December 8, 2013
Santa Fe gov’t comes out in defence of private provincial shipbuilding
Governor Bonfatti lambastes national administration for owing Ultrapetrol shipyard millions of dollars in tax reimbursements
Santa Fe Socialist Governor Antonio Bonfatti is strongly defending his province’s shipping sector, decrying the fact that the administration of President Cristina Fernández de Kirchner owes the Ultrapetrol shipyard “15 million dollars in tax reimbursements” and warning that high production costs may finally sink the company.
He also gave the government some of its own Peronist medicine by telling the President that Argentina — plunged in a deep crisis for nearly 15 years now — was in the 1940s and 1950s the world’s seventh power on the back of the labour-oriented technical school programmes introduced by the founder of her party, the legendary-three-term president Juan Domingo Perón, and that went down the tubes during Argentina’s decades-long decline.
“The technical Value-Added Tax (IVA) stands at 21 percent and export duties stand at six percent, that is, 27 percent of the (shipyard’s) production cost is currently in the hands of the state. No company can survive that in the long run,” he said.
Bonfatti spoke in late September at Ultrapetrol’s Punta Alvear facilities near Rosario, as the firm was launching the 165th barge since it started operating in December 2009.
Facing “fierce” competition from China, the company has exported 163 out of the 165 barges, mainly to Paraguay and Colombia. It has been making 1,500-ton barges and has just started to manufacture 2,500-ton ones to cope with a fast-growing cargo demand.
Miguel Angel Álvarez, Executive Secretary of the Santa Fe CASIN shipping industry chamber, told the Herald that the barges for dry cargo cost US$1 million while tankers cost US$1.6 million.
The day before, while addressing the “Second International Forum Rosario Ports, axis of the Mercosur” in Rosario, Álvarez said that China was delivering the barges in the region freight-free at a cost of US$700,000 each and that although, for instance, Paraguay has imposed a 10 percent import tariff on them, the barges still cost US$770,000, far below Ultrapetrol’s costs.
“We are being left out of the market,” he said at the forum sponsored by the ENAPRO non-state self-governing agency which runs the Rosario port complex, one of the world’s leading grain and oilseed export poles.
Cayo Ayala, the Secretary-General of the shipyard workers union SAON, told the Herald that as soon the barges were launched, they were exported to Paraguay, Colombia and Bolivia “as exports have lower IVA and tax costs whereas if we produce for Argentina, there is no tax reduction and we end up being the country with the highest cost in Latin America. It is much cheaper to fly a convenience flag than to pay the high taxes prevailing in our country... With all due respect, not to see this is clumsy. This market is adding value to our crops and our whole production. The Chinese competition is savage but we don’t fear them. We rather fear those from our very country.” he said. Ayala hailed the “courage” of Ultrapetrol owners for investing in the shipyard.
According to shipping sources, 75 percent of the ships serving the Paraná-Paraguay rivers waterway are Paraguayan-flagged, while only 15 percent are Argentine-flagged, the rest using the flags of Brazil, Bolivia and even Panama. (See Herald story published on October 14).
CASIN said that the firm was the most modern barge shipyard in Latin America. At the ceremony it was announced that the province of Santa Fe, CASIN and SAON signed a three-week training agreement for workers between 18 and 25 years at the shipyard. Ultrapetrol Chairman Felipe Menéndez Ross said that Ultrapetrol has the largest number of welders.
Also present was Bonfatti’s predecessor, national deputy Hermes Binner, whom Ayala hailed as having given so much support during his tenure as governor that the time for the installation of Ultrapetrol “was at least halved.”
Binner, the chairman of the Socialist Party and a former presidential candidate, kept a low profile during the ceremony of the barge-launching.
Ultrapetrol has a capacity to make two 2,500-ton barges a week.
DEMANDS TO NATIONAL
“State policies on ports and waterways are far from accompanying the process we are in and the one coming,” Álvarez said regarding increasing competition in the sector.
“We have a tremendous handicap vis-à-vis the Asian countries.”
“We have requested that the national authorities scrap the Coast Guard Rule Number 8 as it implies barges entering from the Mississippi. In 2008 there were no local shipyards. Now, there are shipyards, and Resolution No. 8 no longer has a reason to exist. We have discussed with the Coast Guard the situation in the Mercosur trade bloc and the (Paraná-Paraguay) waterway. The scrapping of the Resolution would mean that foreign scrap would cease entering the local market.
“When three years ago we launched the Chamber (CASIN), we requested the creation of a national industry authority and today there is no specific national authority in the field. Also, he said, a merchant fleet law should be passed.
“There are a number of legislation proposals going around.”
Regarding this, Álvarez added, “the government should listen to the wise voice of the workers.”
He also said that no national officials came out to explain why Argentina “either by commission or omission” failed to question an IDB loan granted to a Brazilian company — instead of to an Argentine one — to manufacture barges and tug-boats.
He also complained that the government restriction on imports makes it difficult for shipyards to obtain supplies and that the sector is urging authorities so that ship modifications be tax-free, like repairing activity.
“I myself own a shipyard in the province. In Santa Fe province about 80 barges are repaired each year. This is not bad, but if no measures are taken to solve the asymmetries with Paraguay, we will sink. We are choking. The government owes us millions in VAT reimbursements on exports, but we will not give up. CASIN will do whatever it takes.”
Álvarez said that the sector was employing about 8,500-9,000 workers and that it was thinking of employing 32,000 by 2015 “but it seems to me that we will fail to attain that goal.”
“Regarding barge manufacturing we are at about 1,000 and were considering some 3,000 by 2015, with five tug-boats.”
Álvarez also said that CASIN has been demanding the government to reach with Brazil’s shipbuilding sector an agreement similar to that clinched with cars, and that it was trying to seal some private agreements with some Brazilian shipyards.
SANTA FE STRATEGIC PLAN
For his part, Bonfatti disputed the assertion of “those who claim that in the 1940s and 1950 Argentina was the seventh world power on the basis of just grain exports.
‘The fact is that at that time we were manufacturing huge ships, airplanes, and were the third country behind the United States and Germany in handling atomic energy. There was a clear national project, with a production model and an education model. Education law 1420 laid the foundation for the 1918 university reform which led to the training of tremendously skilled professionals who were an example to the world.
“Being unable to discuss a national project, we, in Santa Fe are attempting to recover that model by means of a strategic plan for 2030 for which we have called 70 public hearings attended by more than 30,000 provincial residents and have drawn up almost 350 projects.