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August 20, 2017
Friday, July 28, 2017

High-flying vultures

Of all the privatisations under the decade-long Carlos Menem presidency (1989-99), Aerolíneas Argentinas was perhaps not the most damaging (there were other others with far more serious socio-economic consequences such as water) but it made one of the biggest noises because of the symbolic value of the compañy and its appreciation by the Argentine people as well as because its accounts were relatively healthy in 1990. First came the Spanish state flag carrier Iberia, then American Airlines and as from 2001, again Spanish capital with Marsans. In every case the name of the game for the new owners was asset-stripping. On that score, Aerolíneas was perhaps one of the most reasonable of the nationalisations carried out under Kirchnerism, over and above what a properly performed privatisation might have achieved. At least in theory. The problem (once again) is that those managing this transfer on behalf of the Cristina Fernández de Kirchner government in 2008 were the most nefarious levels of that administration, such as the already convicted former Transport secretary Ricardo Jaime and his superior, Julio de Vido. Restored to state hands, Aerolíneas recovered markets and routes with notable success but ended up struggling with costly burdens and overmanning which persist to this day. Although the World Bank’s International Centre for Settlement of Investment Disputes (CIADI in its Spanish acronym) was evidently partial, last Friday’s verdict obliging the state to pay Marsans (a company up to its neck for corruption in Spain) US$320 million should not come as a surprise. Nothing could end well in the hands of Jaime and De Vido — a pity that CFK did not realise this in time. Rather than an error, a rushed and botched nationalisation to take this state company out of corrupt hands (those of Marsans) looks like complicity.

Like a dog biting its tail, Argentine politics is again confronted with its own reality. Kirchnerism nationalises badly and the Mauricio Macri administration, plagued by officials with conflicts of interest, sometimes should abstain from acting in the name of the state. Not only is one of Macri’s judicial operators linked to one of the law firms defending the vulture fund which bought up the Marsans lawsuit but current Aerolíneas vice-president Siro Astolfi was a lawyer sponsoring Marsans at the launch of its compensation claim.

One lesson which might be drawn from all this is that the mixed economy might have many virtues but not within the same company — De Vido’s hybrid formula of nationalising Aerolíneas while leaving it nominally a private company and not a public service (in keeping with his perpetual quest for control without responsibility) left Argentina wide open in the face of an international law demanding more clarity as to legal status. As a result, the vulture fund buying into the Marsans claim will pocket almost half that US$ 320 million. All justifying one description of Argentina which might sound like the highest praise but is usually a put-down — “a generous country.”

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