Economy Minister Luis Caputo said the government will increase pensions by decree and ultimately replace the current pension formula with a new one in order to improve income. “We are protecting pensioners,” he said on Wednesday.

He also ventured further detail on what utility and public transport subsidies might look like under Milei’s government. His comments during an interview with TV channel TN came a day after he announced a package of sweeping austerity measures, including a massive devaluation that hiked the official dollar exchange rate from AR$366 to AR$800. The announcement was delivered via recorded message, thus giving press no chance to press him for specifics.

“If we maintain the current formula, in the next four months pensioners would be earning between 25% and perhaps 40% less than now,” Caputo said, adding that the value of pension payments would“collapse.”

Private analysts and the Milei government alike expect monthly inflation to range between 20-40% in the coming months, as the effects of newly-implemented austerity measures hit the economy.

Pensions are currently increased automatically every three months in Argentina, using a formula established by former President Alberto Fernández in 2021. Half depends on quarterly tax revenue collected by the ANSES social security bureau, while the other 50% is calculated based on the rate of quarterly salary raises.

“The pension formula clearly does not work,” Caputo said. “The minimum pension is too low,” he continued, adding that retirees are “losing” against inflation. “By eliminating the current formula, we are protecting them.”

Caputo said that, while pensioners will not receive an end-of-year bonus, the decree increasing their payments will mean they receive more than they do now, even after accounting for bonuses.

He added that the government won’t establish bonuses for private or public sector employees. “That will be discussed in salary negotiations” with their employers, he said.

Regarding inflation, the minister said prices have been going up by 1% daily since the previous government lost the elections to President Javier Milei. He speculated that December’s inflation will be “much higher than November’s.”

Energy subsidies

Caputo announced a package of fiscal measures on Tuesday that included a reduction in subsidies to utilities and public transport. During the interview, he clarified that subsidies will not be eliminated completely but rather segmented according to income and consumption. In the case of electricity, gas and water subsidies, they will be reduced gradually.

He explained that instead of subsidizing all tariffs, the neediest households will receive more subsidized power than more affluent consumers. “If I only use 200kw, my tariff will remain the same, but any amount [of electricity] I use over 200kw, I will pay at the full price,” he explained.

In Argentina, modifications to utility tariffs have to be approved at a public hearing. If this new scheme is approved in December, it could be applied starting February, Caputo said. Otherwise, it will be applied in March.

In 2022, Fernández’s government established a staggered subsidy scheme for electricity and gas, making it so that customers with the highest incomes pay the full price, middle-income consumers are subsidized up to 400kw, and those on the lowest incomes receive fully-subsidized tariffs. This is calculated by individual household income.

Transport

Caputo said that only 35% of the full public transport fare will be subsidized for now, acknowledging that “we can’t just reduce them to 0% overnight.” The government plans to eliminate them fully, but over a period of years, he added.

“They make you believe transport is cheap, and I say, why is my son subsidized when he can pay the full transport fare?” Caputo said. “It’s a fake subsidy, because they are charging you [for it] elsewhere. Those who are poorer are subsidizing my sons.”

Caputo said the transport secretariat will give more details in due course, although he did not offer a timeline. Milei’s spokesperson Manuel Adorni had said Wednesday that cuts to public transport subsidies are likely to begin on January 1.