Argentina Seizes Top Soy Exporter in New ‘Statist Vision’

(Bloomberg) -- Argentine President Alberto Fernandez dipped into the play book of his deputy, Cristina Fernandez de Kirchner, with a plan to seize crop trader Vicentin SAIC, ringing alarm bells in the farming industry and among investors in the country.

His government will take control of Vicentin for the next 60 days as it seeks congressional approval to expropriate the agricultural powerhouse, which filed for bankruptcy last year after being caught out in currency swings. Vicentin is a key player in a strategic industry, Fernandez said.

“This is a statist vision for the 21st century,” Production Minister Matias Kulfas said in an interview late Monday after the announcement. The company wasn’t notified, he said.

Under the plan, all of Vicentin’s assets -- the crown jewels of which are soy-processing plants that supply the world with meal for animal feed and cooking oil -- will be placed in a trust managed by the agriculture arm of state-run oil company YPF SA. Shares YPF rose 14% in New York Monday.

YPF Agro would then absorb Vicentin entirely, creating a state commodities giant with major hands in shale drilling, fuel dispensing and crop trading -- and even giving the government more clout in the currency market, Kulfas said.

The move comes at a delicate time for Argentina, which is negotiating a restructuring of $65 billion in overseas debt. It also revives memories of the 2012 nationalization of YPF and other companies during the presidency of Kirchner, and raises questions about how Argentina will lure private-sector investments to lift its economy off the floor.

“History shows us that state interventions, in grain trading in particular, create severe distortions that end up deepening problems instead of solving them,” the Argentine Rural Society said in a statement.

Argentina Seizes Top Soy Exporter in New ‘Statist Vision’

The main opposition coalition rejected the measure, calling it “illegal and unconstitutional.”

The government contends that the repercussions of Vicentin’s financial crisis on Argentina’s farm industry were simply too big to ignore.

“It is not in anyone’s plans to be expropriating companies,” President Fernandez told Radio Con Vos on Tuesday. “I’m not ashamed to say that I am a capitalist. But when capitalism became financial it lost ethical content.”

The closely held firm is a major part of Argentina’s $20 billion-a-year crop export business, accounting for 7.4 million metric tons of oilseed-crush exports in 2019.

“There’s a certain belief, especially among independent and small producers who have been quite damaged by Vicentin’s failure, that the company needed to be saved in some way,” said Juan Cruz Diaz, director of political consulting firm Cefeidas Group in Buenos Aires.

Earlier: Argentina Back to Combo of Money Printing and Capital Controls

But to many observers, the nationalization points to another issue: Who exactly is governing Argentina? Fernandez, who’s far from a free-marketeer but viewed as a moderate, or his deputy, Kirchner, a figurehead for fervent supporters of Latin American leftism and nationalism.

Vicentin’s fate has been closely tied to politics. The company expanded under the presidency of market-friendly Mauricio Macri and then fell into disarray when Fernandez emerged as his likely replacement. Gabriel Delgado, an agriculture secretary under Kirchner, will lead the government’s intervention.

The company defaulted on about $1.5 billion of debt last year. A court in Santa Fe province, where the company is headquartered, has been overseeing a bankruptcy in a procedure that’s similar to Chapter 11 in the U.S.

A big chunk of Vicentin’s debt is owed to state-run Banco Nacion. But the expropriation plan was still a surprise to company executives, who’ve been in talks with existing partner Glencore Plc and other companies, a spokesman said.

“The chosen path fills us with uncertainty and concern,” the company said in a statement.

Switzerland-based Glencore has a joint venture with Vicentin called Renova, which 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.

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