The Vicentin Case Paves The Way To Poverty And Decline

Member of the Academic Council of Libertad y Progreso. Degree in Economics from Universidad Católica Argentina. He is an economic consultant and author of the books "Economía para todos" (Themes, 2002) and "El SindromeArgentino" (Ediciones B, 2006). He serves as a columnist in the newspaper La Nación. Previously, he worked the same task for the newspapers La Prensa (1985-1992), El Cronista Comercial (1992-2001) and La Nueva Provincia de Bahía Blanca (1992-1998). He's the host of the cable TV show "The Economic Report." Lecturer in Applied Economics of the Master of Economics and Administration of ESEADE, senior lecturer in Macroeconomic Theory of the Master of Economics and Administration of CEYCE. President of the Center for Economic and Institutional Studies. He was Economic Adviser to the Argentine Chamber of Commerce (1983-2002) and to the Argentine Chamber of Importers (1992-1993).

INFOBAE – It seems really out of logic that in the middle of a creditors’ call the Executive Power decides to intervene a company in which it is required to put dollars to pay its debts

It seems really out of all logic that in the middle of a summons of creditors the Executive Power decides to intervene a company. It is that in all summons the judge of the case appoints a trustee who controls that the plan presented by the debtors to face the payment to the creditors, duly agreed, is respected. The trustee only intervenes if, for example, the company’s shareholders want to sell some important asset that takes away their solvency and prevents them from paying creditors in the future in case of going bankrupt. So there is no risk for creditors that the company’s shareholders sell strategic assets or empty the company so that creditors cannot collect because the trustee appointed by the judge is controlling the situation, therefore there was no point in intervening the company .

Furthermore, in order to resort to intervention, the Executive Branch cites in intervention decree 522/2020, dated July 9, on page 3, the law they resort to to justify intervention. Says the aforementioned decree: “the temporary occupation for SIXTY (60) DAYS of the company VICENTIN S.A.I.C. in the terms of articles 57, 59 and 60 of Law No. 21,499, which is administratively provided for in the public interest and in order to ensure the continuity of the company, the preservation of its assets and assets, and the protection of jobs in danger, which becomes urgent in the context of the emergencies dictated by Law No. 27,541 and the unprecedented health emergency situation in the country, taking into account the volume of the company in issue, food sovereignty and the need to avoid high negativity impacts on the economy. ”

To begin, law 21,499 was promulgated by Jorge Rafael Videla on January 17, 1977, a law that was intended to regulate the expropriation procedure under the terms of article 17 of the National Constitution. But the curious thing is that art. 17 says that public utility must be established by law of Congress, and at that time there was no Congress, with which the military was assimilating its legislative functions to a constitutional congress. In other words, the Executive is based on a de facto government law that also establishes intervention for a de facto government.

Forced the legal framework to intervene the company, which is no less because the precedent remains that by a simple presidential decree all companies in Argrentina become subject to intervention, I doubt that there is interest in sinking investments in our country, given the fragility that has private property.

All this introduction comes to mind because we remember that the economic prosperity of countries is tied to institutional quality. A legal certainty that must prevail. Without that legal certainty, there will be no investments and the inhabitants will be condemned to increasing poverty, unemployment, low wages and the absence of a future of prosperity.

The argument that the State wants to help producers seems really unusual. To begin with, Vicentin is in call for creditors and the Executive, who says that he is going to save the company, is also in call for creditors because he is negotiating a debt that he cannot pay. Like Vicentin and without agreement, for now, with creditors. It must be a unique case in history that someone who is in bankruptcy claims to come out in salvage of another who is in bankruptcy. Said more directly, the government cannot pay its own debt and also its main source of income is monetary issuance, and does it intend to pay Vicentin’s debt? What are you going to pay it with if the tax resources are not enough to meet your current expenses?

Nor is it true that food sovereignty is being safeguarded. 85% of Vicentin’s turnover is concentrated in grain milling and biodiesel production. The group companies dedicated to food, such as their refrigerators and oil production, represent only 7% of the company’s turnover. I doubt that if those companies disappear people will stop eating for that reason.

Nor is it true that food sovereignty is being safeguarded. 85% of Vicentin’s turnover is concentrated in grain milling and biodiesel production. The group companies dedicated to food, such as their refrigerators and oil production, represent only 7% of the company’s turnover. I doubt that if those companies disappear people will stop eating for that reason.

Nor is the argument that the government wants to help producers in the area affordable. That the government says that it wants to help agricultural producers is striking. The soybean producer receives a $ 50 dollar for every dollar he produces in soybeans and pays his inputs, if he is lucky, at $ 72. He has income at $ 50 and costs at $ 72. In reality, while the real dollar has a market price of $ 126, the government gives the producer a dollar of $ 50. An exchange gap of 152%.

The argument of paying a better price to the producer to help him has so little support that just mentioning that to help him, it would only be enough to lower the retentions, the argument quickly falls apart. But also, the price of soy is governed by the Chicago market. It is a commodity that cannot have too many deviations in the market price. If, by nationalizing Vicentin, the state paid more for the ton of soybeans than its competitors, there would be a loss that the taxpayer would be financing. And, again, it should be remembered that today the State does not have the resources to finance its own expenses to the point that monetary issue is already the main source of financing for the public sector.

The issue of expropriation deserves another comment. In order to expropriate Vicentin, Congress has to declare it of public utility and previously compensated. Here, the Executive appointed a financial controller to manage the company without prior compensation to its shareholders.

But I doubt that anyone can seriously argue that a grain milling company is in the public utility. That is for the case, for example, of having to expand a route and it is necessary to expropriate part of a field to be able to expand it, not for the state to become an entrepreneur and take a private company. If the company was mismanaged, another will buy it or go bankrupt, but charging the taxpayers the cost of a company with problems has no logic, and less in a government that has lost 194,000 jobs since it assumed according to data. officials from the Ministry of Labor, taking the data to March, which only had 10 days of quarantine.

Regarding the argument that the state needs a company that exports to make dollars, it is false. Today all exporters, be they grain or screws, have the obligation to deliver to the BCRA the exported dollars for which they receive a non-market exchange rate. So today, by force, the State keeps the exporters’ dollars. It doesn’t take a state to expropriate a business to keep export dollars. It is already doing so, in addition to keeping the producers’ income through taxation.

Finally, the president stated that he is concerned that Vicentin falls into the hands of foreign capital. It is good to remind the President that Argentina was built thanks to the flood of foreigners who came to work in Argentina thanks to the legal security that prevailed in those years. Argentina grew up with foreigners who came to work, not to seek social plans, and many of them created, with great effort, large companies that generated thousands of jobs. The golden stage and growth of Argentina cannot be understood without the legal security that prevailed at that time, the freedom to produce and the flow of immigrants who came to work. And the Argentine decline cannot be understood without remembering the legal insecurity that populism imposed with regulations, expropriations and the culture of the gift.

In summary, there is not a single legal or economic argument that justifies the expropriation of Vicentin, we only know that with this new violation of property rights, Argentina is condemned to scare investors, to flee those who are sunk today investments in Argentina and to create the conditions to increase poverty, indigence, unemployment and continue the decline of Argentina.