Argentine provinces shore up finances
November 29, 2017 |
Sub-sovereigns eye more funding in order to increase potential investments, not just enough to cover their spending
In a bid to sustain long-term economic growth, Argentina’s provinces are shoring up their finances, reducing taxes and preparing a pipeline of infrastructure projects to attract capital and investment.
“I am optimistic that we are on the correct path and that we are advancing,” Alfredo Cornejo, governor of the western province of Mendoza, said Wednesday at LatinFinance's Argentina Sub-Sovereign and Infrastructure Finance Summit in Buenos Aires.
Mendoza, along with most of the country's provinces, are working with central government on reforms to make it more attractive for investment and financing. Potential changes include reducing the gross income tax, streamlining labor regulations and putting order in state finances.
Ideally, the reforms will cut the cost of doing business in Argentina and encourage investment to spur economic growth.
Should reforms materialize, provinces are set to benefit. After years of running budget deficits, Argentina's sub-sovereigns can get their financing under control and refocus fundraising efforts not just on public spending but also public works, said Marcelo Etchebarne, a partner at law firm Cabanellas, Etchebarne & Kelly.
He cited Mendoza as a good example. Over the past two years, the province has brought its current fiscal account into balance from a 7% deficit, and is on track to reach a 1.3% surplus in 2018.
“It does not need financing to cover its costs,” Etchebarne said. “It can go to the market now to finance public works.”
Northern province Chaco, is also taking steps to improve its public finances, with a view to attracting investment to diversify its agriculture-strong economy. With healthier state finances, companies will be more likely to invest in the real economy, helping to expand on sunflower and soybean farming to the production of sunflower oil and soy milk, said Cristian Ocampo, Chaco’s minister of finances.
“We want to encourage investors to bet on the real economy,” he said. “It has enormous potential.”