Since 4 PM today, governors from every provinces met in the Casa Rosada to sign an agreement outlining a plan by which the national government will repay them withheld co-participation funds.
Federal co-participation is the system by which the State and the provinces divide the total tax revenue between the provinces and national entities. Those funds are important because they’re used to fund public services and pay employees in the provinces. Starting in 1992, the national government began taking 15 percent from each province’s co-participation to fund the National Social Security Administration (ANSES), which was in severe need of money (this is why). Back in November, the Supreme Court ruled that taking 15 percent of funds away from the provinces was unconstitutional. It also required the government to return funds that had been withheld starting from 2006 and on, including accumulated interest, to the provinces.
Originally, the Supreme Court ruling only applied to the provinces of Santa Fe, San Luis and Córdoba, which had actually taken legal action over these withheld funds. A week later, however, former President Cristina Fernández de Kirchner signed an emergency decree (DNU) declaring that all the provinces had to be paid back, which was seen as a huge blow to President Mauricio Macri’s incoming administration because that was a huge sum of money for the State to hand over. Except in the end, Macri issued another DNU trumping Cristina’s DNU because it would have greatly harmed social security (taking away too many funds from ANSES for it to function).
However, provincial governments didn’t let go of their claims and kept on negotiating until they finally got the national administration commit to get their funds be returned to them. How will the agreement work, then? The central government commits itself to handing back the 15 percent due in installments of 3 percent annually (i.e. a fifth of what is due will be paid once a year) until the 15 percent mark is reached in 2020.
In addition, provinces will be able to take out loans with a subsidized interest rate of 15 per cent (yes, the same number). As for the ANSES funding, the National Treasury will take care of the difference in order for its services to remain unaffected. According to a draft of the agreement presented by the Interior Ministry, the sums divested will amount to almost AR $86 billion by 2020.