Milei slashes provincial transport subsidies in 'revenge' for omnibus bill flop

The Argentine government clamped down even harder on federal financing of provincial governments, shutting down a fund used by provinces to subsidize public transport fares.

The move is seen by some provincial authorities as an act of revenge over this week's failure of the omnibus bill the executive branch had submitted to congress. 

The transport compensation fund, originally established in 2019, paid out 8.62bn pesos (US$10.4mn) to transport operators outside the Buenos Aires metropolitan area in December, according to official documents.

The federal transport secretariat argued that both the provincial and national administrations had agreed in 2017 and 2018 to phase out subsidies in Greater Buenos Aires and that subsidies in provinces would be eventually be handled by the respective provincial authorities.

However, the secretariat decided to maintain a federal subsidy for users of the SUBE transport pass nationwide, which provides a 55% cut to fares.

“The decision of the State is that funds will reach users directly, without any intermediaries,” the transport secretariat said in a release.

The measure was immediately criticized by provincial governors, whom right-wing libertarian President Javier Milei has blamed for the failure of his signature omnibus bill in congress, which was aimed at carrying out a sweeping overhaul of the State and economy.

After the bill went back to debate in committees this week, the president accused provincial governors of “betraying their voters” by not backing the bill.

An unnamed governor was reported as saying by daily La Nación that the measure was “a declaration of war” and that Milei can no longer talk about backing dialogue any longer. 

The newspaper noted that the governor was from the center-right Juntos por el Cambio coalition, which includes some of Milei’s own government officials, including security minister Patricia Bullrich. 

Santa Fe governor Maximiliano Pullaro, also part of the coalition, said that his province was receiving 1.5bn pesos per month from the scrapped fund.

“We never believed that the subsidies would be cut off,” Pullaro was quoted as saying in a Santa Fe government release.

"Once again we've been left on our own," he said, "There is always discrimination against Santa Fe in particular and against the provinces of the Argentine Republic regarding subsidies." 

He added that Santa Fe would maintain a 2bn-peso subsidy from its own funds.

Before the presidential runoff election in November, provincial governors were pressing the federal government to increase the amount of money contributed to the transport subsidy fund and overhaul how the cash was distributed, complaining that it benefited Greater Buenos Aires most.

Milei had already reduced funding to the provinces after taking office, which has undermined the governments' capacity to carry out public works.

Andrés Asiaín, head of the Scalabrini Ortiz economic and social studies center (CESO), told BNamericas that although Milei has the power to halt discretional transferences to provinces, but he cannot cut their shares of tax revenues.

After the defeat of the omnibus bill, however, the executive branch is expected to double down on its austerity policies and the provinces will likely have to continue covering more of their own costs rather than using federal funds.

The provinces "will have to pay salaries with their own money. There won't be any fiscal pact in the short term," a source close to the presidency was reported as saying by news outlet TN.