Argentine Senate approves ‘Cold Zones’ and Central Bank reforms

The Argentine Senate approved changes to the “Cold Zones” (Zonas Frías) regime on Thursday, substantially reducing the number of households eligible for gas subsidies in specially designated areas across the country. The reform passed by a 38-8 vote.

The Cold Zones scheme was originally established in 2002 to help those living in the colder areas of the country. It covered Patagonia, Malargüe in Mendoza province, and the Puna region.

It was broadly expanded in 2021, during the government of Peronist Alberto Fernández, to also benefit the provinces of Buenos Aires, San Luis, Córdoba, La Rioja, Tucumán, Catamarca, San Juan, Salta, Santa Fe and La Pampa.

The law approved on Thursday returns the scheme to its original scope.

The Cold Zones subsidy is financed through a 5.44% surcharge on the price of gas at the point of entry into the system and provides eligible beneficiaries with discounts of 30% or 50%, depending on their qualification status.

Under the new scheme, only households in non-Cold Zones earning less than three basic food baskets — a threshold currently set at AR$4.8 million (US$3,154) — will be eligible for state aid through the Targeted Energy Subsidies (SEF) system. 

The same will apply to people with disabilities and military veterans.

The opposition rejected the bill and attempted to break quorum by leaving the chamber. However, the government was able to win approval for the reform with the support of northern provinces.

The final vote reflected clear geographical divisions: all the senators from northern provinces — where the weather is warmer — voted in favor, including lawmakers from Salta, Tucumán, Misiones, Catamarca, and Corrientes. 

Meanwhile, representatives from the affected provinces — including Santa Cruz, as well as Radical lawmakers from Buenos Aires, Mendoza, Santa Fe, and La Pampa — joined Peronism in voting against the bill.

Argentina’s Energy Secretary estimates that the new scheme will save the government roughly US$400 million annually. The funds will be used to settle outstanding debts with gas distributors.

However, while the government projects that 1.6 million households will lose their subsidies under the reform, opposition figures put the number closer to 2.5 million.

Changes to the central bank charter The Cold Zones regime wasn’t the only piece of legislation to see changes approved by the Senate on Thursday. The reform of the Argentine Republic Central Bank’s (BCRA, in Spanish) charter also passed, by a 46-22 vote.

The new charter aims to narrow the BCRA’s mission, establishing the preservation of the currency’s value as its primary mandate. 

Under a framework introduced in 2012, the institution was currently tasked not only with monetary stability but also with financial stability, employment and economic development with social equity.

The changes also eliminate the Central Bank’s ability to grant temporary advances to the national government and place strict limits on other forms of financial assistance.

The new charter also requires a two-thirds majority in the Senate to remove BCRA officials.

The original bill, approved in the Lower House, called for a majority vote in both chambers, but the provision was changed at the request of the opposition. 

As a result, the new charter will require another vote in the Chamber of Deputies for final approval.