US$ 3,3 Billion in subsidies to Rio Turbio coal mine - IDESA

Informe Nº: 02/11/2017

US$ 3,3 Billion in subsidies to Rio Turbio coal mine

The evidence that the subsidies to the Río Turbio coal mine were used in an obscure way are more than 10 years old. The opportunism of the Judicial System and a large part of the ruling class, allowed billions of dollars to be squandered and diverted to spurious ends. Given this failure, it is pertinent to warn that the solution is not to put honest and competent officials to administer the coal mine but to use public funds to reconvert the workers who were deluded with an unrealistic project.

Among the multiple causes that led to the impeachment and subsequent imprisonment of the former Minister of Federal Planning, Public Investment and Services of the previous government, were the subsidies to the company Río Turbio coal mine. In a September 30, 2007 IDESA report -Issue number 200- ( alerted about the unfeasibility of the project, that the Treasury subsidies were practically all the income of the company and that only a part were destined to salaries while the rest was used to finance purchases of questionable legitimacy.

It was also noted that the end was predictable. It would either end in a corruption scandal or, at a time of lower fiscal boom, it would be impossible to continue financing such a high level of transfers. History showed that both things happened: a corruption scandal with a jailed ex- minister and fiscal unsustainability.

Information published by ASAP and the national budgets allow us to measure the magnitude of the public funds allocated to Río Turbio from that time to the present. According to these sources, between 2007 and 2018 it can be seen that:

  • Total Treasury subsidies assigned to Río Turbio coal mine amount to U$S 3,3 billion.
  • Of these subsidies, approximately US$ 2 billion were destined to salaries.
  •  The remaining US$ 1,3 billion were used for non-salary expenses.

The data confirms the enormous effort that the whole society has been making for more than a decade to subsidize the company of Río Turbio and that almost 40% was not used to pay salaries, but other contracts administered with little transparency and doubtful rationality. This suggests that the preservation of jobs is the excuse to assign billions to obscure deals that culminated – as warned in that 2007 report – in a corruption scandal.

The high social costs of opportunism that prevails in a large part of the society emerge once again. If politicians, the media, businessmen, analysts, unions, NGOs, who now talk about the Rio Turbio issue and vigorously criticize the former Minister had done it a decade ago, when the facts were already visible and public, millions of dollars would not been squandered and 10 years of shady dealings that contaminated politics’ values would have been avoided. The most serious aspect is that Justice looked the other way when a decade ago it was evident what today is considered a clear presumption of crime. But having a condescending attitude with those who holds the power and be lapidary with those which not, is a widespread evil in Argentina. As long as society tolerates opportunism, failures will continue to be repeated.

The damage of using public funds to prolong the agony of an unviable project is not only measured by the waste of public resources and their use in seemingly illegal purposes. No less important is that for a decade an illusion was created for many people: that in that company they would find prosperity. Coal is a polluting source of energy, in danger of extinction and, in such a remote place, it is not feasible. Faced with this reality, it is absurd to continue using public funds to sustain it and it is very pertinent to use them to reconvert the jobs of the affected people.

To turn the page after the Rio Turbio incident, it is essential not to postpone the re-conversion and not to think that the solution is to incorporate more suitable and honest managers into the company than those put in by the previous government. It is not a minor fact that in the 2018 budget allocates to the company twice the amount of resources in comparison to 2007. No matter how good the intentions are, if the idea is to continue subsidizing an unviable project, there is a high risk that at some point the new managers will be tempted and, when they are no longer in power, accusations will be back again. 

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