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ARGENTINA | 13-06-2020 08:00

Government leaves door ajar for Vicentin U-turn

After fierce pushback from agro industry and opposition, President Alberto Fernández meets with Vicentin executives and says Argentina will consider other options. Nationalisation remains on the cards for now, however.

Days after shocking investors and farmers with a plan to nationalise one of the nation’s biggest agricultural firms, the government on Friday opened the door to a less dramatic rescue strategy.

After meeting with President Alberto Fernández late Thursday, Vicentin SAIC said the government is willing to consider other ideas to avoid expropriation.

The Peronist leader’s government still plans to take control of the bankrupt firm, the fact that it’s now open to alternatives is a breakthrough for Vicentin. Monday’s nationalisation announcement met with fierce opposition from the opposition, the agriculture industry, businessmen and even pot-banging protesters from Buenos Aires to Santa Fe Province, where Vicentin is based.

“The president has been very clear,” Santa Fe’s Peronist Governor Omar Perotti, who was at the meeting, told reporters. “His objective is rescuing the company. He’s in a process where expropriation is one mechanism, but what’s emerged from the talks is that if better proposals are put forward, the president is willing to listen.”

In a statement, Vicentin said the government would analyse other types of public-private partnerships to save it from nationalisation. On Friday, Fernández said the government isn’t seeking to nationalise more businesses, but didn’t want to see Vicentin go into foreign hands.

“We’re rescuing a business that if it went on like this, it would cease to exist or fall into hands and capital that aren’t Argentine,” Fernández said on a visit to La Rioja Province, before going on to pour cold water over hopes another path will be sought.

"Expropriation is the tool to be able to rescue the company, there is no other way," the president declared to the La García news portal.

"I asked them [the Vicentín executives] for an alternative. What they propose is that the State enter the company without expropriation. What happens is that this involves an agreement with businessmen who are very scattered. And that is very little transparent, "said the president.

According to Fernández, "they know that only the State can help them."

 

Criticism

Opposition leaders, farmers, economists and even a close former ally of influential Vice-President Cristina Fernández de Kirchner said nationalisation would only complicate the country’s critical debt negotiations with private lenders.

Because a court is overseeing Vicentin’s bankruptcy, the Executive branch is also being criticised for encroaching on judicial matters in a nation with a long history of such tensions.

“There’s no need to expropriate Vicentin,” said Marcos Buscaglia, an Argentine economist and co-founder of consulting firm Alberdi Partners. “The nationalisation could cost the government dearly and derail debt-restructuring talks.”

Fernández announced the nationalisation Monday at a press conference, flanked by Productive Development Minister Matías Kulfas, without notifying Vicentin executives beforehand.

The Vicentin takeover is reviving unpopular memories of Fernández de Kirchner’s second term in office. After expropriating oil company YPF SA in 2012, the following years saw her approval ratings slump and her party voted out of office.

Agriculture, Fisheries and Livestock Minister Luis Basterra, said Friday that "there is no other alternative than expropriation," but added that "if another way is found, at a lower cost, it is welcome."

 

Reigniting debate

Indeed, the plan to nationalise Vicentin is reigniting debate about who really is in power in Argentina: the president or vice-president.

A poll by Buenos Aires-based pollster Management & Fit shows 47 percent of Argentines believe the decision was Fernández de Kirchner’s, with only 23 percent saying Fernández made the call on his own. Forty-seven percent also disagreed with the expropriation; just 21 percent approved.

“The government’s biggest challenge is gaining the public’s trust,” said Mariel Fornoni, Management & Fit’s director. “The ability to start building trust has been fundamental for Fernandez, and these types of things lose it.”

Fernández de Kirchner’s second term, from 2011 to 2015, also saw contentious policies to reform Argentina’s Judiciary in what critics labelled a move to amass power in the executive. Now, the constitutionality of the Vicentin nationalisation is being questioned because a judge is already in charge of the company’s bankruptcy.

“We express the importance of respecting the division of Argentina’s republican powers,” the country’s grain exchanges said in a statement.

Kulfas said in an interview that provincial Judge Fabian Lorenzini’s rulings will be respected.

The planned takeover of Vicentin has realised the farm industry’s worst fears under Fernández: state meddling in its business and the potential to unbalance grain markets.

“State intervention implies the risk of distorting equilibrium prices,” Argentina’s main crop associations said in a statement. “State-run companies have different priorities to private companies; they don’t necessarily need to be profitable.”

 

Risks

That sort of negative reaction may be scaring Fernández, who’s well aware of the risks of fuelling a feud with the country’s farmers.

Back in 2008, when Fernández de Kirchner was in charge and Fernández was Cabinet chief, a move to hike export taxes during a commodities boom turned into a political crisis after farmers across the country protested and blocked roads. Fernández de Kirchner eventually lost a vote in congress and Fernández resigned, staying out of public office for more than a decade until he became president in December.

Vicentin defaulted on debt at around the same time after over-stretching itself with credit to farmers. Ironically, it was the figure of Fernández who precipitated the firm’s downfall. After it became clear he’d become president and probably raise export taxes, farmers rushed to tie in contracts.

It felt, some said, like a bank run. And in the end, it led Vicentin, the 91-year-old firm specialising in exporting soy meal and oil, to file for bankruptcy, saying it couldn’t meet a US$350-million payment owed to suppliers and that it’d seek to restructure about US$1 billion in debt.

Judge Lorenzini said in March that the company’s defaulted obligations totalled 99.3 billion pesos (US$1.4 billion).

The loans granted to Vicentín by the state Banco Nación are under judicial investigation in a case in which Sergio Nardelli (until now the director of the company) and Javier González Fraga, head of the banking entity during the previous government of Mauricio Macri, face investigation.

 

– TIMES/AFP/BLOOMBERG

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