Adelmo Gabbi, President, Bolsa de Comercio de Buenos Aires (BCBA)

On the future of Argentina’s capital markets 

What reforms are necessary to increase the volume of transactions in capital markets? 

GABBI: Argentina needs a thorough, comprehensive and structural reform of sector legislation to attract more users, and therefore increase the size of the market. That said, there are two main areas of reform. First, a decrease in total fiscal charges on transactions, and second, an overall rise in confidence and trust in financial institutions to attract foreign investors to our capital markets. Coupled with this, there needs to be a strengthening of legal security for all shareholders, but especially for minority shareholders, who have to be assured that a level playing field exists for them vis-à-vis their majority counterparts. 

These reforms will allow Argentine capital markets to attract more players to the market, such as young, foreign investors, as well as small and medium-sized enterprises, which will start to see the capital market as an additional funding instrument.

Although some legislative steps have already been taken, we are looking forward to a very thorough reform of capital markets enacted as a law, rather than the small parliamentary legislative changes we have seen during the last two years. A complete change in our mindset is necessary. A patchy reform process has to be substituted by efficient policies that will lay the foundations for a functional system for the coming decades, and one that will prove useful in developing the country as a whole.

How can the Argentine capital market become a long-term financial instrument for large infrastructure projects?

GABBI: Indeed, this is the primary task of capital markets, and we are working to update our market structures and make this a reality again. Funding for infrastructure should not be understood as a burden on fiscal deficit because, if done efficiently, investment in infrastructure helps reduce it. Our severe fiscal imbalances are currently caused by our need to import energy and other spending patterns elsewhere. If Argentina manages to become more self-sufficient in energy terms, as was the case until 2010, and the current distortive government expenditures are corrected, then the country will be able to solve its chronic financing challenges.  

In this context, the recent passing of the public-private partnerships (PPP) law has been warmly welcomed by all market players. Private participation remains crucial for the correct and long-term financing of such projects, as the experience of other countries in the region has shown. As mentioned earlier, corporate governance and legal security are indispensable for the successful implementation of this measure. Argentina is seeking to attract long-term funding, with investments of 30 or more years. Investors will not participate in PPP schemes unless they are sure about the quality of legal security and rule enforcement. In this regard, good corporate governance is the backbone of the whole process. Clearly, investors seek returns on their investments, but they also look for high degrees of transparency.  

How can capital markets attract local IT firms to go public in Argentina, rather than on foreign stock markets?

GABBI: Argentine IT companies have tended to go public on international trading floors, mainly in New York. However, this pattern seems to be reverting. ByMA, Globant, Mercado Libre, Despegar.com, which are some of the country’s most important unicorns, have already gone public in Argentina, or will do in the near future, and other IT companies will surely follow suit. I am also convinced that a new capital markets law will help intensify this trend, with more non-traditional companies of all sizes finding capital markets a very attractive instrument to find financing. Additionally, a larger market will also allow the appearance of new financing schemes, such as crowd funding or a larger number of venture capital investors.

It is therefore absolutely crucial for the future of the Argentine capital markets to consolidate legal security, corporate governance and minority shareholder protection. Capital markets have to regain their lost appeal for both majority and minority shareholders and, at the same time, become attractive and reliable for non-conventional investor profiles and first-time users. A more significant presence of IT unicorns and innovative companies will surely draw a younger, non-traditional investor to the country’s capital markets.