Banks are reluctant to issue letters of credit (L/Cs) for some imports of fuel into Argentina due to volatility in the market.

At least four cargoes of fuel from Europe to Argentina have been turned back recently because of several factors negatively impacting state-owned Compañía Administradora del Mercado Mayorista Eléctrico (Cammesa), which operates the country's wholesale power grid.

Bank concerns

Banks are concerned about payment issues due to Cammesa's problems, which include high fuel stocks and increased competition.

One trader recently told local media that because of these problems, banks are reluctant to open L/Cs with Argentine importers.

Negative impacts

Concerns centre on Cammesa's lack of earnings in recent months due to an exceptionally mild winter which is now coming to an end.

This means the state-owned company, which imports and sells fuel to thermal power producers, has amassed substantial fuel stocks and may not now need fuel it has on order form Europe.

Argentina's thermal power plants, which require imported fuel, are also facing fiercer competition from the country's hydropower and nuclear electricity producers.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.