Social Safety Nets for Vulnerable Populations in the Province of Buenos Aires

active

Country Context. The current macroeconomic context in Argentina is characterized by a marked recession and implementation of a strong fiscal consolidation program, supported by a large IMF SBA program. Since taking office in December 2015, the Government has implemented structural reforms to eliminate distortions in the economy which included the gradual reduction of global subsidies for public services such as electricity, gas and transport. Nevertheless, the magnitude of the remaining macro-economic imbalances and a strong drought has led to heavy pressure on the Argentine peso in April and August of 2018. In June 2018, the IMF approved a Stand-by Agreement (SBA) for US$50 billion which was amended to US$56.3bn in October 2018, accompanied by modifications to the fiscal and monetary program. Government also accelerated the fiscal consolidation path, with a commitment to achieve a primary balance in 2019 and a primary surplus in 2020; and shifted the new monetary regime to one which establishes a reference zone for the peso. The economy contracted by 2.5 percent in 2018 and is projected to further contract by 1.3 percent in 2019, although signs of a bottoming-out of the recession have increased over the past weeks.Sectoral and Institutional Context. Starting in 2002 until the end of 2015, Argentina’s Government used a wide range of subsidies to protect households and to support specific sectors of the economy. When the current administration took office at the end of 2015, public policy tools included transfers to the private sector; revenue-related support measures (e.g., tax exemptions and deductions); and programs aimed at supporting specific regions (e.g., Patagonia, Tierra del Fuego, and La Rioja), sectors (e.g., mining), and policy objectives (e.g., supporting Small and Medium sized Enterprises, youth entrepreneurship, and R&D). Following the energy emergency declared by Decree No. 134 in December 2015, upstream subsidies to the electricity sector declined and in February 2016 the federal government implemented the electricity Social Tariff for residential users. The ST offers electricity generation cost discounts for specific residential users as well as community-based organizations. A few months after implementation, in April 2016, more than 20 percent of users were covered by the ST. Despite the success in quickly and effectively enrolling beneficiaries in the ST (a large majority were automatically enrolled), important challenges remain in covering the target population due to issues in design (eligibility criteria and information used) and implementation (constraints to identify beneficiaries due to lack of information).Eligibility criteria for the ST were defined by the Ministry of Energy, with inputs from the National Council of Social Policies (CNCPS). Eligible users included retirees, pensioners, beneficiaries of non-contributory pensions, salaried or self-employed workers with income below two minimum wages, beneficiaries of social programs, low productivity self-employed workers registered under the “monotributo social” scheme, war veterans, domestic workers, beneficiaries of unemployment insurance, persons with disabilities and electricity-dependent persons. Users who have more than one property, a car newer than ten years, a plane or a luxury boat are excluded. Vulnerable populations living in slums areas of the Conurbano (in Greater Buenos Aires) are usually covered freely through community meters under a separate scheme, Convenio Marco, governed by agreements between the regulatory agency and electricity providers.Starting in January 2019, the regulatory and fiscal responsibilities in the energy sector were transferred from the Federal government to provinces (Law No. 27.469, Consenso Fiscal). This has resulted in the provinces having to commit additional resources for the payment of social electricity tariffs and requiring additional resources for regulation of the electricity sector. Provinces have assumed this delegation through provincial laws accepting the Consenso Fiscal and including the corresponding fiscal commitments in their own budgets 2019.Currently, the administration of the electricity ST in the PBA involves different federal and subnational institutions, and an integrated monitoring system is lacking. Data to identify electricity users is collected by the subnational regulatory agency OCEBA and the federal regulatory agency ENRE (38.5 and 61.5 percent of total users, respectively). Electricity consumption data is held by distribution companies and while ENRE compiles this information for EDESUR and EDENOR , OCEBA is starting to request this information to the distribution companies. Eligibility assessment for ST is in charge of the federal agency SINTyS, who provides the list of ST users to ENRE and OCEBA. Distribution companies claim ST subsidies to OCEBA and ENRE monthly, and then OCEBA and ENRE compile and inform the Directorate of Public Services for reimbursement to CAMMESA who is the distribution companies’ provider.This Project will support the Province of Buenos Aires’ authorities with the implementation and financing of the social tariff for electricity. The project will support the transition of the ST from the federal to the provincial level by strengthening the capacity of the PBA government in the short term to administer the ST, and to improve identification and monitoring of its beneficiaries. In the medium term, the developed institutional capacities will help the PBA to address major ST reforms. The proposed lending instrument is a three-year investment project financing loan (IPF) that will finance the ST under a disbursement linked indicators (DLIs) component and a technical assistance component that will disburse under regular procurement methods. The proposed Project is aligned with the Argentina Systematic Country Diagnostic (SCD) and the Country Partnership Framework (CPF), which highlight the importance of ensuring a strong safety net to support those who may be hit by structural changes in the economy. The Project contributes to reducing poverty and increasing the welfare of the bottom 40 percent, as the Social Tariff program can mitigate the negative impact of electricity prices increases among the most vulnerable families.