An interesting article today by Tomas Canosa in Clarin raises questions about transportation subsidies in Buenos Aires, unintended beneficiaries and outdated policies which made more sense a decade ago.
While the federal government will dole out some US$3 billion in public transportation subsidies this year, a report by an opposition think tank shows 9 out of 10 beneficiaries are Capital Federal residents with the greatest disposable incomes in the country.
While a ride on the BA Subte only costs a paltry US$0.27, the Fundacion Pensar report says 89% of Subte passengers don’t really need the subsidized rate. Similarly high percentages apply to colectivo (city bus) passengers and regional rail passengers, clocking in at 75% and 71%, respectively. By some estimates, the government pays Metrovias $0.92 for every Subte pass sold and colectivo companies $0.68 for every bus fare sold. Conversely, a ride on public transportation typically costs 2-3x more in the interior of the country.
The subsidies were first implemented in 2001 during the financial crisis in an attempt to prevent further deterioration of purchasing power, but weaning a nation off such handouts is not a viable strategy for re-election. In fact, as the Argentine economy has blossomed over the past decade, transportation subsidies have surged from US$460 million in 2001 to US$3.03 billion this year.
In summary, the report laments “the clear failure of the system in terms of redistribution which benefits those with the greatest purchasing power.” While it’s difficult to argue over government inefficiency and the slippery slope of subsidies, one could also argue the transportation subsidies in BA are actually benefiting those who deserve them most, the 9 out of 10 CapFed residents who theoretically pay the most in taxes. For those passengers, the word SUBTE might actually mean Socialism’s Ugly But Terribly Efficient. (Full Story in Spanish)
For more information about living and investing in Buenos Aires, simply complete the form below.[gravityform id=56 name=Living& Investing In Buenos Aires title=false description=false]