Argentina rescinds postal privatisation
After a long dispute, President Nestor Kirchner's government canceled its contract with the company that acquired the nation's postal service in one of the most controversial privatizations of the laissez-faire 1990s.
The firm that saw its franchise rescinded is part of SOCMA, the conglomerate controlled by Italian-born industrialist Franco Macri, one of Argentina's richest men.
It's the company's "fault" that the 1997 privatization of the postal service, known as Correo Argentino, was rescinded, Cabinet chief Alberto Fernandez said.
"It is not the government's intent to put public services back in state hands," Fernandez said, noting that officials have 180 days in which to award the contract for the postal service to another company, this time using "transparent means."
Kirchner's government, which is reviewing all the public service privatization contracts of the 1990's and has frozen utility rates since January 2002, wants "the Argentine state to stop playing the fool."
In fact, Wednesday's move against the postal concessionaire could be seen as a shot across the bows of the European-owned companies that acquired the water and power companies during the privatizations, as those firms are also at odds with the government.
At a press conference, Fernandez said the SOCMA's contract was rescinded by two presidential decrees that noted the company had failed to keep its end of the bargain.
Correo Argentino, which is in default to its creditors, committed "successive breaches" of contract from the very start, wiping out all chances of renegotiating it.
Fernandez said Correo Argentino owes the state some 450 million pesos ($156.25 million) in payments, which it has not made since 1999.
Planning Minister Julio de Vido said the company had also failed to maintain the domestic and international postal rates it had agreed to, with "subsequent harm" to postal customers.
The company "sytematically violated" the terms of its contract with the state and allowed service to deteriorate, De Vido added.
The Macri group holds a 69.2 percent stake in Correo Argentina. Of the remaining shares, 14 percent belong to Banco Galicia, 5 percent to the World Bank's International Finance Corporation and 11.8 percent to postal service employees.
The postal services' 12,000 employees received stock under the stock-sharing plans established in all the public services that were privatized in the 1990s.
SOCMA issued a statement Wednesday – just hours before the Kirchner administration's announcement – accusing the government of acting with "animosity and arbitrariness."
In its communique, SOCMA noted that while "every other concessionaire and privatized firm has been able to open negotiations" with officials, "Correo Argentina hasn't even been able to meet with the National Communications Commission, its logical regulatory body."
Last year, Correo Argentino, the country's largest postal company, posted more than 428 million pesos ($148.61 million) in sales, but sustained losses of 78 million ($27.08 million).
The government is trying to declare the company bankrupt because it has piled up 900 million pesos ($312.5 million) in debt.
SOCMA "thought it could renegotiate its contract by simply depositing 26 million pesos (some $9 million)" with the government to cover its debt to the state, De Vido said.
The company also wanted the expense it incurred in laying off 3,000 workers to be counted as an investment in the firm, among a number of requests the government deemed "unacceptable," he added.
"Many companies fail to fulfill their original contracts. What we try to determine is whether the current depression or the company itself is to blame," he said
The process of privatizing Correo Argentino, which took place between 1989 and 1999, during Carlos Menem's administration, was marked by controversy and charges of corruption.
