Q-1: Mrs. Giorgi, till October 2001 you were heading the secretary of Industry. Can you tell me what your primary goals have been since you were nominated Secretary of Energy and Mining?
A-1: I have three primary goals. The first is to encourage stability of rules in energy and mining where we have long-term projects and it is very important to maintain the rules of the game. We need to maintain the laws and to create new laws that are complimentary to the current judicial infrastructure. In my opinion, it is important to develop new investment in Argentina. My second goal is concerning the Energy sector. I will now separate my goals between Energy and Mining. In Energy, my second concern is to consider the huge opportunities that integration will bring to Argentina. Here I am referring to the regional integration of Argentina. Today it is impossible to make decisions about policies concerning gas, hydroelectricity, and electricity, without considering the whole of South America as one area. Why? Because investors are thinking that way. That is the reason why my second goal is to work as a state to bring together all the tools that investors will need to improve the development of this integration. This does not require work only on the side of Argentina's policies. This work requires the participation of all countries involved in integration. It is necessary to work with Brazil, Uruguay, Paraguay and Chile. In the last years we have had integration very related to the levels of deregulation in the market. We have had a very successful integration with Chile. We have seven pipelines with Chile, including one oil pipeline, one power line and several gas lines. We have two pipelines underway with Brazil and one underway with Uruguay. We are now exporting 1000 megabytes of electricity to Brazil. The countries in what we call the Mercosur cooperate together. We must also work in a regional and international forum in order to reduce the asymmetries caused by the different rates of deregulation. Our work in this area will be very hard in the next six months, but I feel that the progress that we will make will be very important and that after things will go more quickly. The private sector is pushing us to construct the entire framework that they need to do business. As for Argentina's role, we are working to increase flexibility in terms of imports and exports in gas, in oil, and we are working especially with Brazil trying to construct a framework that will allow access to the Brazilian market with the same conditions that the Brazilian producers have. I feel that step-by-step we are going in the right direction. My third goal is to increase competitiveness and decrease deregulation in order to increase the benefits that the residential users will receive. I believe that our deregulation process in electricity, in gas and oil really were very successful. Argentina was one of the countries, which began with these types of policies. Our success is visible in numbers and quantity. For example, our production of oil increased 70% since 1992. Gas increased more than 100%. The prices in the wholesale market in electricity decreased by more than 70%. In the households we have reduced prices by 20 to 25%. Now we are exporting. This year our exports will total 4 billion dollars. There has also been an improvement in services and quality. We are trying to be a country with enough oil to satisfy our own demand and to export. We export nearly 30% of our production.
Q-2: What do you reply to those demands, asking the state for a fast proceeding of the deregulation in the energy sector, in order to allow greater private activities?
A-2: Well, this is why I say one of my goals is to increase competitiveness. Eight years ago, when the process began, technology was quite different from what it is now. No one was thinking about regional integration in the way that we do now. We have a lot of things which have changed the framework. We need to have a second generation of deregulation in order to adapt the framework to the new reality of global economies. In that sense, I have two things, which I believe are very important to do. Firstly, we must increase the role of the trade companies in the distribution area. They can offer different quality of services and we must be careful because someone is responsible for the investments. Increased deregulation will open up for new players, but we must never forget that someone will pay for this investment and all players must be able to profit. Deregulation is a big question in the World everywhere, how to do it, how to introduce the changes. In my opinion, you must take into account that new players are necessary but you must never forget who will invest and never forget that at the end of the line, there is a user and in the end, gas, electricity, oil are public services. In this second generation of changes it is necessary to make policies, which will take into account the next five years on the market. Countries such as Argentina with a huge potential for growth and demand both internal and external must not make the mistake of lowering prices too much on the market and then in return hurt the growth of the market. Thirdly, it is very important to have regional integration where imports and exports are equal. It is also very important to have other players, such as industrial players because they can help when the demand in electricity is unexpected high, resulting in electricity shortages if there is not an extra supply. We must bring in the necessary incentives for investors, especially in Argentina where we have a huge demand. We have fixed our agreements with Chile; we need now to do that with Brazil.
Q-3: An important challenge will be the improvement of the existing infrastructure needed for the transport of energy, in order to make investment profitable. Who will be in charge of the costs?
A-3: We have a federal plan for transport along the coast in the range of 750 million dollars. That plan will produce integral connections with lines all over the country. Now we are having great success with this plan. We have signed a contract to install a high-tension line in the South. We have an offer for another line. At the end of February we will have a mining line go up for auction. We are confident that we will have enough offers to launch the project. We are working with the private sector in areas where they will benefit from lines. Transport is very important. There are many communities, which are outside of the urban areas. Almost 35% of our population is in Buenos Aires. This federal line is a way of encouraging the regional policies. That is why the public sector decided to finance these projects, but I believe that the private sector's participation is very important. We are thinking in the near future to allow high-tension lines to be built with "right of congestion". It would allow transporters to sell part of their open access at a higher price. For example, a generator that wants to sell a piece of his line can do so at a higher price. The business of transport is not interesting enough in itself. Since 1992 we have had only one line. The federal plan ( Plan de Infraestructura”) is a mix of the private and public sector. We are looking to produce the incentives to encourage the private sector to participate more. Open access requires all who want to use the line to pay a fee. An incentive would be to propose a toll for 80%, and then I can use 20% of my line where I want. Those who want to be sure that their energy will cross the line will have to pay a higher price. In Argentina we call that the "right of restrictions".
| Q-4: Recently, the government announced a special project, which is aimed to support the development of such remote areas for investment as Patagonia. You were mentioning already the regulatory framework. Can you give us some more details about the project, the companies involved and its future opportunities for Patagonia and the interested investors?
A-4: The line to Patagonia is part of our Federal Plan to build Transport infrastructure through a mixed public-private funding program. The contract for the Patagonia line is the first of the four 500 MW lines we expect to build through this program. The participating private player will be Aluar, a local aluminum producer who generates its own electricity, and who will pay for 20% of the line (total cost is estimated to be $ 78 million) the rest will be funded by the government. The construction of this line will have a huge impact in the region, since it will interconnect the Patagonia grid with the national transmission grid, this will support the integration of Patagonia to the rest of the country in terms of electricity. Without any doubt a long awaited and significant step. For the region it will mean increased security of energy supply.
Q-5: Surprisingly enough, the mining sector currently accounts for less than 1% of the GDP, with exports amounting to 700 million dollars. Less than 27% of Argentina’s mineral resources have been exploited. As Argentina neglected more or less its own rich natural resources in the past, do you foresee any significant changes in the sector’s exports within the next few years?
A-5: Well, my perspective is very different from yours. You know that ten years ago the mining sector was not at all developed. We had a growth of 300 million dollars to 300 billion. This is a result of our very open mining laws, which resemble laws in Australia, Canada and the US who wanted to attract miners. We are focused in two areas. The first is to improve exploration. We have eliminated the value added tax in exploration. For this reason many companies have come to explore in Argentina. In the last years mining is 1% of the GDP. I agree with you that it should be more, at 5 or 6%. We are increasing incentives in terms of taxes, and secondly, we need to have complimentary agreements with Chile, as a great amount of our geological resources are located on the border with Chile. Here we can have problems with different labor laws, customs, etc. We need to have the same rules in both countries. We have recently had a very important discovery of gold in the South by a junior exploring mining company. I believe that the mining prospects in Argentina are very significant.
Q-6: You once compared the public sector and the private sector in mining and energy to an airport control tower and its planes. What exactly did you mean by that?
A-6: To work very closely with the investors, symbolized by the planes, to bring all the incentives that attract the investors to explore and develop Argentina's resources, and to maintain the rules of the game. The role of the state would be comparable to the role of the airport control tower. With all of this, the planes can take off and land successfully.
Q-7: Could you explain to our readers the role of CAMESA - which you are heading - within the energy sector?
A-7: The role of CAMESA is to manage the wholesale electricity market. CAMMESA is conformed by all market players and its core functions are to guarantee operations within the wholesale market. This means allowing access for generators according to lowest marginal cost, dispatching the energy, billing users and transferring funds to suppliers and communicating in real time the spot price that results from supply and demand as well as long term contract prices. CAMMESA’S role is essential to guarantee competition and transparence in the wholesale market.
Q-6: One final question on a more personal level. If you were to describe yourself as a person, would you say that you have the perfect job?
A-6: Yes, this is a job that I really love. I am the type of person who if I really love the job I can do it with the level of quality that I want to do. I am very demanding with myself.
NOTE: World Investment News Ltd cannot be held responsible for the content of unedited transcriptions.
|
