Buenos Aires province resists Milei's cuts, as Kicillof keeps public works moving

Buenos Aires province's Peronist governor Axel Kicillof is moving ahead with 1,545 public works projects – involving over 1.06 trillion pesos (US$1.11bn) – despite deep funding cuts from the federal government. 

Libertarian President Javier Milei has only agreed to resume funding for specific projects, choosing to halt or transfer the rest to the provincial administrations. Many have not been able to take over the public works contracts, worsening an already fraught situation for Argentina's construction sector.

Federal transferences to provinces and autonomous capital Buenos Aires fell 18.5% year-on-year in August, according to the fiscal analysis institute (Iaraf). In the case of Buenos Aires province, the drop was 18.0%.

According to Buenos Aires’ provincial project database GeoInfra, of the 1,545 projects listed as “under execution,” 471 involve roadworks (430bn pesos), 519 are for public spaces and municipal buildings (150bn pesos), 227 are for flood control and canals (261bn pesos), 298 are for potable water and sewerage works (206bn pesos), and 30 are in the energy sector (15.9bn pesos).

In addition, another 235 projects are currently listed as being tendered.

Despite the province’s efforts to keep works moving, the local construction sector continues to report negative results.

In January-July, cement deliveries fell 24.6% compared with the same period of 2023, according to the provincial statistics office. Cement production also dipped 26.7% year-on-year in the first seven months of 2024. Asphalt production fared even worse, tumbling 42% in the period.

Provincial investments 

Buenos Aires is one of only two provinces which have not joined Milei’s Rigi investment scheme, and it is now also planning a separate system of its own to attract investments.

“We cannot accept that the only way to receive investments is to focus on primary sectors, to raffle natural resources and not add value. On the contrary, this is an economic and industrial development project,” Kicillof said earlier this week during an encounter with business and union representatives to present the provincial strategic investment regime (RPIE).

Kicillof said that his administration is still in talks with the local legislature over the details of the provincial scheme.

Some of the details that have been published include tax benefits for projects whose capex is at least US$50mn, which can be extended if they create employment, technological innovation, substitute imports or are located in low-income areas.

Further extensions can be made if the project contributes to increasing exports. 

Aside from the minimum capex requirement, companies adhering to RPIE will have to allocate 50% of their payments to local companies, the provincial government said via social media. 

Although the federal government has boasted that Rigi’s first projects will entail US$50bn in investments, others have criticized the scheme for favoring primary industries such as mining, agriculture and gas, to the detriment of local industry.

National construction chamber Camarco has also warned that the minimum US$200mn capex requirement to access Rigi’s benefits will prevent many infrastructure projects from participating.