Traders size up the making of a state soybean giant in Argentina
The shock waves from Argentina’s surprise seizure of soybean
powerhouse Vicentin SAIC are being felt strongest in the crop-trading houses of
Rosario.
It’s still unclear how exactly the nationalisation will play
out. But in Argentina’s grains hub on the Paraná River there are already fears
that by becoming a major state-run player, Vicentin will be afforded unfair
advantages over rivals like Bunge Ltd and Cargill Inc, or will distort the
market by overpaying farmers.
“We have to see which way it goes,” said Mariano Grassi, who
heads Rosario brokerage house Grassi SA.
After Vicentin defaulted on about US$1.5 billion in debt
last year, Grassi, the exporter’s second-biggest commercial creditor, formed a
negotiating group that includes cooperative ACA to try to reach an agreement on
repayments.
“Will the new Vicentin have a professional board and
efficient inner workings but with state oversight through its equity stake? Or
will it be a purely political tool that uses government policy to keep a
competitive advantage and increase control of dollar revenues?” Grassi said.
“That’s the fear.”
One hope, Grassi said, is the figure of Gabriel Delgado, an
experienced farm technocrat who’s well respected in Argentine agriculture
circles. Delgado was appointed by President Alberto Fernandez to lead the expropriation.
For now though, “uncertainty rules,” said Mateo Reschini, an
analyst at brokerage LBO in Rosario.
“This still needs congressional approval and then we’d have
to see how Vicentin would operate,” Reschini said. “Is this going to be simply
a rescue, with the company working largely as it used to, or will the
government accept running it at a loss as a price to pay for a bigger state
footprint in the grain and currency markets?”
Argentina’s currency struggles are a backdrop that can’t be
ignored. The Central Bank has been ramping up intervention to protect its
dollars that back the peso. The soy meal and oil that Vicentin ships are a key
source of hard currency.
In an interview, Production Minister Matías Kulfas –
outlining a “21st century statist vision” for Argentina – said the government
wants to have a larger role in grain and currency markets.
“This will help to have more stability and avoid cyclical
economics,” he said.
“There is a straight path between an unsustainable FX
framework and the nationalisation of Vicentin,” Juan Manuel Pazos, chief
economist at TPCG Valores, said in a note. “In our view, the government plans
on using Vicentin to increase USD supply in the FX market to crush depreciation
expectations in the short-term, trying to force producers into selling their
stocks of grain.”
There are also concerns for investors in state-run oil
company YPF SA, which would absorb Vicentin into its grain-trading arm.
That could work out badly for YPF as it branches out into
non-core businesses that risk “being left aside and run poorly,” as well as
increasing the debt load, said Fernando Valle, a Bloomberg Intelligence analyst
in New York who covers the company. Valle said the addition of Vicentin would
recall the expansion of Brazil’s Petrobras SA in the mid-2000s.
Kulfas said the management of YPF’s agriculture department
is top class and will win the confidence of producers.
Another question is what the government will do with
Vicentin assets, such as its remaining stake in a processing joint venture with
Switzerland-based Glencore Plc.
Known as Renova, the venture includes one of the world’s
biggest soy-crushing plants. Fernandez said it was too soon to say how a new
state partnership with Glencore would work.
Argentina is the largest exporter of soy meal for animal
feed and soy cooking oil, and in recent years Vicentin has fended off
multinationals to have the top share of those shipments.
Comments
Post a Comment