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Perfil

ECONOMY | 29-05-2024 12:15

Vested interests stall Milei’s plan for Fabricaciones Militares state munitions plant

Milei government offers voluntary retirements as it defines what to do with a massive state firm owning thousands of hectares. Numbers in the red for state-run arms manufacturer, but its system of inter-administrative direct contracting also makes it attractive.

After almost six months in office, the Javier Milei government has yet to define what to do with the giant state-run firm that provides 1,465 jobs and covers over 55,000 hectares of terrain – almost triple the surface of Buenos Aires City. 

Over the years, Fabricaciones Militares Sociedad del Estado (FMSE), the munitions manufacturer and complex that is dependent on the Defence Ministry, has been at the heart of political scandal and corruption allegations.

It was targeted by President Milei and appeared on the initial list of companies to be privatised in the first run of his ‘Omnibus’/’Ley de Bases’ mega-reform bill. However, by the time the proposed legislation re-appeared last month, it had been excluded.

Nevertheless, the government does not rule out advancing with its privatisation again at a later date.

In recent weeks the FMSE board of directors, headed by Hugo Pascarelli, has embarked upon a plan of voluntary and early retirement offers. “The objective of the board of directors is to have a staffing in keeping with the company’s economic and productive reality for its daily operations,” read an April communiqué addressing the subject.

On May 21, Fabricaciones Militares decided to halt activities at its Azul FANAZUL branch in Buenos Aires Province, one of its five industrial plants where it produces mining explosives. The official argument is that there is no remaining market for the product, given the supposed collapse of an agreement with a Peruvian mining company.

In Córdoba, the company has two more plants: one in Villa María producing mining explosives and gunpowder in bulk, the other in Río Tercero separated into two sites. One is dedicated to metal engineering for the repair and upkeep of railway rolling stock and Army jeeps and the manufacture of storage tanks for chemicals, while the other sector operates as a chemicals plant producing nitric acid, ammonium nitrate and sulphuric acid.

The firm’s main munitions plant is in Luis Beltrán Fray, Santa Fe Province, where it produces ammunition of different calibre, bulletproof jackets and hand grenades. 

These industrial plants, plus the company’s central administrative headquarters in the nation’s capital, total almost 1,400 hectares. But Perfil has been able to ascertain that the sum total of FMSE assets is a total 55,388 hectares – i.e. almost triple the land surface of Buenos Aires City. The vast differential comes from just one site: the Serrezuela shooting range in Córdoba that accounts for 53,869 hectares. 

The company has been loss-making in the past with negative balances of 447,026,129 and 948,781,877 pesos in the years 2020 and 2021, respectively. It has reversed the situation in the last two years, according to accounts to which Perfil had accesses, posting surpluses of 423,756,262 pesos in 2022 and 10,864,973,506 pesos last year – a massive improvement from one year to the next.

 

Controversies

The firm’s assets, however, do not tell the full story. Fabricaciones Militares has been at the heart of a series of controversies and scandals involving deficient products and overpricing.

In 2021 the company was denounced for the overpriced purchase of Beretta Pistols in relation to direct contracts dating from 2017, as well as the overpriced sale of bulletproof jackets to Santa Fe Province. Contraband has also been suspected in the case of armaments manufactured in Río Tercero.

The biggest recent controversy has been the sale of deficient bulletproof jackets with ANMAC banning the continued manufacture of that model. The death of Buenos Aires City Police officer Maribel Salazar in February, 2023, placed the spotlight on those bulletproof jackets which had been categorised as “unsuitable” following expert examination.

Prosecutors specialising in the illicit use of firearms and other explosives are investigating irregularities in the manufacture of these jackets and analysing whether there is sufficient evidence to present charges. But despite all these antecedents, Bullrich ordered the purchase of bulletproof jackets for US$607,500 last December.

 

Oversight

The state firm is monitored by ANMAC (Agencia Nacional de Materiales Controlados). This means the state is on both sides of the counter in a sensitive issue like the manufacture and sale of armaments. Until 2015 many officials interchanged careers between FMSE and ANMAC, which might explain some of the links between Fabricaciones Militares and its apparent watchdog. Furthermore, there is an inter-administrative system of contracting – i.e. there is no need to tender for contracts and purchases being made directly.

Now the Milei government is debating within itself whether to cash in on the firm’s real estate or to beef it up as Argentina attempts to join NATO as a “global partner.” 

Back in April, Defence Minister Luis Petri met with the treaty organisation’s Assistant Secretary-General Mircea Geoana at NATO headquarters in Brussels, while he was in Europe to confirm the purchase of several F-16 fighters of United States manufacture in Denmark. It’s a clear display of where the government is heading in its foreign policy – to consolidate its alignment with the United States, Israel and the European Union. 

One recent internal signal was Petri’s dismissal of his portfolio’s Cabinet chief Carlos Becker, who had been imposed by Security Minister Patricia Bullrich to advance purchases to modernise the Armed Forces – he had been previously in charge of all war materiel under the orders of General César Milani, the Army chief-of-staff during the Cristina Fernández de Kirchner Presidency.

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