Argentina postpones PPPs due to deteriorating financial conditions

28 December 2018 - 12:00 am UTC

The Argentine government has put new PPP projects on hold until Argentina’s country risk experiences a significant decline, Jose Morea, head of the sub-secretariat for PPPs, told Inframation.

Morea said this temporary suspension will not affect the six awarded road corridors, but the government will suspend the tenders for the USD 630m Río Diamante-Coronel Charlone transmission line and the USD 700m Norpatagónico rail PPP.

The government was also planning to launch a USD 990m second phase of transmission lines in the coming months and a third USD 660m phase at a later date but these are now suspended also.

On December 18, the government also confirmed that it will finance the Portezuelo del Viento hydropower project through a public works scheme.

The current levels of Argentina’s country risk mean that companies seeking loans to develop PPP initiatives in the country will pay interest rates of over 10% in US dollars.

According to a 6 December report by Fitch Solutions, Argentina’s PPP program will advance at a slow pace during 2019 as weak investor confidence will challenge the attainment of financing for already awarded PPP contracts and restrict the government’s ability to launch new PPP tenders.

“From 2020, we expect improving macroeconomic conditions in the country to yield a more supportive environment for PPP development. A reduction in interest rates will facilitate access to credit in the country, improving the ability of PPP developers to access financing for projects,” Fitch Solutions’ report says.

“The decision to suspend Argentina’s PPP program sounds reasonable given the volatility of the domestic and international financial scenario,” Mauro Chiarini, senior director of local ratings agency FIX SCR, an affiliate of Fitch Ratings, told Inframation.

Chiarini highlighted that Argentina’s country risk when it awarded the first road PPPs earlier this year was approximately 400 points while that index is now close to 800 points.

 

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