Future of FFI’s $8.4bn Argentinian green hydrogen project hangs in the balance over access to foreign currency
Andrew Forrest’s renewable H2 venture demands ‘free availability’ of foreign exchange in cash-controlled Argentina for 15GW behemoth
The future of a giant 15GW green hydrogen project in Argentina hangs in the balance after a disagreement between the project developer, Australia’s Fortescue Future Industries (FFI), which is owned by iron-ore billionaire Andrew Forrest, and the country’s government over the terms of access to foreign currency.
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But speaking to the elDiarioAR website this week, Argentine president Alberto Fernández, said that there was a “problem” with the Pampas scheme because FFI has made some demands that the government would find difficult to fulfil, such as the creation of a “special dollar” that would give green hydrogen developers privileged exchange rates between the US dollar and the Argentine peso.
However, Argentina has reportedly already included free access to foreign currency in its draft hydrogen law, tabled by officials this month.
Argentina has had strict currency controls in place since 2019 to prevent the devaluation of the peso, which limit the amount of foreign currency companies and individuals are able to buy to pay for goods and services.
This applies to payments on goods imported into the country, as well as exports: if exporters are paid in foreign currency, they must convert it into pesos at an officially mandated exchange rate.
“We want the investment [in Pampas] to be made and we have confidence in that company,” Fernández is quoted as saying, although he added that there was a “problem” with advancing the Pampas scheme. “Some of the proposals are difficult to fulfil under these conditions, for example, a special dollar like the one for soybeans. We are working to resolve these issues.”
Fernández appears to be referencing the so-called “soy dollar”, introduced this year to help Argentina’s giant soybean export industry, which allows exporters to exchange their dollars for a higher number of pesos than would usually be allowed under the official exchange rate.
“To advance to the next stages of the project, it is essential to have a regulatory framework that defines the basis for the development of this industry in Argentina,” it says.
“This framework should include the following aspects: access to financing at internationally competitive costs; free availability of foreign currency for the payment of debt and creditors abroad; a favourable tax regime; financial and fiscal stability; coexistence between the Hydrogen and Free Trade Zone Development Law and the expansion of the national electricity system.”
At least some of these fiscal requirements are on course to be met. In fact, Argentina’s draft hydrogen law includes “access to the free exchange market”, energy secretary Flavia Royón told a conference in Rio Negro, Patagonia, last week — a statement which raises the question of why a “soy dollar” proposal is on the table.
“Among the various tax benefits contemplated, the following stand out: fiscal stability for 30 years, access to the free exchange market, accelerated amortisation of income tax, financial benefits, incremental and differentiated export duties according to each type of project,” said Royón.