In our previous column, we explained why prolonged subsidies for energy and hydrocarbons in particular end up being perverse for economies and societies as a whole.
Successive governments around the world and in Latin America, mostly of a populist nature, have introduced or maintained subsidies, sometimes with very noble intentions, but more often than not just to seek votes and stay in power.
We have shown that subsidies make countries’ economies suffer because they see their coffers bleed, state companies collapse and the fiscal deficit balloons. Subsidies promote inefficiency, loss of competitiveness, waste in the long term (gasoline in Venezuela) and finally it is the wealthy who are most favored.
Prolonged subsidies also lead to shortages, as is the case in Venezuela and Argentina, for example, because investments are discouraged and new and efficient technologies, such as solar or wind energy, are not allowed to compete.
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