August 2, 2018 |
Lea Gimenez leaves Paraguay's Finance ministry this Wednesday; incoming minister Benigno López lays out the next administration’s infrastructure and debt priorities for one of the fastest growing economies in the region.
Paraguay’s President-elect Mario Abdo Benítez inherits one of South America’s best performing economies when he takes office in August. Over the last five years, economic growth in Paraguay has averaged more than 6% per year, and in 2018 Paraguay is again on course to be one of the region’s brightest spots.
Yet, significant challenges remain, such as reducing poverty and upgrading the country’s infrastructure. LatinFinance dis- cussed the new administration’s economic plans with the incoming finance minister, Benigno López, who is also Abdo’s half- brother and a former central bank board member.
LatinFinance: What are the economic priorities for the new administration?
Benigno López: We want to continue to stoke economic growth and improve productivity and build on the key achievements of the last five years. Paraguay has enjoyed a period of macroeconomic stability and solid fiscal management. We also believe we have some challenges — improving health and education. We also need to find more ways to attract investments in infrastructure. Our infrastructure deficit is costing us in terms of competitiveness. We have to keep developing policies that help us to reduce that gap.
LF: What are your infrastructure plans?
BL: Two very important projects are already in process: the Ruta Transchaco and upgrading our main international airport [the Silvio Pettirossi airport in Asunción]. We need to find a solution in the near term for the airport. Building several bridges that will help to improve connectivity with our neighboring countries will also be a priority, along with improving water and sanitation systems.
LF: The government recently announced plans to launch a new tender in the first half of 2019 for the Ruta Transchaco. What does the government need to do to attract more foreign investment for infrastructure projects?
BL: We think public-private partnerships [PPPs] are an important way to attract investment to projects. For some reason, the current model has not worked in an adequate way. So far, we’ve only had two projects and the process is still ongoing. In many countries, the PPP process has taken time. We’ll continue to examine our PPP structure and look for ways to bring in more investors to these types of projects.
LF: Do you think the PPP structure needs to be changed?
BL: We want to understand if there is a way to improve it. We have had several projects where companies have shown interest but in the end very few decided to bid. We believe that PPPs are in important instrument that offers an opportunity for large institutional investors to invest in Paraguay. We also want it to work efficiently. We’ll look at we’ve learned during the process and try to determine what, if anything, should be improved.
LF: Is there another PPP model being implemented in another country in Latin America that you think might serve as potential model for Paraguay?
BL: I don’t know if the problem is the model or the execution or how it’s being implemented. That’s why we want to better understand if there is a problem.
LF: What are Paraguay’s financing needs for 2019? What is your strategy for the capital markets?
BL: The budget process is still ongoing, so it’s still early to discuss what our financing needs might be. In recent years, Paraguay has turned to the market for bond issues that range from $300 million to $500 million and up to $1 billion. We will continue along those lines. We’re still analyzing the amount.
We are also exploring the possibility of requesting that Congress approve a single authorization for a bond sale program for [Benítez’s] entire term. We believe that the era of low interest rates is over, so this could give us more flexibility, particularly in the current market environment. We’re in the process of looking at what is the best approach.
LF: Do you think you’d make the request to Congress in the next few months?
BL: If we choose to go that route, we would do it this year. The change would apply to issuing debt in both the domestic and international markets. It will require talks with lawmakers, but it could represent important savings in the long run. LF