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OPINION AND ANALYSIS | 03-07-2021 23:22

‘Experts in regulated markets’

Argentina’s ‘experts in regulated markets’ are making big bets just at the right time.

Argentina’s business elite are good students of the great Warren Buffett, whose famous advice has become the stuff of market legend: “Be fearful when others are greedy, and greedy when others are fearful.” In our own domestic jargon we’ve coined the phrase “especialistas en mercados regulados” to ironically refer to a group of investors who call themselves businessmen but rather than optimising management have honed their skills on weaving deep networks of influence and capital in order to snap up quasi-state monopolies at discount prices. Interestingly, there’s actually a university in Spain that offers a Master’s degree titled “expert in the economics of regulated markets,” but it’s not totally clear whether the programme at the Universidad Carlos III de Madrid covers the all-important aspect of building strong and long-lasting relationships with a political class that appears to be in constant flux, despite the actors being always the same.

Regardless, our own experts in regulated markets are making big bets just at the right time. Whereas a substantial sector of high society is currently eyeing condos in Miami or Barcelona for their kids, our market movers and shakers are taking advantage of a ravaged economy with some of the lowest levels of investment in the historical timeline. As Tristan Rodríguez Lorredo points out in his weekly columns in Perfil, our current rate of investment is below the rate of the amortisation of capital, which essentially means we are consuming what we have without being able to restock.

Without getting too technical, investment as a percentage of GDP should come in at 24 percent in order to reduce unemployment and poverty gradually, and at 50 to 60 percent in order to grow at an annual clip of four percent. Over the last decade we’ve been stuck around 16 percent and in 2020 we slid below 12 percent. This, Rodríguez Lorredo concludes, is the main reason behind a nefarious vicious cycle of a lack of quality private-sector jobs, a shift toward low-quality jobs with minimal security, increased state spending in social plans and inefficient government jobs which in turn increases the deficit and leads to money printing and resulting inflation. A chart cited by economist Luis Campos on his Twitter account shows private and public sector wages stuck at their lowest level since October 2015 – down more than 30 percent in real terms. Labour in Argentina is extremely cheap right now, particularly if measured in dollar terms.

According to data from the INDEC national statistics bureau, in the first quarter median income for individual earners in Argentina stood at 42,394 pesos. That’s US$423.94 at the official exchange rate or US$249.37 at the black market “blue dollar” rate. For the 27 percent of the working population that doesn’t have to earn a wage but have to rely on their own means for income, the figure is 32,163 pesos. Do the math.

When the going gets tough, the tough get going. Probably the number one specialist in regulated markets of the day is José Luis Manzano, who was the head of the Peronist bloc in the Chamber of Deputies in the 1980s and then Carlos Menem’s Interior Minister in the 1990s. Manzano and his eternal partner Daniel Vila, along with a little-known multi-millionaire named Mauricio Filiberti, have teamed up to buy acquire Edenor, Argentina’s largest electricity distributor, from Pampa Energía, owned by Marcelo Mindlin, who was close to Mauricio Macri. “[Manzano] received his certificate of real power,” Jairo Stracchia wrote in his weekly review, “he got approval for the acquisition of the largest electricity distributor in the country, Edenor, from the same State to which he has to ask for money in order to pay salaries and with which he has to restructure debts for unpaid electricity, given that that same State doesn’t allow it to hike electricity bills.”

As Carlos Pagni points out in a column this week, said investors already own the electricity distribution game in Mendoza, where they owe copious amounts of money to Cammesa, the state-run firm that sells electricity to distributors. Filiberti, who is new to this group, is the one putting up the big bucks, say Pagnis, and he made his fortune selling chlorine to public water sanitation firm AySA. Experts in regulated markets meet and multiply!

The other biggie right now is the Hidrovía Paraná-Paraguay river waterway, recently nationalised by the Alberto Fernández administration. “The key 1,635-km portion of the 3,442-km waterway, which transports 80 percent of Argentina’s exports and connects five countries, will be operated by the Administración General de Puertos (AGP) port authority, despite strong objections from the farming sector and the political opposition,” explained commodity focused media group Argus. In the midst of a drought that has reduced water levels, the nationalisation sparks fears of inefficiency just when dredging and maintenance are needed the most, particularly from the sceptical agricultural sector. 

It has been in the crosshairs of the Kirchnerites for a while now, who claimed its private control undermined national sovereignty. The rumour is that the government is set to subcontract Electroingeniería — the firm led by ultra-Kirchnerite Gerardo Ferreyra — which will in turn bring in Chinese firm Shanghai Dredging. On the geopolitical front, the US won’t be too happy if China has a hand in controlling a key corridor for global agricultural supplies. Others point at old differences between Cristina Fernández de Kirchner and Gabriel Romero, the head of one of the private firms that was in charge of the waterway named EMEPA. During the famous “corruption notebooks” case, Romero said he was forced to fork over US$600,000 for the crown during the Kirchnerist heyday. Rumours.

These are just a few of the largest examples of what is going on in an economy that has just been banished even farther from the garden of even, with MSCI downgrading our market to “standalone.” At its most elemental, the argument shouldn’t be about more or less state but about productive investment. The Argentine state, of course, cannot be trusted to do this. Can the private sector? When looking at the biggest market moves, it seems as if they are playing the same games as the politicians.

Agustino Fontevecchia

Agustino Fontevecchia


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