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Page added on September 29, 2007

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Argentine energy crunch looms over next government

Argentina’s next government will have to consider raising natural gas and electricity prices soon after it takes office in December as a way to avoid a repeat of the energy crisis of recent months.

President Nestor Kirchner has avoided mass blackouts in the run-up to an Oct. 28 presidential election by imposing energy restrictions on industry in Latin America’s No. 3 economy, where supplies are tight due to rapid economic growth and years of underinvestment to expand production.
Polls suggest Kirchner will be succeeded by his wife, Sen. Cristina Fernandez de Kirchner, and she has already ruled out significant utility rate increases, saying any changes to current prices will be gradual.

The new government will take office on Dec. 10, during a month in which energy demand jumps as Argentines crank up air conditioners during the Southern Hemisphere summer. Experts expect a repeat of the problems posed by this year’s winter — the harshest in more than four decades.

The energy crunch is seen as one of the biggest threats to Argentina’s continued economic expansion, and the impact of bigger fuel imports and limited factory working hours during the winter has left its mark on key economic data.

July’s industrial production index came in below expectations, due to the dramatic slowdown in steel industry output caused by energy restrictions to plants.

Meanwhile, city neighborhoods have suffered blackouts as cables overheated due to excessive demand and farmers struggled to get ahold of diesel during the corn and soy harvests.


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