Hydroelectric concessions expire and Kirchnerism threatens to nationalize the management of dams

Senator Oscar Parrilli presented a controversial bill to return to nationalize the management of the country's electric power generation dams. The proposal is to return to the old and obsolete centralized planning system that prevailed in the country before the modernization of the 90s, whereby the administration of the dams would pass into the hands of Energía Argentina S.A. (ENARSA) and with the participation of the Provinces of Neuquén, Chubut and Río Negro.

The operation arises in response to the expiration of the concessions signed by former President Carlos Saúl Menem between 1992 and 1993, many of them with an expiration date for 2023. Only in August of next year, five contracts with private companies will expire, and the national government will be able to opt for the renewal or for the de facto expropriation of the services. Kirchnerism is pushing for the latter possibility.

By means of Law 24,065, President Menem privatized the administration, operation and exploitation of all hydroelectric developments that were retained under state control.

The privatization of the services in the form of concessions allowed the country to recover the patrimony of the energy resources, and to make possible a better exploitation of the electric energy services through hydraulic generation.

The state and planned administration of the energy system demonstrated a widespread failure in Argentina's history. Under the former conglomerate of Empresas Nacionales de Energía (ENDE), the State concentrated the monopoly of hydroelectric generation and prevented its development throughout the 20th century.

The centralized system led to a deep energy crisis in the mid-1970s, so the then Minister of Economy José Alfredo Martínez de Hoz undertook a program of "peripheral privatizations" to de-monopolize state participation in the system and thus allow private investment to enter.

The peripheral privatizations made it possible to expand investment, installed capacity and hydroelectric power production, but the collapse of the massive state-owned companies in the 1980s led to the worst energy crisis in Argentina's history. The system that Kirchnerism intends to replicate today caused a 40% collapse in the domestic supply of hydropower, while installed capacity stagnated.

The total privatization of the massive state-owned companies and the opening of new concessions allowed a 178% increase in the domestic supply of hydroelectric power between 1989 and 2001. During the same period, the system's installed capacity grew by 48.61%. Menem's privatizations recovered energy generation for the benefit of society.

The dynamism of the system returned to flank for the 2000s, after the tariff freeze ordered by Néstor Kirchner and its maintenance practically unchanged until 2015. These irresponsible measures discouraged investment and decapitalized the energy system, causing the country to return to a deficit in its trade balance on this item.

Parrilli's project finds in the private management of services a scapegoat to justify the insufficient performance of the system in recent years, when in fact it was the tariff regulations themselves that distorted relative prices and limited investment.