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Viewing cable 06BUENOSAIRES2191, GOA PRICE CONTROLS STRATEGIES - EDUCATION AS EXEMPLAR

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Reference ID Created Released Classification Origin
06BUENOSAIRES2191 2006-09-26 17:55 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Buenos Aires
VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #2191/01 2691755
ZNR UUUUU ZZH
R 261755Z SEP 06
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 6029
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUEHRC/USDA FAS WASHDC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 5671
RUEHMN/AMEMBASSY MONTEVIDEO 5815
RUEHSG/AMEMBASSY SANTIAGO 5280
RUEHBR/AMEMBASSY BRASILIA 5503
RUEHSO/AMCONSUL SAO PAULO 2980
RUEHRI/AMCONSUL RIO DE JANEIRO 2036
UNCLAS BUENOS AIRES 002191 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E FOR THOMAS PIERCE, WHA FOR WHA/BSC AND WHA/EPSC 
PASS NSC FOR JOSE CARDENAS 
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE 
PASS USTR FOR SUE CRONIN AND MARY SULLIVAN 
TREASURY FOR ALICE FAIBISHENKO 
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER 
US SOUTHCOM FOR POLAD 
 
E.O. 12958: N/A 
TAGS: EFIN ECON ELAB ETRD ALOW AR
SUBJECT: GOA PRICE CONTROLS STRATEGIES - EDUCATION AS EXEMPLAR 
 
------- 
SUMMARY 
------- 
 
1. (SBU) Private school fees remain a politically sensitive 
barometer in greater Buenos Aires and GoA efforts to "manage" 
tuition expenses offer an instructive insight into the Kirchner 
administration's approach to controlling inflation.  Private school 
tuition fees have already jumped 24 percent in 2006, reflecting 
substantial GoA-authorized increases in teacher salaries.  However, 
the GoA has only authorized such increased fees through the end of 
this calendar year and senior GoA officials are leaning hard on 
school administrators to roll back these increases in 2007. 
Additional GoA efforts to control education fees via cost-plus 
pricing formulas and by mandatory public disclosure of school 
expenses may well help depress headline inflation numbers through 
planned October 2007 elections, but many here doubt the 
sustainability of these GoA strategies.  END SUMMARY 
 
-------------------- 
CONSUMER PRICE INDEX 
-------------------- 
 
2. (U) The Consumer Price Index (CPI) rose a monthly 0.6 percent in 
August, in line with the central bank's (BCRA's) consensus forecast 
and bringing 12-month inflation to 11 percent.  Accumulated 
inflation for the first eight months of 2006 totaled 6.1 percent, a 
1.6 percentage-point drop from the same period in 2005.  This 
official CPI measures inflation only in the Greater Buenos Aires 
urban area.  According to the BCRA's consensus published in August, 
CPI inflation is expected to be 0.8 percent in September, and 10.1 
percent for the full year 2006. 
 
3. (U) A 2.9 percent jump in education expenses was the single 
largest contributor to the August CPI increase.  Education prices 
rose 20.2 percent over the first 8 months of the year, higher than 
the full year 2005 increase of 17.5 percent.  Education prices 
include both school tuition fees and school supplies prices.  There 
are approximately 900 private schools in Buenos Aires city and 5600 
in Buenos Aires Province. 
 
--------------------------------------------- --- 
HOW TUITION FEES WERE INCREASED - AND CONTROLLED 
--------------------------------------------- --- 
 
4. (U) School tuition fees rose 3.2 percent in August and 23.8 
percent thus far in 2006.  Regulations allow private schools to 
boost tuition fees during an academic year (which runs from 
approximately February to November) only if schools incorporate 
increases in teachers' salaries required by law.  Teachers' salaries 
were increased March 2006, establishing a "floor" salary of ARP 840 
(approximately USD 270) per month throughout the country.  The 
Government of Buenos Aires City set an additional 10.2 percent 
salary increase in August 2006, benefiting approximately 37,000 
local teachers.  Teacher salaries represent 70 - 80 percent of 
private school costs. 
 
5. (U) The GOA authorized school tuition fee increases based on the 
March 2006 authorized teacher salary increases - but only effective 
June 2006 and only through December 2006.  The GOA required that 
schools charge this premium as a separate line item, a "compensation 
for higher costs" (CHC) charge.  The GoA's Secretariat of Domestic 
Trade and the City of Buenos Aires government announced they would 
jointly launch a website where private schools would have to detail 
their individual cost structures, so that parents would be able to 
monitor how schools calculated their CHC and challenge any "abusive" 
behavior. 
 
------------------- 
RECENT NEGOTIATIONS 
------------------- 
 
6. (U) Secretary of Domestic Trade Guillermo Moreno met with private 
 
schools representatives September 7 and asked that they drop the CHC 
premium from their 2007 tuition fee schedule.  Carlos Galli, 
executive secretary of private school chamber COORDIEP, and Perpetuo 
Lentijo, president of another school chamber ADEEPRA, later 
commented to media that private schools have been subject to strong 
GoA pressure to roll back tuition fees for the upcoming 2007 school 
year.  Secretary Moreno subsequently clarified that any future 
school fee rises reflecting teacher salary increases would only be 
authorized only under a CHC-like mechanism. 
 
------- 
COMMENT 
------- 
 
7. (SBU) With of 50% of Buenos Aires City students and 30% of 
greater Buenos Aires Province students attending private schools, 
tuition fees remain a politically sensitive barometer here.  GoA 
efforts to control school prices via temporary authorization of 
cost-plus pricing formulas and public disclosure of school expenses 
may well have a short term impact, but many here doubt the 
sustainability of these measures.  The Kirchner administration is 
committed to keeping the "canasta basica" consumer price index under 
control through planned October 2007 elections.  This may become an 
increasingly difficult challenge for the GoA: Citibank analysts 
calculate that the July 2006 price index has been "suppressed" by a 
full 17 percent due to the imposition of explicit or implicit GoA 
price controls. 
 
8.  To see more Buenos Aires reporting, visit our classified website 
at: http://www.state.sgov.gov/p/wha/buenosaires 
 
MATERA