| Work Detail |
Companies are renegotiating contracts individually, because payments have been suspended since November and amounts must be agreed upon.
Construction is one of the sectors that most stimulates the economy. In fact, governments tend to invest in public works not only because it allows for better infrastructure, but also because of the impact it has on economic activity. However, works with national financing have been paralyzed since December 2023 and it is estimated that some will only be resumed between September and December 2024. Construction companies are renegotiating contracts to see how the execution of these projects can be resumed.
Construction is one of the sectors that most stimulates the economy. In fact, governments tend to invest in public works not only because it allows for better infrastructure, but also because of the impact it has on economic activity. However, works with national financing have been paralyzed since December 2023 and it is estimated that some will only be resumed between September and December 2024. Construction companies are renegotiating contracts to see how the execution of these projects can be resumed.
Inflation
Today, Indec will publish the inflation rate for July and the Government expects it to be the lowest of the year.
This week, the national Government issued a decree that enables it to make changes to the public works contract regime and will allow it to terminate or renegotiate those that were signed before December 10, 2023. The provincial Government maintains that it has already defined how to advance the projects in execution with national financing, but the construction sector states that work has not yet resumed and that there are doubts about payments.
The Minister of Government, Infrastructure and Territorial Development of the province, Natalio Mema, explained that no works will be transferred to Mendoza, but that the Nation will continue those it was carrying out. Those of Enohsa (National Entity for Water and Sanitation Works) will continue to be executed by the agency, except for some that are being resolved directly with the entity.
Regarding the construction of housing, Mema recalled that it was agreed that the Nation and the province will practically pay for it equally, but that they have to resolve it with the Housing Secretariat - without depending on a decree - and that the final agreement is being defined. This excludes, of course, the housing projects that are being developed in certain municipalities with direct financing from the national Government.
Poverty and indigence in Mendoza
Poverty in Argentina: they claim that the real figure would be 73.3% and that “the middle class barely exists”
It should be remembered that this agreement was finally sealed in June, with the visit of the Chief of Cabinet of Ministers of the Nation, Guillermo Francos. However, the province acknowledged that there is no clear date for the resumption of these projects and that each project will be reactivated as the national Executive has a budget.
Gerardo Fernández, president of the Confederation of Small and Medium-sized Construction Companies (CPC), indicated that there are few projects financed by the Nation in Mendoza, because it was one of the provinces most "punished" in this regard. He added that it has been said that some will be completed with national financing and others will be transferred, but there has not yet been any progress in this regard.
He stated that, just as the current contracts were not fulfilled when the new administration began, the works have not been transferred to the provinces now, beyond the announcements and the fact that an agreement has already been reached with 20 (the City and Province of Buenos Aires, La Pampa and Formosa have not yet done so).
On the other hand, he explained that there is a macro agreement between the Nation and the provinces, so that they take charge of the works, but that later, specific agreements have to be signed for each project and that, in practice, documents come and go, but "there is not a single work that has been transferred and is in progress."
Fernandez also said that the Nation is in the position that the historical value must be paid. That is, the amount that was billed in October or November. This implies that the executing entity, whether it is the province or the municipality, must pay the difference or it will not be possible to execute the work. This is because inflation in the construction sector, from November to date, exceeds 100%.
“What you had invoiced for $100 million is now $200 million. There is no company, no matter how solid it is, that can afford that loss,” he said. He added that, although the province has stated that it wants to continue the works, it is also negotiating company by company to try to reduce the amount owed.
Lecap
Bye Fixed Term: What are LECAPs and how to invest pesos in this instrument
For his part, Dalmiro Barbeito, president of the Chamber of Independent Construction Companies of Mendoza, indicated that Governor Alfredo Cornejo renegotiated contracts for national works to which the national Government had cut off financing and that the same occurred with the homes that were tendered with national funds.
“There is a commitment that the funds that have not been sent since December will start arriving from September or October,” he explained. This implies that, in practice, work would only resume in the last four months of the year or at the beginning of 2025, while public works have been paralyzed - completely in the case of national works and slowed down in those that depend on the province - so far in 2024.
Barbeito pointed out that, on the other hand, there is no news about the works that had financing from the IDB and stated that he has never seen anything like this: that the national government “distracts” international funds and does not pay for promised works, with a certificate of progress. He explained that the current administration took a long time to appoint new officials linked to the area and that only now are the sub-secretariats analyzing which projects will continue.
Barbeito explained that, in theory, the province will pay the certificates, but that the companies are renegotiating the contracts and debts, because when a work is stopped, there are related costs, such as deterioration, insurance payments, custody and general expenses. He indicated that the November value would be paid, but with the interest for late payment established by contract.
“All construction companies want to renegotiate the works in order to finish them,” he said. He also said that the province has had much better behavior with contractors than the nation, which has not paid work certificates for seven months. He added that, from the chamber, they are doing everything possible to close the new agreements between September and December, so that the activity begins to reactivate.
EMERGENCY ORDER
A few days ago, the Argentine Chamber of Construction sent a request to the Minister of Economy, Luis Caputo, to declare a state of emergency in the sector and apply urgent measures that allow companies to “overcome this transition period, until the necessary mechanisms are generated so that activity regains its rhythm.”
The document states that “not only have new works not been launched, but most of those that were in progress have been suspended, even those that were financed by international credit organizations, and in many cases, payments on overdue certificates have also been interrupted.” This has led to many companies “being in very serious trouble, making their continuity practically unviable.”
They also recalled that the sector is one of the largest generators of employment in the economy and that, according to data from the chamber itself, almost 110,000 direct jobs have been lost in recent months. They also explained that it is estimated that for every direct job, one indirect job is created. |
