It’s been over a decade since the last visit of the US president to Buenos Aires, capital of the second largest Latin American country with a world famous heritage of football and tango. President Obama visited the country on March 16, 2016, shortly after President Macri, inaugurated in December 2015, reached a deal with the decade-long holdout creditors, a legacy of the country’s grave financial crisis in the early 2000s. Mr. Macri, former senior analyst at Sideo Americana, a Macri family enterprise specializing in civil construction, and two-term chief of government of Buenos Aires, may be the one to reconnect this alienated country back to the global financial market.
Argentina has been an economic powerhouse in Latin America—the country has 43 million young (median age 30 years old) and well educated inhabitants and an urban residency rate of over 90%. Services and industry together account for 89.5% of the GDP and accommodate 95% of the labor force in 20152. From 1991 to 1998, average annual GDP growth rate reached 6.4%.
Moreover, Argentina is an energy giant. It is a top 30 producer and consumer of electricity - second largest in Latin America, next to Brazil - and a top 30 producer of crude oils. Beside this, Argentina is well endowed with solar irradiance. The northwestern part of the country—along the Andes—has an irradiance level of 2,600 kWh/sqm, highest
in the country. Nevertheless, renewable energy has been stagnating in the country. In 2012, the country only ranked 104th globally, by kWhs of electricity generated from renewable sources.
Argentina has set a target of generating 8% of the country’s electricity from renewable energy sources by 2017 and 20% by 20256. As for solar power, global consultancy firm Ernst & Young estimated that only 10 MW worth of solar projects have been installed to date, leaving a huge market untapped. To better use such great energy endowment, Buenos Aires plans to generate 3.3 GW solar power by 2020, according to Ernst & Young.
However, with the installment of the new government things are set to change. This government has decided to upgrade the current Environment Secretariat into a fully-fledged Ministry of Environment, at the same level with - and as a parallel authority to - other ministries. President Macri also announced his intention to more closely cooperate with the United States and the United Nations in fighting climate change. All can be seen as endeavors to facilitate sustainable practices in Argentina, which missed out on a decade of financing opportunities mostly because of the holdouts. In the world of finance, a holdout is the refusal of a creditor to accept an undesirable repayment offer from the debtor. As a result, the debtor could face litigation filed by the creditor compelling to offer better terms. On the sovereign-debt level, same rationale also applies, and the defaulted country would also be excluded from theinternational credit markets.
In this way, renewable energy will be a priority in the new government’s plan, should President Macri eventually lead Argentina out of the lock out.
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