 13.1 INTRODUCTION Since the start of the 1990s, Argentina has instituted reforms in its energy sector. Among them was the implementation of a more decentralized system to encourage greater private participation. As a result of this process, key economic variables were positively affected, including the following: a higher number of agents participating in the market on the supply and demand sides; a growth in networks and the number of users served; improvements in the quality of the service; fewer energy losses; a wholesale electricity price decrease as a result of competition; and the incorporation of modern equipment. However, in the years following privatization, regulatory aspects and market mechanism design issues began to appear as well. Most apparent were structural problems. There was the lack of competition in the gas upstream; the failure of the system to make electricity transport investments; and the deregulation in the marketing segment. Structural problems already existed before the 2002 crisis1 even though their ramifications did not appear until after the crisis; for instance, the lack of energy planning, which contributed to gas supply–demand imbalances that began in 2004 and affected the electricity sector’s development as well. The outbreak of the 2002 crisis was significant not only for changes in the exchange rate regime but also in the energy sector. In particular, the crisis revealed the structural problems previously mentioned and generated new ones. This chapter focuses on selected issues which help to identify the...

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