Argentina : Capital Market Financing for Infrastructure
Argentina’s improved sovereign credit rating has helped to spur the recent sub-sovereign and corporate bond issues. In early April 2016, Standard & Poor’s upgraded Argentina’s sovereign ratings for local and foreign currency debt to B from B-....
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/212571498688497844/Argentina-Capital-market-financing-for-infrastructure http://hdl.handle.net/10986/28322 |
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okr-10986-283222021-05-25T09:02:45Z Argentina : Capital Market Financing for Infrastructure World Bank Group INFRASTRUCTURE FINANCE CAPITAL MARKETS BONDS MUTUAL FUNDS ACCESS TO FINANCE Argentina’s improved sovereign credit rating has helped to spur the recent sub-sovereign and corporate bond issues. In early April 2016, Standard & Poor’s upgraded Argentina’s sovereign ratings for local and foreign currency debt to B from B-. This follows the ratings upgrade from Moody’s which raised Argentina’s sovereign rating for foreign currency denominated debt from C1 to B3 in 2016. This rating was re-affirmed by Moody’s in March 2017. Since Argentina’s re-entry into the international capital markets in early 2016, there has been USD 8.4 billion and USD 4.4 billion of bonds issued by sub-sovereign and corporate entities which is being used, in part, being used to support infrastructure projects. Although investor appetite has been relatively strong, it is difficult to ascertain the level of liquidity for sub-sovereign debt over the long-term. The potential level of involvement of foreign and local banks in the financing of infrastructure is still to be determined once Public-Private Partnerships (PPP) projects are tendered. Going forward, the issues that will impact the participation of lenders are: (i) the timing for completing and implementing the underlying regulatory framework for PPPs; (ii) the development of a project pipeline and subsequent tenders; (ii) macroeconomic conditions. The ability of the renewable energy projects under the RenovAR program to obtain bank financing will serve as useful benchmark for the rest of the PPP program. Although the enactment of the capital markets law is intended to reduce market inefficiencies, additional legislation, regulation and policies are needed to deepen and widen local capital markets. This law, which is still under legislative review, may not go far enough to develop the institutional investor base needed to provide long-term financing for infrastructure. Provisions could be added or new legislation could be developed which will: (a) encourage insurance companies to offer new types of products; (b) rebuild private pension systems by incentivizing the establishment of asset management companies; (c) providing preferential tax treatment for closed end mutual funds or value capture adjacent to real estate; (d) supporting the establishment of REITs; (e) reviewing the governance structure, mission, and investment strategy of the FGS; (f) support the development of long-term hedging instruments to manage currency risk through trusts or related mechanisms; and (g) promote the issuance of peso-linked bonds while developing a peso/dollar hedge market. 2017-09-12T21:38:51Z 2017-09-12T21:38:51Z 2017-06-28 Report http://documents.worldbank.org/curated/en/212571498688497844/Argentina-Capital-market-financing-for-infrastructure http://hdl.handle.net/10986/28322 English en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work :: Other Financial Sector Study Economic & Sector Work Latin America & Caribbean Argentina |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
INFRASTRUCTURE FINANCE CAPITAL MARKETS BONDS MUTUAL FUNDS ACCESS TO FINANCE |
| spellingShingle |
INFRASTRUCTURE FINANCE CAPITAL MARKETS BONDS MUTUAL FUNDS ACCESS TO FINANCE World Bank Group Argentina : Capital Market Financing for Infrastructure |
| geographic_facet |
Latin America & Caribbean Argentina |
| description |
Argentina’s improved sovereign credit
rating has helped to spur the recent sub-sovereign and
corporate bond issues. In early April 2016, Standard &
Poor’s upgraded Argentina’s sovereign ratings for local and
foreign currency debt to B from B-. This follows the ratings
upgrade from Moody’s which raised Argentina’s sovereign
rating for foreign currency denominated debt from C1 to B3
in 2016. This rating was re-affirmed by Moody’s in March
2017. Since Argentina’s re-entry into the international
capital markets in early 2016, there has been USD 8.4
billion and USD 4.4 billion of bonds issued by sub-sovereign
and corporate entities which is being used, in part, being
used to support infrastructure projects. Although investor
appetite has been relatively strong, it is difficult to
ascertain the level of liquidity for sub-sovereign debt over
the long-term. The potential level of involvement of foreign
and local banks in the financing of infrastructure is still
to be determined once Public-Private Partnerships (PPP)
projects are tendered. Going forward, the issues that will
impact the participation of lenders are: (i) the timing for
completing and implementing the underlying regulatory
framework for PPPs; (ii) the development of a project
pipeline and subsequent tenders; (ii) macroeconomic
conditions. The ability of the renewable energy projects
under the RenovAR program to obtain bank financing will
serve as useful benchmark for the rest of the PPP program.
Although the enactment of the capital markets law is
intended to reduce market inefficiencies, additional
legislation, regulation and policies are needed to deepen
and widen local capital markets. This law, which is still
under legislative review, may not go far enough to develop
the institutional investor base needed to provide long-term
financing for infrastructure. Provisions could be added or
new legislation could be developed which will: (a) encourage
insurance companies to offer new types of products; (b)
rebuild private pension systems by incentivizing the
establishment of asset management companies; (c) providing
preferential tax treatment for closed end mutual funds or
value capture adjacent to real estate; (d) supporting the
establishment of REITs; (e) reviewing the governance
structure, mission, and investment strategy of the FGS; (f)
support the development of long-term hedging instruments to
manage currency risk through trusts or related mechanisms;
and (g) promote the issuance of peso-linked bonds while
developing a peso/dollar hedge market. |
| format |
Report |
| author |
World Bank Group |
| author_facet |
World Bank Group |
| author_sort |
World Bank Group |
| title |
Argentina : Capital Market Financing for Infrastructure |
| title_short |
Argentina : Capital Market Financing for Infrastructure |
| title_full |
Argentina : Capital Market Financing for Infrastructure |
| title_fullStr |
Argentina : Capital Market Financing for Infrastructure |
| title_full_unstemmed |
Argentina : Capital Market Financing for Infrastructure |
| title_sort |
argentina : capital market financing for infrastructure |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/212571498688497844/Argentina-Capital-market-financing-for-infrastructure http://hdl.handle.net/10986/28322 |
| _version_ |
1764466457255608320 |