President Alberto Fernández is facing resistance from the agriculture industry, businessmen and even pot-banging citizens after announcing a decision to seize one of the world’s largest soy meal and oil exporters, Vicentin SAIC.
Argentines from Buenos Aires to the northern city of Avellaneda, where Vicentin is headquartered, protested against the expropriation. On Wednesday evening, the sound of banging pots and pans could be heard in the capital, a traditional form of protest.
Opposition leaders, economists and even a close former ally of Vice-President Cristina Fernández de Kirchner slammed the decision, saying it will only complicate the country’s critical debt negotiations with private lenders. Given a court has been overseeing Vicentin’s bankruptcy, the executive branch is also being criticised for encroaching in judicial matters in a country with a long history of such tensions.
“There was no need to expropriate Vicentin,” said Marcos Buscaglia, an 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 without notifying Vicentin executives beforehand. The firm sent out a defensive statement Monday and its leaders met with the president Thursday. A government official said there was no plan to change course right now and Fernández’s decision stands, despite speculation about potential backtracking.
Production Minister Matías Kulfas said in an interview that the the bankruptcy judge’s rulings would be respected. Vicentin itself called for the judge to be involved in any takeover. In a joint statement, Argentina’s main grain exchanges said: “We express the importance of respecting the division of Argentina’s republican powers.”
The episode may pose a setback to Fernández’s recent surge in the polls, boosted in part by citizens who didn’t vote for him in last year’s election. In March, he implemented one of the strictest Covid-19 lockdowns in Latin America, earning praise as many other nations in the regions became hot spots of the pandemic. However, the Vicentin decision is reviving old memories of Fernández de Kirchner’s presidency when she expropriated oil company YPF in 2012.
“The government’s biggest challenge is gaining the public’s trust,” said Mariel Fornoni, director of polling firm Management & Fit. “The ability to start building trust has been fundamental for Fernández, and what these types of things do is lose it.”
Fornoni says the Peronist leader’s approval rating soared from 38 percent to as high as 58 percent in recent weeks, before cooling to 53 percent in the pollsters’ latest survey. She anticipates his approval rating will fall again next week.
Negative reaction to the expropriation announcement may well have scared Fernández, who’s well aware of the risks of fuelling a feud with the country’s farmers.
Back in 2008, when his now deputy was in charge and Fernández was her Cabinet chief, a move to hike export taxes during a commodities boom turned into a political crisis after farmers across the country protested and set up roadblocks. Kirchner eventually lost a vote in Congress and Fernández resigned, staying out of public office for more than a decade until he was voted president last year.
Vicentin declared bankruptcy last year after over-stretching itself in credit to farmers. Ironically, it was Fernández who precipitated the firm’s downfall. When it became clear he’d be 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, a 91-year-old firm specialising in exporting soy meal and oil, to file for bankruptcy, saying it could not meet a US$350-million payment owed to suppliers and that it would seek to restructure US$1 billion in debt.
by Patrick Gillespie & Jonathan Gilbert, Bloomberg