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30 APRILE 2018

19:00 - Argentina


(ICE) - ROMA, 30 APR -

Argentina said on Tuesday (April 22) it received 32 bids for six road projects requiring around $8 billion in investment, in a big test of how public-private partnerships (PPPs) can help cash-starved Latin American governments beef up infrastructure.

The bids came from 10 consortia representing seven foreign and 19 Argentine companies, including a unit of engineering firm Techint Group together with Spain's Acciona Concesiones. A unit of Portugal's Mota Engil also bid together with two Argentine construction firms. Builders from the United States, Colombia and Italy also presented offers.

Since taking office in December 2015, President Mauricio Macri has focused on upgrading the South American country's infrastructure after decades of under-investment. But growing public works spending has complicated another priority: cutting the budget deficit to 3.2 percent of gross domestic product this year.

"PPP projects are done with better quality, in less time and at a lower cost, because the companies have incentives to innovate," Transportation Minister Guillermo Dietrich told reporters at an event announcing the bids.

For Argentina, the road auctions mark the first wave of a total of $26.5 billion in PPP investment planned through 2022, including a total of $12 billion in road projects through the current and future bid rounds. Dietrich said those investments would generate $4 billion in government revenue through taxes.

More than 17 countries in Latin America have PPP programs, and they account for roughly 40 percent of infrastructure investment commitments, according to the World Bank. For example, Colombia has attracted $18 billion investment in 32 toll road projects, and in Chile PPPs in renewable energy have led to more than $9 billion in commitments since 2012.

Under such programs, private companies finance the project and enter into a long-term contract with the state to recoup their investment.

Critics of PPPs say governments do not always get a good deal. In Latin America, several infrastructure projects have become ensnared in corruption scandals, largely involving Brazilian builder Odebrecht. Last year, Colombia's government terminated an $861 million PPP river dredging contract that was led by Odebrecht.

The road contracts in Argentina will be awarded by June 1, an official said at the Tuesday event.


Despite booming financial markets and international praise for Macri's agenda, Argentina has struggled to attract the levels of long-term, brick-and-mortar investment needed for growth. Investors fear a potential return to populism in future elections, and double-digit inflation makes financing difficult.

The government has tried to address these concerns through the PPP structure. It will issue companies quarterly certificates entitling them to U.S. dollar payments based on construction progress, which companies can use as collateral to raise funds.

"Long-term financing had been seen as one of the main challenges," said Candela Macchi, infrastructure ratings director at Standard & Poor's in Buenos Aires. But, she added, the Argentine structure resembled successful PPP projects elsewhere in Latin America, such as the ongoing construction of Lima's metro system.

"It could be a good option to obtain financing."

Earlier this month, the government issued a decree exempting PPP operators from value-added tax. The operators will also be able to collect tolls.

The six projects of the first stage include more than 2,500 km (1,550 miles) of roads, with $6 billion in upfront investment and $2 billion in later maintenance. Each consortium can be awarded no more than two of the projects.

The largest project by investment value includes building or expanding some 390 km of highway around the grains export hub of Rosario, seeking to alleviate massive traffic jams caused by freight trucks loaded with corn and soybeans during harvest season.

That project received bids from two consortia. One includes Argentina's Helport SA and Spain's Obras y Servicios Copasa and the other Argentina's SACDE and Groundwork Development LLC of the United States. 

Credits: Reporting by Luc Cohen; Editing by Christian Plumb, Rosalba O'Brien and Tom Brown