August 2008

Regulatory body suggests new model

Fernando Herrero, chief regulator at the time, approves a technical report aimed at changing the formula to define the prices of fuels. It is recommended that RECOPE’s costs (K factor) be acknowledged as a percentage, based on the import price for each product. Until then, they were estimated as a fixed amount. That year it was ¢58 per liter for all fuels. With the K% RECOPE’s real costs are not considered; among others, they include insurance, shipping, and inventory. Five months before, industrialists complained about the prices of gas and bunker fuel. Read the letter.

Noviembre 2008

Change cheapens LPG gas and asphalt

ARESEP approved the change. This caused that the fuels which are the most used and the ones with the highest international price (gasoline and diesel) pay more for the K factor, subsidizing those with lower demand and price (asphalt and LPG gas). “This model change is justified because it would favor road construction since the future prices of asphalt will be less affected, as are those of liquid propane gas, which is used to cook food and is a substitute for electricity and firewood,” the report states.Read the report.

November 2008

RECOPE questions subsidy

RECOPE appealed the decision: "The sale of any product below its real cost entails a subsidy which is prohibited by law.” ARESEP rejected the claim. In 2009, using the K percentage, every liter of diesel was charged ¢54 and ¢40 that of asphalt. This even though the real cost for RECOPE was ¢41 per liter of diesel and ¢56 for asphalt.

September 2014

Diesel: the worst hit

An investigation by La Nación on the impact of the change in the formula, made by the Regulatory Body, found that from 2009 through September 2014, diesel consumers have additionally paid almost ¢73.5 billion; users of gasoline have paid an extra ¢29.5 billion. Meanwhile, companies using asphalt have saved ¢11.6 billion and LPG gas buyers over ¢33 billion."The head of the Regulatory Body knew,” Xiomara Garita, ARESEP analyst.

"It is not a cross subsidy,” Fernando Herrero

October 2014

Unknown impact on roads

The National Highway Board does not know if the price of road repairs decreased as a result of the lower price of asphalt, generated by the subsidy. This product had already benefitted in 2006 because of a ¢128 per liter decrease, when chief regulator Herrero eliminated a subsidy for diesel and aviation gas. In 2006, Herrero said he had reports from the Government, according to which the cost of road repairs would be up to 20% lower as a result of the cheaper asphalt. Companies dealing in asphalt supported the measure, link to letter.