Infrastructure investment in Argentina has dwindled in recent years, but a new public-private partnership (PPP) program might give the country a much-needed boost over the next four years.
The PPP program will feature a $26 billion investment beginning this year through 2022 for roads, energy and mining, communications, water, sanitation and housing, Moody's Investors Service reported on March 15. Bank debt and bond issuance in the country will fund investments, which Moody's said remain low among domestic investors. Argentina saw $88 billion in total assets under management (AUM) by the end of 2017; however, only 6% went toward infrastructure.
"The PPP efforts will help boost the country's low investment rates and will do so in a way that limits the program's fiscal impact," Moody's said. The program was developed by analyzing PPP programs elsewhere in Latin America, such as Peru.
Government certificates, called TPIs, will fund construction, with limited risk exposure for more investors, Moody's Vice President and Senior Analyst Daniela Cuan said in the report.
In FCIB's December 2017 Credit and Collections survey for Argentina, 94% of respondents said they did not extend credit to customers. This was a drastic increased compared to the April 2017 survey, when only about 30% reported the same thing. One respondent said that anyone who plans to conduct business in Argentina should closely monitor the country's "ever-changing government restrictions and monetary policy."
Issues with extending credit showed problems with payment, such as postdated checks, wire transfer delays, incorrect invoices as well as customers only paying once they've been paid.
-Andrew Michaels, editorial associate