Argentina agrees fuel price rise caps with firms, pledges FX access

A YPF oil station displays the price of differents refined petrol and diesel per litre in Buenos Aires, Argentina, February 4, 2016. REUTERS/Enrique Marcarian/File Photo

BUENOS AIRES, Nov 28 (Reuters) - Argentina on Monday reached an agreement with major oil firms operating in the country to put a cap on fuel price increases in a bid to keep costs at the pump down for hard-hit consumers amid surging inflation.

The deal with firms like state company YPF (YPFD.BA) and Shell (SHEL.L) would see fuel price increases of 4% in December, January and February and then 3.8% in March. Monthly inflation has recently topped 6% and is set to end 2022 at around 100%.

We want all sectors to "contribute to significantly lower inflation, which is the main drama in Argentina," the Ministry of Economy said in a statement.

In return, the government said that it would ensure access to foreign exchange markets for energy firms, despite tight capital controls that restrict currency conversion. The government wants to spur more local oil and gas development.

"The state undertakes to guarantee access to foreign currency for firms, especially for the supply of lubricants, and to temporarily reduce taxes on fuel imports to guarantee supply for the agricultural sectors," the ministry added.

Argentina's key agriculture sector, the main driver of the country's exports, has faced issues around planting and harvesting in recent years due to high prices and occasional shortages of fuel for agricultural machinery.

The South American country, a major exporter of soy, corn and wheat, is also home to the huge Vaca Muerta shale formation that could make the country an important energy exporter if it can succeed in accelerating domestic oil and gas production.

Reporting by Nicolás Misculin; Editing by Conor Humphries

Our Standards: The Thomson Reuters Trust Principles.