RIO DE JANEIRO, BRAZIL – Argentina’s President Alberto Fernández used his vice-president Cristina Kirchner’s handbook to seek a plan to nationalize agricultural trading company Vicentin SAIC, a move that should alarm the soybean markets and the country’s investors.
Fernández’s government will take control of Vicentin for the next 60 days as it seeks Congress approval to expropriate the agricultural enterprise, which applied for judicial reorganization last year after suffering the impact of currency fluctuations.
“This is a statist vision for the 21st century,” said Production Minister Matias Kulfas in an interview Monday after the announcement. The company has not been notified, he said.
Under the plan, all of Vicentin’s assets – whose crown jewels are the soy processing units that supply the global market with feed and cooking oil – will be placed in a trust managed by the agricultural arm of the state-owned oil company YPF.
YPF Agro would fully absorb Vicentin, creating a state-owned commodity giant with a major stake in shale gas exploration, fuel distribution, and crop trading, and providing the government with even greater influence in the exchange market, Kulfas said.
The move comes at a delicate time for Argentina, which is negotiating a US$65 billion restructuring of foreign debt. It also recalls the nationalization of YPF and other companies during Cristina Kirchner’s presidency, raising concerns over how Argentina will attract private sector investment to revive its economy.
“History shows us that state interventions, particularly in the grain trade, generate serious distortions that ultimately deepen the issues instead of solving them,” said the Argentine Rural Society in a statement.
The main opposition coalition criticized the measure, calling it “illegal and unconstitutional”.
The government claimed that the repercussions of Vicentin’s financial crisis on the Argentine agricultural sector were simply too great to be ignored. The privately held company is an important part of Argentina’s agricultural export business, valued at US$20 billion per year; it accounted for 7.4 million tons of soy crushing exports in 2019.
“There is a certain conviction, especially among small and independent farmers who have been largely affected by Vicentin’s debacle, that the company needed to be saved in some way,” said Juan Cruz Diaz, director of Cefeidas policy consulting in Buenos Aires.
But for many observers, nationalization points to another question: Who exactly governs Argentina? Fernández, who is far from being viewed as an advocate of the free market, but is still considered moderate? or Kirchner, now his vice-president, known for her nationalistic stance?
Glencore, based in Switzerland, has a joint venture with Vicentin, called Renova, which includes one of the world’s largest soy crushing companies. Fernández said it is too early to tell how a new state partnership with Glencore would work.
Argentina is the world’s largest exporter of soy meal for feed and cooking oil, and in recent years Vicentin has captured market share from large multinationals.
Source: Bloomberg