Public-private partnerships to fund transport infrastructure projects in Argentina



In March 2018 the Ministry of Transport (MoT) announced that it would invest AR131bn ($6.8bn) in transport infrastructure projects in 2018, 32% more than the amount invested in 2017. Guillermo Dietrich, the minister of transport, said at the time that the additional investment is possible due to the ministry having saved some AR71bn ($3.7bn) as a result of greater transparency and more efficient use of resources.

Among the projects earmarked for investment is a 4.5-km road bridge connecting the cities of Paraná and Santa Fé. This will be achieved through a PPP, with a tender to be announced later in 2018. The tender is likely to attract interest from both domestic and international companies, such as Brazilian infrastructure conglomerate CCR, which said at the end of 2017 that it would pursue motorway concession opportunities in Argentina and Chile. Furthermore, the Entre Ríos province will also be the beneficiary of investments totalling AR23bn ($1.2bn) for 1900 km of road infrastructure works, including the conversion of a 130-km section on Route 18 into a motorway.

Investment Priority

Increasing investment in transport infrastructure was highlighted as a priority by the World Bank in its “Argentina – Capital Market Financing for Infrastructure” report published in June 2017. It calculated that Argentina requires $155bn worth of investments to meet its transport infrastructure needs, of which 10-20% could be financed through PPPs. According to the report, 2018 is expected to be a key year, given the first PPP tender was launched already for the renovation of 2500 km of motorways.

Argentina has also introduced reforms that allow for the financing of projects through capital markets. In May 2018 Congress passed the capital markets reform bill, which lifted restrictions on the participation of foreign capital. The reforms were deemed necessary given the lack of sufficient money on the local market to fund such projects. The new law allows for creditors to take over a project if the investors fail to deliver the required funds, but also stipulates that it will be the government, and not the investors, who will handle the negotiations to secure rights of way and land use agreements, which would likely streamline the execution of projects. Furthermore, developers are eligible for compensation in the event a project is cancelled.

Planned Works

Following the MoT’s announcement to increase investments in infrastructure, in April 2018 the first PPP tender for road infrastructure was carried out, attracting 32 bids for 3000 km of works, which will amount to around $12.5bn in investment.

In addition, a slew of other projects have either been announced or completed. These include improvements to the quays at Puerto Madryn, 3000 km of roads in the Buenos Aires province and the construction of a new motorway in Jujuy province.

There is also the AR15bn ($776.7m) project to upgrade the Ezeiza International Airport in Buenos Aires, which includes reconstructing the main runway, expanding the terminal building and building new access roads. This falls under the government’s AR23bn ($1.2bn) plan to upgrade 30 of its airports.

What could be considered the flagship road infrastructure project is the Agua Negra tunnel, which will connect Argentina to Chile through the Andes. The planned 13.9-km tunnel, to be built at an altitude of 4080 metres, would link Argentina’s San Juan province to Chile’s Coquimbo region, and is slated to cost around $1.5bn. Construction is expected to take 10 years.

The tunnel is a vital component of the Central Bi-Oceanic Railway Corridor, which connects the Pacific Ocean to the Atlantic Ocean via Porto Alegre in Brazil. Financing of the project is assisted by the Inter-American Development Bank, which has approved a credit line to both Argentina and Chile totalling $1.5bn. It is also providing legal, technical and environmental assistance for the structuring and preparation of the tunnel. As of March 2018, 26 firms comprising 10 consortiums have placed bids on the project, according to the MoT.

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The Report: Argentina 2018

Transport & Infrastructure chapter from The Report: Argentina 2018

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