Argentine govt lacks capacity to back sustainability investments – Moody’s

Government-backed sustainability investments in Argentina will remain limited due to the federal administration’s lack of financing options, although sustainable financing generally has potential. 

“The government, in general, has very little financing capacity, regardless of the issue,” Moody’s senior credit officer Gabriel Torres said during a press conference in reply to a question by BNamericas about the government’s capacity to finance its recently announced sustainable mobility plan.

Torres said Argentina’s debt and fiscal deficit levels aren’t that high, but the government doesn’t have the means to finance them. This situation would persist even if the opposition candidate wins next year’s general election.

“A government led by the current opposition could start with some public policy measures that we would consider positive for credit … but the essential part is for markets to believe that debt payments are feasible,” he said, adding that debt restructuring will be sought regardless of the party in power. 

Some US$987mn in sustainable bonds have been issued in Argentina since 2019, with 62% coming from the energy sector. 

While this only represents 11% of corporate bonds in the local market as of September, and only 1% of the regional sustainable bond market, Moody’s sees potential for growth as investors become more interested in the reputational benefits of these mechanisms and sustainability is incorporated into investment decisions, Moody’s said in a separate report.