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Argentina PPP law needs track record, S&P says

The law must overcome two decades of anti-business policies, the agency notes in a fresh report, as the country’s president looks to add $70bn in infrastructure and energy investment.

PPP legislation signed last year by Argentina’s president marks an improvement over previous laws, but it remains to be seen whether the law will draw in investors, according to Standard and Poor’s.

The report, issued by S&P last week, looked at President Mauricio Macri’s plan to invest around $70 billion in the transportation and energy sectors, which have “suffered from considerable underinvestment in the past 15 years”. Private investment is expected to account for the majority of energy spending and around 25 percent of transportation investment.

On the PPP legislation, S&P said the new law “includes several positive features” which will increase transparency and clarity for private-sector concessionaires. Its “robust and clear framework” will make business easier for private investors, the report added.

But the lack of a track record remains a daunting obstacle, as the law looks to “reverse the pernicious impact of Argentina’s anti-business policies during the past 15-20 years”. Even with the benefits brought by the legislation, success of the government’s infrastructure investment plan is not guaranteed, S&P warns.

Argentina’s transportation plan calls for $33 billion in investment by 2019, adding 2,800 km of new roads totalling $12 billion, with $2 billion of that targeted to come from the private sector. The programme plans for added spending on cargo rail, urban transport and ports and airports, with port enhancement funded mainly by the private sector.

On energy, Macri aims to add around 20GW of energy by 2025, with close to half coming from renewable sources. Total investments needed to meet this goal are estimated at $36 billion.

For infrastructure programmes to succeed, the report concludes, Argentina needs to draw “big international players” with construction expertise into the country.