World Bank’s IFC Triples Argentina Loans on Holdout Resolutionby
IFC to loan $1.8 billion to Argentina’s private sector in 2016
Reforms and holdouts settlement allowed IFC to triple loans
The World Bank’s International Finance Corporation is more than tripling its investment in Argentina this year after President Mauricio Macri’s government began carrying out economic reforms and resolved a 15-year legal battle with holdout creditors.
The IFC will lend about $1.8 billion to Argentina’s private sector this calendar year compared with $500 million in 2015, Liz Bronder, director for Latin America and the Caribbean, said by phone from Buenos Aires. That total includes a $378 million loan to oil producer Axion Energy Argentina SA to expand its plant in Buenos Aires province, Bronder said.
“Many years ago Argentina was the largest single country that we had exposure to and then in the last five years we’ve almost done no financing in Argentina given the conflict of several member countries of IFC around the holdout issue,” Bronder said. “When the government announced their programs that helped stabilize the macroeconomic situation and the move toward negotiations with the holdouts we were able to finance freely what demand we could see in the country.”
Macri assumed office in December and swiftly moved to unravel currency controls and trade restrictions implemented by the previous government while restarting talks with creditors who sued Argentina for full payment following its $95 billion default in 2001. The country’s borrowing costs have tumbled as Macri resolves disputes and opens up the economy.
It’s possible that the IFC will increase its exposure to Argentina next year, Bronder said. The IFC is particularly interested in the agricultural business and in renewable energy. The government received about six times its original tender for thermal generators, the Energy Ministry said Tuesday.
While Macri faces a challenging macroeconomic environment of high inflation and a contracting economy after cutting energy and transport subsidies, Bronder said Argentina is moving in the right direction.
“Inflation is a worry and we obviously keep an eye on the macroeconomic situation whenever we make loans, but the government seems to be on the right track,” Bronder said. “Their ability to control inflation is going to open up more domestic sources of financing.”