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Interview

Ricardo Delgado – Sub-Secretary of Public Federal Works, Ministry of Interior, Argentina

Ricardo Delgado, sub-secretary of Public Federal Works of Argentina highlights the significance of infrastructure development throughout all industrial sectors as a fundamental element for the country’s growth ambitions. He furthermore elaborates on the ongoing reforms of Argentina’s public tender system which will enhance transparency and allow more competition from SMEs.

Could you please introduce yourself to our international readers as well as your mandate as sub secretary of Ministry of Interior?

Our mission is to grow the country’s economy, however, as national capital is scarce, we are in significant need of foreign and private investors

I am an economist by training and assumed the position of Under Secretary of Public Federal Works within the Ministry of Interior, Public Works and Housing in January this year. My mandate is to help to generate new investments in infrastructure projects as well as to design tools to facilitate the development of current works. One of the common objectives among the three ministries driving infrastructure projects (Ministry of Energy and Mining, Ministry of Transport and Ministry of Interior, Public Works and Housing) is to attract investment into Argentina. In order to do that, the oil and gas industry is key to improving our reputation and attracting foreign direct investments; ultimately also in infrastructure development. Our mission is to grow the country’s economy, however, as national capital is scarce, we are in significant need of foreign and private investors.

According to a recent KPMG study, Argentina’s infrastructure will need USD 30 billion of annual investments for the next decade. How would you assess the attractiveness of Argentina to foreign investors?

We estimate that investments into infrastructure must reach six percent of our GDP in order to be able to develop the Argentinian infrastructure to a level where it supports a stable, long-term GDP growth of around five percent in the long term; currently we are investing less than 2.5 percent of our GDP into infrastructure—hence why we are in significant need of investments. We have already implemented some of the most needed regulatory changes in order to make Argentina more attractive to investors: the fixed currency exchange rate was removed and we enabled the free flow of foreign currency in and out of the country! We are already witnessing some positive effects as a results of changing the regulatory environment. The next step is to restore investor confidence in Argentina founded on long-term trust; we need to communicate that we will respect the conditions of long-term contracts regardless of future political changes. In the last 17 years, Argentina has defaulted on all its international contracts hence why our access to international capital markets is strongly limited. The former lessens our credibility and thus lowers our attractiveness to investors, therefore the clear and strong message that from a governmental and judicial perspective we will respect all contracts made! Last but not least, we need to enhance our economic stability which includes effectively fighting against inflation—our current goal is an inflation rate below 20 percent.

What are the most important challenges in infrastructure that you have right now?

There are numerous challenges within all sectors of the country in the context of infrastructure; the energy sector is one of the most challenging however significant as without sufficient energy we cannot guarantee a stable growth rate. The latter sector gains even more significance as our capital is limited hence why importing energy is not a sustainable solution. We need to develop our infrastructure in a way that it resolves bottlenecks within the oil and gas value chain allowing the industry to increase production significantly. What’s more, all transport networks across our country are in a desolate state, that includes roads, railways and ports! The former three are crucial to all sectors including the oil and gas industry. In addition to the former, we must further develop our social infrastructure including housing and water distribution, in order to sustainably enhance the quality of life for Argentinians.

What is the role that different provincial governments are playing in the development of infrastructure and energy?

We are closely collaborating with the regional governments in Neuquén, Chubut and Santa Cruz–the provinces with the largest conventional and unconventional resources in Argentina—in order to drive infrastructure development, especially in hindsight to the needs of the local industry. These infrastructure development projects have different scales, regarding either the whole province or individual cities, such as Añelo in Neuquén, to enhance logic in respect to their significance as geographical hub in the respective province to the industry. I am confident, that hand-in-hand cooperation with the individual provincial government is the right pathway for infrastructure development!

What are the challenges behind this cooperation?

Frankly speaking, there are not many challenges as our interests are mutual and we share a common goal! Obviously, different provinces have different needs which we as federal government need to address—there is no ‘one fits all’ solution—; for instance, some of the provinces have significant fiscal deficits which complicates matters in the context of allocating resources to the multitude of needed infrastructure projects. As federal government, our ambition is to address the former by creating the mandatory conditions for the provinces to attract investments, improving nationwide credibility by establishing the right regulatory framework and—if needed—directly support the financing of the most important projects.

Could you give us an overview of your role within the national register of public works?

Upon assuming position as sub secretary the national register of public works was a mere empty box. We are currently in the process of thoroughly restructuring the registry to ensure a centralized register of all companies contracted with public works including their specific qualifications. The overarching aim of the former, is to be able to tender projects while including a more thorough qualification dimension. The latter is complimented by an additional project, which is aiming at enhancing transparency of the tender system at large as well as drawing on best practices within the sphere of public work via internal audits, for instance. Both, the restructuration at large and enhancing transparency will leverage the competition within the public works tender system which is a historic challenge within Argentina. The Argentinian citizens have a right to know where their taxes are spent and have a right that we as the government ensure to spend these taxes wisely; a simple social demand we must not ignore!

The Argentinian citizens have a right to know where their taxes are spent and have a right that we as the government ensure to spend these taxes wisely

To what extent are Argentinian SMEs considered in these reform plans?

We are specifically focusing on Argentinian SMEs in the sense that it will allow them showcase their expertise within the system of public works in a more competitive way! In recent years, companies that wanted to participate in the tender system had to pay a fee of approximately USD 10,000; for large corporations it is not an issue to pay that fee even when not awarded a contract. The opposite is the case for Argentinian SMEs. We’re currently establishing pathways for these SMEs to participate without having this high risk thus allowing them to place their bid without betting with their operational survival. What’s more, we are focusing on promoting partnerships in between Argentinian SMEs and larger MNC’s; this will create valuable synergies for the MNC as they will be able to tap into domestic knowledge and cultural expertise, while the SMEs gain value through know-how and technology transfers. These kind of partnerships will also enhance the overall quality of work carried out in Argentina thus benefiting the development of our country at large! Another challenge we tackle is the bureaucracy within the tender system. Currently the average time from opening a tender to assigning the project is 300 days – highly inefficient. Our objective is to cut this to 180 days thus gaining momentum in addressing our infrastructure needs.

From your perspective, why should the stakeholders in Argentina be optimistic about the future?

Argentina has significant potential for all industries! We have the resources: water, land, oil and gas, and much more! All we need is to find the right cooperation in between all industrial stakeholders across the sectors in order to create synergies which will support our efforts in shaping the right environment for all businesses to prosper. The new political generation is aware of this challenge and is proactively building bridges in between the different stakeholders. Two decades ago, the thought of a non-Peronist government having success in Argentina would have been ridiculed – today, we are making it possible! The Government is in the path of reducing inflation, stabilizing the economy and encourage investments within their first legislature period, this is a milestone in the history of Argentina!

I am in constant dialogue with the different governors and mayors and I am convinced that this recent election has brought a new political perspective on what needs to be done and how to drive growth to all of them—in the ruling party as well as in the opposition! Most Argentinians –fortunately—are aware that change needs to happen; the reality of the past was a fantasy world! Argentina lived in a bubble for the past 12 years, but now we are finally advancing on the correct path! Nonetheless, all of us need to be aware that there is still a long way to go.

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