Argentina hopes new PPP scheme can revive its decaying infrastructure

Argentines are gearing up for a new public-private partnership (PPP) initiative that many are confident will help renew the country’s decaying infrastructure.

The first of a three-part tender for 13 highways and two bridges are due on April 20. The following two will take place before the end of 2018.

Initial guidance for the first tender was $6bn for six projects, but the final amount is likely to be closer to $5bn, according to José Luis Morea, undersecretary of PPPs at the country’s Ministry of Finance.

The second auction features another six projects with expected investments of $5bn and the third comprises three projects with between $2bn and $3bn in estimated investments.

In the first tender, more than 40 companies expressed interest through 10 consortiums, Morea said.

“We are working against the clock to speed up the development in a sustainable fashion,” Morea said on Wednesday at LatinFinance’s 4^th Cumbre Financiera Argentina in Buenos Aires.

Market makers are cautiously optimistic that PPPs can succeed in Argentina, in part because the country is coming so late to a financing structure that is commonly found throughout the region.

“They have incorporated positive aspects from the region, they took the good examples from other countries,” Daniela Cuan, a senior analyst at Moody’s said on comparing Argentina’s efforts to its neighbors. Still, she cautioned, “it is something that is quite new, we have yet to test a lot of things.”

One of the positive aspects of the PPP structure in Argentina is the “clear delimitation of risks,” which simplifies financing.

Eduardo Zemborain, head of special industries & investment banking at ICBC, agreed that work done to date was “quite professional,” but warned the investments were large and the timeframe was often long, meaning that risks are also larger for countries like Argentina, which only reentered the international capital markets back in 2016.

Part of what is motivating investors besides these risks though is the “great commitment from the government to push this forward,” said Federico Barroetaveña, CFO of Techint Ingeniería & Construcción.