Could Argentina’s mid-term elections’ outcome help unlock infrastructure investment?

6 Nov 17

The investment conditions for Argentina’s $69bn infrastructure plan may become more predictable following the results of the country’s mid-term elections, says Candela Macchi. 

For some, President Mauricio Macri’s planned US$69 billion overhaul of Argentina’s infrastructure hung in the balance before the midterm elections held on 22nd October.
 
A loss of seats for the president’s official party, Cambiemos – the minority seat holder in Congress – may have diminished investor confidence and, in turn, financing availability for the large-scale projects.
 
However, Cambiemos secured more than 40% of the national vote in the elections – at which half of the chamber of deputies’ seats and a third of the senate’s seats were at stake.
 
In the medium term (at least), Argentina’s infrastructure ambitions can be supported by a more stable and predictable environment for investors – an essential facet for any infrastructure programme’s success.
 
So, what are the Argentine government’s infrastructure ambitions?
 
The plan comprises a US$33 billion transport programme and a US$36 billion energy programme.

Given the scale of these projects, the planned 10-year timeframe has always been considered ambitious, which means that securing financing over the medium term is key for the plan to achieve its goals.


The transport programme includes the construction of 2,800 kilometres of new roads by 2019, and the refurbishment and construction of at least 24 airports.

Given the scale of these projects, the planned 10-year timeframe has always been considered ambitious, which means that securing financing over the medium term is key for the plan to achieve its goals –whatever the electorate mandated in this election cycle. 

The energy programme includes the flagship RenovAR scheme – a public tendering programme initiated in 2016 and costing US$15 billion.

Power generation projects have gained the most traction in the overall plan, with contracts awarded to 59 clean energy projects totalling 2.4 gigawatts (GW) of generation capacity under the RenovAr scheme alone.

Although the energy programme is moving forward, meeting the government’s target for renewables (to represent approximately half of all new power generation capacity within 10 years) in time seems ambitious – especially given that renewables only account for 1.8% of current national electric energy consumption.

The continuity of Cambiemos’ tenure is widely viewed as important to both programmes for different reasons.

For the transport programme, which is 83% publically funded, the support could result in securing the project’s continued cash flow and timely completion of projects within budget – as well as for placating the private investors in the residual.

Meanwhile, because the majority of energy projects are financed by private sources, investors may enjoy more predictable and stable conditions for investment.

Cambiemos – although still a minority seat holder – has added to its seat total. In turn, the current climate could improve – thereby increasing investor confidence in the infrastructure plan over the medium term.

A larger congressional presence for Cambiemos will also help the party push through laws aimed at encouraging domestic investment, as well as maintaining its public funding. Had it transpired that Cambiemos only retained parity with its pre-election standing, there may have been little change to the status quo.

 The results, however, suggest a smoother pace of development for Argentina’s infrastructure to come.

Of course, that the Inter-American Development Bank (IBD) has recently announced increased loan support for Argentina’s infrastructure plan is also a promising sign of growing investor confidence.

This will be a key factor in the country’s ability to secure the foreign direct investment needed for future development.

In this respect the market can expect favourable conditions for the plan to be sustained in the medium term. 

An earlier version of this article appears here

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