President Mauricio Macri’s administration has received good grades after six
months in power, but needs to maintain sustainable policies that keep high inflation at bay, speakers said at the 2nd Cumbre Financiera Argentina, hosted by LatinFinance’s in Buenos Aires last week.

Since
coming into office, the new government has lowered tariffs for the country’s
agribusiness sector, lifted capital controls to promote equity investment and
allowed the Argentine peso to float freely.

The Macri administration also negotiated the end of a prolonged dispute with holdout creditors, which culminated in Argentina issuing a $16.5bn
four-tranche bond in April. As a result, the country is in no rush to return to
the cross-border market and it may not even have to make another issue in 2017,
Finance Secretary Luis Caputo said.

“The financing plan for 2017 is very comfortable,”
Caputo said. “It might be that we won’t have to go to the market in 2017.
We’re not worried about it.”

Caputo also said the government aims to balance the budget by
2019. Before then, the country faces a manageable timetable of interest
payments on its existing debt, he said.

During the roadshow for Argentina’s bond sale last month,
investors were surprised to hear that the sovereign did not intend to return to
the international market for at least a year, Caputo said. “It maximized
the appetite for risk,” he said of the strategy.

By
staying away from the cross-border market, the federal government also gives
room to sub-sovereign and corporate issuers to sell bonds abroad, Caputo said. The provinces of Neuquen, Mendoza and Buenos Aires followed with cross-border deals.

Cordoba
and Salta are next in line to tap the cross-border bond market, sources said at
the event. Cordoba has hired bookrunners JPMorgan and Morgan Stanley to take officials to investor meetings, starting May 29, and arrange a possible bond issue for up to $1bn.

Salta
could follow with a $350m bond deal in June, Gov. Juan Manuel Urtubey told LatinFinance.
Urtubey said he could not identify the international bookrunners but added that
the province had hired local lender Banco Macro to work on the deal.

On
the corporate side, Pampa Energia CFO Gabriel Cohen said the energy company is
monitoring cross-border opportunities to fund a portfolio of investments that
include thermal and wind projects. Pampa agreed earlier this month to buy 67.2%
of Petrobras’ assets in Argentina for $892m. The company said it
will get up to $700m in bank financing and $225m in private financing to pay for the acquisition.

“We are waiting to see the spreads shrink as the markets react to
the flow of good news,” Cohen said. “We saw great demand for the
sovereign [bond issue], and the sub-sovereigns papers have been oversubscribed.
It appears there will be a market for corporate issuers.”

According to
Horacio Aguilar, managing director of capital markets and corporate finance at
local financial services firm Puente, Argentina’s sovereign bonds are trading
at higher levels in the secondary market than even better rated countries.
“As Argentina is able to improve its problems, such as inflation, the
spreads are likely to tighten even more,” he said.

Katia
Bouazza, the head of Latin America global banking financing at HSBC, said she
expects to see more successful transactions coming from Argentina but she
cautioned against volatility in the international market. “Sometimes the
markets are closed, not because of any specific matter related to the country,
but because of global events. Right now, the markets are reacting to whether
the US Federal Reserve will hike interest rates in June,” she said.

Argentina’s
M&A and equity markets have also seen an uptick in activity since the
sovereign bond issue. Grupo
Supervielle, the parent of local lender Banco Supervielle, raised about
$280m last week in the country’s first global public offering since
technological services company Globant
in 2014.

Brazilian petrochemicals
firm Unipar
Carbocloro earlier this month agreed to buy a controlling stake in Solvay
Indupa, an Argentine subsidiary of Belgium’s Solvay, for $202m.

As activity increases on the capital markets, Argentina’s provinces will set their sights on renewable
infrastructure development, said Alfredo Cornejo, governor of the province of Mendoza. To finance this, the government will look to multilateral lenders for
initial support.

IFC intends to support the government plans to develop infrastructure
projects, whether through financing or advisory services, said Gabriel
Goldschmidt, the head of infrastructure in Latin America and the Caribbean for
IFC.

However, a thin project pipeline is Argentina’s most pressing
problem, and financiers are struggling to find projects ready to be funded,
panelists said.

“It takes time to prepare a project for
financing, and we are seeing now there is more availability of resources than
specific funding needs,” said Enrique Boilini, senior advisor at Argentine
pension fund Fondo de Garantia de Sustentabilidad (FGS). “We can take
long-term risk in Argentine pesos. That’s a match with our mandate to pay
pensions,” he added.

The Macri administration recently called for bids to develop up to 1,000MW of clean energy
projects, but foreign developers are unlikely to present offers because they
are still coming to terms with the changes to regulations, panelists said.

“The analysis has just started,” said Pablo Albina, CEO
of Schroders Investment Management.

“Trust
in contracts as a source of law needs to be restored,” said Carlos
Albarracin, a partner at law firm Milbank. “The PPP scheme has to be
modernized, and lawmakers need to create mechanisms to better distribute the
risks among the different participants in the projects,” he added.