Argentina slams Shell for fuel price hike after devaluation

The Argentine government faces rising corporate ire as support sinks.

Argentina slams Shell for fuel price hike after devaluation

World Bulletin / News Desk

Argentina on Monday blasted oil company Shell for increasing prices as the government seeks to contain inflation after a 20 percent currency devaluation.

Presidential Chief of Staff Jorge Capitanich said Shell, the second-biggest fuel retailer in Argentina, raised diesel and gasoline prices out of “greed” and with intent “to hurt the country.”

Shell said Sunday it would raise pump prices 12 percent on Monday, making it the first fuel retailer to do so since the devaluation last month.

“Shell's attitude is always conspiring against the country’s interests,” Capitanich said in a televised news conference.

Juan Jose Aranguren, the chief executive officer of Shell Argentina, justified the increases on Monday, saying that the drop in the value of the peso against the dollar has increased the cost of crude, which is priced in dollars.

“Our costs rose 23 percent, and we only decided to increase our prices by 12 percent,” Aranguren said on Radio Mitre.

He went on to question the government’s attacks against companies.

“I am shocked and saddened by the misuse and abuse of words like conspiracy and attempts against the interests of the country,” Aranguren said. “They are very strong words against an oil company that is trying to defend its interests” to run a sustainable and profitable company.

“If with 12 percent they think we are conspiring, imagine what we would be doing with a 23 percent increase,” he said.

The government’s attack on Shell comes as it seeks to contain inflation after a 20 percent devaluation hiked dollar costs in peso terms.

Businesses have responded by raising prices to keep from falling into losses.

The government is seeking to cap prices by threats of fines, sanctions, shutdowns and even prison time for executives.

“They are hitting much harder than expected,” said Federico MacDougall, an economist at the University of Belgrano in Buenos Aires.

But the hurling of threats may not work as it has in the past, when the government had greater public support.

President Cristina Fernandez de Kirchner, who has long relied on price controls to fight inflation, won a second four-year term with 54 percent of the votes in 2011. After implementing capital controls and failing to contain inflation that is expected to reach 30 percent this year after hovering at 20 percent and 25 percent over the last three years, her party only snared 33 percent of the votes in the October midterm congressional election.

“If you lose power, opponents are going to attack,” said MacDougall.

Companies want to improve – or at least defend – their profitability, and with the government’s falling popularity, they now see a chance to press for changes to their benefit.

Some of these demands are simply to compensate for the devaluation, as Shell claims.

Farmers, on the other hand, are reportedly seeking a reduction in export taxes before meeting the government’s request that they sell an estimated 8 million metric tons of grains held in storage.

The government estimates that this will bring US$3.5 billion into the country, helping to shore up dollar reserves that have tumbled to a seven-year low.

“There are a lot of companies that are against the government, and now they see a chance to express their demands,” MacDougall said.

The government has fined retailers for what it calls “abusive” price hikes, called farmers “greedy” for sitting on crops and now alleged that Shell is conspiring against national interests.

Economists say that a more standard way to contain inflation is to slow the economy, by raising interest rates to cool demand.

The government opposes such methods, saying that slower growth will increase unemployment.

That puts the president in a bind. If she backtracks on her economic policies, she could lose some of her hardcore supporters, cutting her support base and raising the risk of an early departure, MacDougall said.

“The president has to fight,” he said. “This is a struggle to the death". 

Last Mod: 04 Şubat 2014, 10:13
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