The Nation should not be in charge of water services in AMBA

Local governments are responsible for the provision of utilities such as electricity distribution, urban transport, water supply, and sanitation. This implies taking charge of the utilities’ regulations, provision, and financing of the services when fares do not cover production costs. The exception in Argentina is the Metropolitan Area of Buenos Aires (AMBA) where the federal government assumes these roles.

In the case of water and sanitation, the service in the AMBA is regulated by a tripartite entity made up of the national government, Buenos Aires City (CABA), and Buenos Aires province called Water and Sanitation Regulatory Entity (ERAS). Services are provided by the company AySA, which produces water and sanitation services exclusively for the inhabitants of the AMBA. Since its nationalization in 2006, AYSA is 90% owned by the federal government and the other 10% by the workers.  

Unfortunately, there is only partial public information on the federal subsidies that AySA receives. However, the company’s Annual Report for 2020 shows the following:

• Revenues from service sales, i.e., what the company charges the inhabitants of the AMBA, were about $29 billion.
• Transfers from the national government, i.e., what the company received from the Argentine people as a whole, amounted to $55 billion.
• In other words, the Nation contributed approximately 65% of AySA’s income.   

These data show the enormous inequity of the federal government taking charge of public services in the AMBA. The AMBA’s inhabitants pay less than 1 out of every 3 pesos of the resources managed by AySA. The other 2 pesos are paid by the federal government with taxes paid by all Argentines.

The transfer of AMBA’s utilities managed by the federal government is an issue that deserves an urgent, integral, and professional workout. Urgent because it is a source of the public sector’s disorganization and fiscal deficit generation causing flagrant inequities in favor of the AMBA’s inhabitants, to the detriment of the other provinces’ inhabitants. It has to be integral because it involves several services such as energy distribution, urban transport, water and sanitation, and also justice in the part that is administered by the other provinces. It has to be assumed with professionalism in order to avoid the costly and wasteful sloppiness that has been going on for a long time.

In the case of electricity distribution, the previous government established that from January 1, 2019, the electricity distributors Edenor and Edesur will be subject to CABA and Buenos Aires province jurisdiction. The current government, without any apparent reason, as soon as it took office suspended the process. In view of the critical federal fiscal situation, it recently announced an inconsistent scheme where it intends to charge full rates only to some CABA’s neighbors. The same improvisation is happening with urban transport. The transfer of the bus lines that only go through CABA is being promoted, leaving the lines that cross CABA and the suburbs (Conurbano) under federal responsibility. This clumsy, improvised, and partial way of transfer aggravates the deterioration in the quality of services and preserves the regressive economic subsidies in favor of the AMBA.

In the case of water and sanitation in the AMBA, the steps to follow are simple. On the one hand, the national government should withdraw from the tripartite entity (ERAS) which would become a regulatory entity in charge of CABA and Buenos Aires province. On the other hand, the federal government must transfer the ownership of 90% of AySA’s shares to CABA and the province of Buenos Aires. Both jurisdictions must take over the management of the company and define the utility regulation. If they choose to set utilities below costs, the subsidies to cover the difference must be financed with their own resources.