In Argentina’s sunny Mendoza province, officials had been preparing to break ground on the Vecaso solar park, a 115 megawatt project costing US$90-million. The culmination of nearly four years of planning, Vecaso was one of several ambitious projects to take root under a renewable energy push by the government of President Mauricio Macri.
But that project is now in limbo, along with at least two other clean-energy investments totalling half a billion dollars – victims of political and economic uncertainty that has crimped cash flow into Argentine industries from shale drilling to cars.
Latin America’s No. 3 economy is facing default fears after a sharp market crash and has imposed stricter capital controls to protect the peso in the wake of an election last month that saw business-friendly Mr. Macri beaten by opposition candidate Alberto Fernandez.
Once a sector that represented more than US$4.5-billion in investments and 9 per cent of the country’s total generation, the clean-energy projects have ground to a halt as companies and financial backers wait for signals from Mr. Fernandez on his approach to energy and economic policy.
“The idea was to start construction before the end of the year, but with the current uncertainty we have been forced to adjust,” said Ramiro Marquesini of Verano Capital, the Latin American company responsible for building the Vecaso solar park.
Mr. Marquesini said he hopes the construction will not be delayed beyond June of next year, if the situation has stabilized by then.
Mr. Fernandez’s vice-president will be former president Cristina Fernandez de Kirchner, known for interventionist economic policies during her two terms between 2007 and 2015. The return of the Peronists to power from next month has prompted investor fears that Argentina could be headed again in a more protectionist direction.
A spokesman for Mr. Fernandez did not respond to request for comment for this story.
The political uncertainty – not to mention inflation running at nearly 51 per cent – has put up a barrier to finishing renewable energy projects in development, such as the Vecaso solar park, industry executives said.
Further complicating the landscape are capital controls imposed by Mr. Macri’s government that require financing institutions to convert investment dollars into pesos upon entering Argentina.
“Development banks and export credit agencies all just stopped making disbursements,” said Gustavo Castagnino, communications director for Genneia, an Argentine energy firm that suspended the development of four wind farms representing a total of 200 megawatts.
Marcelo Alvarez, president of the Argentine Chamber of Renewable Energies (CADER), said in an interview that the situation was affecting “one of the few sectors that had real investments in recent times,” adding that projects requiring a large initial investment were particularly affected.
In northwestern Argentina, a planned solar park in Jujuy province – already home to South America’s largest solar farm – stalled after the results of the August primary election indicated that Mr. Macri was on his way out, according to a source with direct knowledge of the project.
Those behind the project had been in talks with European development banks for US$100-million in funding to build a 96-megawatt solar farm. The paperwork and due diligence was in advanced stages, according to the source, who declined to be named owing to the political sensitivity of the issue.
Then, Mr. Fernandez trounced Mr. Macri by a wider-than-expected margin, sending the peso and markets tumbling.
“We had an informal ‘okay,’ but when they were presenting the project to their steering committees, after the results of the primary, they didn’t say no – they told us they were going to wait until things were more stable,” the source said.
The project leaders are now looking into alternative funding options, the source said.