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Argentina cancel soy giant takeover plan amid political pressure

. Jun 27, 2020
Argentina cancel soy giant Vicentin takeover plan amid political pressure Photo: PointImages/Shutterstock

When Argentinian President Alberto Fernández took office in December 2019, he was aware of what he was getting himself into. GDP dropping 2.2 percent, yearly inflation at 53.8 percent, urban poverty reaching 15 million, and billions upon billions of foreign debt. These matters have caused some headaches to the new administration, but only now has Mr. Fernández had to deal with the first economic hot potato unrelated to any of his predecessors: the expropriation of Argentina’s major grain exporter Vicentin. 

As a part of Argentina’s most profitable sector — which accounts for 10 percent of the country’s GDP and 60 percent of all exports, according to the Agricultural Foundation for the Development of Argentina (FADA) — Vicentin declared bankruptcy in December last year, with a total debt of USD 1.4 billion to more than 2,600 creditors.

</p> <p>Besides employing almost 1,300 people, the company is seen as a leader of Argentina&#8217;s soy industry and the national government does not want to be judged as having a hand in its collapse. After being attacked by the opposition, President Fernández said the plan of expropriating Vicentin was an “exception” and that people had to leave ideological matters aside, seeing the government wasn’t planning on saving “a profitable company, but a bankrupt company.”</p> <p>But it wasn’t enough. Accused of turning back on pragmatism and creating a precedent for further interventions, the government faced street protests calling for a retreat. Some demonstrators claimed “democracy and expropriation” couldn’t be said in the same breath.&nbsp;</p> <p>And the public pressure caused the government to cave. The Executive branch agreed to construct a plan that would avoid expropriation while maintaining some level of intervention. Instead, the idea would be to carry out a shared takeover between the provincial administrations of Santa Fé and the Federal District. If that plan goes ahead, the decision will have to be made by a court.&nbsp;</p> <h2>Vicentin: to expropriate, or not to expropriate</h2> <p>Common knowledge dictated that if the proposal to expropriate Vicentin had relied on congressional approval, it would have been passed easily — as the government holds a majority in the lower house.&nbsp;</p> <p>Hypothetically speaking, if the measure reached the Senate and required a casting vote, the decision would fall onto the lap of the Senate President, which happens to be former President and current VP Cristina Kirchner. Ms. Kirchner was specifically targeted by protestors for having nationalized companies herself during her eight years in office.</p> <p>With the politics aside, was the idea to expropriate Vicentin good, bad, or necessary?</p> <p>According to Argentinian economist Gustavo Grinspun, the answer is, “paradoxically, all of the above.” As in politics, when it comes to the economy and Argentina, there is no perfect answer. If the company is indeed in financial ruin, this requires action. However, it is also a fact that foreign investors — who are already wary of Argentina — are repelled in cases of legal insecurity.</p> <p>“The Vicentin case in Argentina is a complex one. It affects one of the two largest national players and the sixth in the most important agro-export complex in the Argentine economy, one of the most important in its production on a global scale. And it has been subjected to the most cracked, fierce, and irrational political confrontation, in the face of the existence of at least four serious underlying situations, which require a sustainable solution,” the expert told <strong>The Brazilian Report</strong>.</p> <p>The political “expropriation” of this subject is no accident. While Argentina&#8217;s left-wing governments of most of the 2000s and 2010s have been associated with state involvement in the private sector, the fact that it is Vicentin which is in the spotlight adds an extra component.&nbsp;</p> <p>The company was the single largest private-sector donor to the re-election campaign of former president Mauricio Macri, who tried and failed to defeat Mr. Fernández last year.</p> <p>“This initiative &#8211; which until now is an intention announcement &#8211; has shown disdain for institutional forms and low political sensitivity. Despite being a problem that has been present since at least the middle of last year and the subject of the transition of governments last December, it seems to have not considered more integrative, more operational, and better-executed alternatives,” the expert said.</p> <p>To heat things up further, the soy giant is also the target of a judicial investigation for fraud, after having requested credits from the Argentinian National Bank shortly before filing for bankruptcy. Mr. Grispun says that, right now, the government has a quest to fulfill, as the challenge should be to find, within the bankruptcy proceedings, an effective solution for creditors.&nbsp;</p> <p>“Therefore, the great challenge of the government should be to supervise, propose and ensure, with its interventions, that the possible solutions to be explored and developed respect the variety of problems of utility or public interest. At the same time, helping to align and accommodate the regulatory and judicial procedures and deadlines, both in the bankruptcy, on the one hand, and of any criminal cases, on the other, that fit the shareholders.”

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Lucas Berti

Lucas Berti covers international affairs — specialized in Latin American politics and markets. He has been published by Opera Mundi, Revista VIP, and The Intercept Brasil, among others.

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