Private sector financing woes stymie Milei's infrastructure plans

Argentine President Javier Milei is seen as lacking a long-term plan for infrastructure beyond clamping down on public spending and hoping the private sector will take up the slack, according to economist Miguel Kiguel.

However, problems with access to private sector financing and other difficulties are making it tough for companies to step up their activity in the sector.

“It hasn’t been decided how infrastructure will be done. I believe that [the government] will try to ensure that the private sector does as much as possible, with all the problems that it has, since concessions were attempted before and those contracts weren’t fulfilled,” Kiguel, a former financing secretary at the economy ministry and current head of consulting firm Econviews, said in response to a question from BNamericas during a seminar. 

Since taking office in December, Milei has virtually halted all federal financing of public works, with the explicit objective of putting infrastructure development mainly in the hands of private firms.

Argentine construction chamber Camarco says that Milei’s austerity measures have paralyzed around 3,500 projects and that as many as 100,000 jobs have been lost.

“It’s not clear what will go into concessions and what won’t, or what is going to be carried out by the State. That has yet to be defined,” Kiguel said at the event hosted by Chilean non-profit think tank CEP in Santiago to discuss the economic challenges in neighboring Argentina.

The economist said that private firms are interested in participating in many sectors of the Argentine economy, such as energy, mining and oil, but that many are in “wait-and-see” mode due to the possibility of Milei’s deregulation efforts being reversed in the medium term.  

“They don’t want to miss out if things really change, but are treading carefully,” he said, adding that Argentina has previously had a tendency to swing between political extremes, which has the effect of scaring away long-term investment.

When asked by BNamericas after the event about the specific obstacles to private investments in Argentine infrastructure, Kiguel said the sector is still facing the same issues that sank the PPP program pushed during Mauricio Macri’s presidency (2015-19).

“The main problem is financing. They have no access to loans now. There’s no long-term credit in Argentina,” he underscored.

During his presentation at the CEP seminar, he said that Milei has succeeded in temporarily improving the country’s fiscal standing, but still faces big challenges in controlling rampant inflation and lifting controls on government action, including currency and capital controls, and other regulations.

He also pointed to Milei’s lack of support in congress and conflicts with provincial governments as his biggest weaknesses, which mean that the president will have to conduct shrewd negotiations in order to pass any reforms.