Argentine public-private bill to boost financing by $90bn

Bloomberg

Argentina’s President Mauricio Macri will send a public private partnership bill to Congress in the coming weeks that will increase the country’s financing capacity by as much as $90 billion, according to his top adviser on foreign investment.
The bill will allow the government to speed up its investment in infrastructure while providing legal guarantees for private sector investors and creditors, HoracioReyser, Macri’s adviser on foreign investment, said in an interview.
The bill is also designed to facilitate corporate access not only to multilateral lenders but also to capital markets. According to Reyser, financing through the project could oscillate between $75 billion and $90 billion of long-term credit lines.
“This will allow us to access greater levels of financing and accelerate construction projects because if the state had to build all the works with its own financing and its own technical capacities it would take a lot longer than if one opens up the possibility of construction and finance to other players,” Reyser said in an interview in Buenos Aires. “This needs to be seen as an additional source of financing that can generate efficiency and transparency in infrastructure projects.”
Macri assumed power in December vowing to open up Argentina’s economy by unwinding controls and regulations that had driven away investment. In six months, he’s lifted currency controls, brought the country out of a 15-year default by settling with holdout creditors and announced a multi-billion dollar infrastructure plan to kick start a flagging economy.
Long-term Objective
The bill was designed in consultation with local business chambers and multilateral lenders such as the World Bank’s International Finance Corporation, the CorporacionAndina de Fomento and the Inter-American Development Bank, Reyser said.
While those lenders would probably be the initial creditors available, the long-term objective is to open up credit lines with other lenders by providing additional protection from risk, he said.
The PPP law would not only distribute risks evenly between the state and its private partners but also provide legal protection for lenders by technical arbiters, he said.
“The aim is to get to where one can issue bonds in capital markets to finance an infrastructure project,” Reyser said. “The security and knowledge the PPP law brings to this ecosystem will allow for this kind of financing.”
Macri has announced plans to spend as much as $26 billion to upgrade Argentina’s road and railway network and modernize airports, ports and urban transport systems over the next four years. Argentina Reforms Likely to Provide 2016 FDI Boost: BI Basics
Foreign direct investment in Argentina fell 42 percent in 2014 to $6.6 billion, according to the United Nations’ Economic Commission for Latin America and the Caribbean, or CEPAL. That compares to investment of $62.5 billion in neighboring Brazil and $22 billion in Chile. Reyser said that even that number is misleading since many companies were forced to reinvest their profits due to capital controls.
Reyser said Argentina’s objective is to attract about $25 billion a year. Macri has already received pledges of about $15 billion since taking office, although some of those are over several years.
The reforms Macri has implemented, which included devaluing the peso by about 30 percent and removing subsidies on utility bills, have caused inflation to accelerate to about 40 percent and the economy to stall as consumption falls.