The genesis of this series was that when the main stories of the week were such well-trodden fields as, say, AFA football corruption or Cristina Fernandez de Kirchner’s trials with nothing to add to what everybody else was writing, it made more sense to go looking elsewhere beyond the headlines for issues offering something new to say and perhaps even deserving more attention. Yet this week the Techint saga is such a novel battleground that there is no need to seek further.
How did an exclusively private tender become such a political football and why should there be much to choose between the tubing of an Argentine multinational flogging Brazilian steel and an Indian competitor hawking Chinese steel? And why all the fuss now since Welspun Corp Ltd was apparently awarded the contract just before Christmas? Techint CEO Paolo Rocca is feeling highly aggrieved but perhaps his underlying grievance is that this decision effectively offers the outside world a level playing-field ahead of local companies.
The Southern Energy (SESA) consortium’s decision is generally described as preferring a Welspun bid undercutting Techint by some 40 percent for the tubing for the pipeline to export Vaca Muerta shale gas – a slam dunk, but it is not as simple as that. Claiming rights of “first refusal,” a kind of droit du seigneur to which Techint felt a strong sense of entitlement by virtue of its long dominance of energy infrastructure, Rocca offered to match the competing offer (US$203 million as against his US$280 million) – a loss-making proposition for him because he would have to absorb the higher Argentine costs of local taxation, exorbitant labour litigation and all the other things the libertarian government is supposed to be reforming but worthwhile if he can thus retain his domination of the local market. If a local candidate is offering the same price as foreign competitors, surely the choice of a consortium with 75 percent of its shares in Argentine hands and the backing of the national government could only go in one direction (into which YPF CEO Horacio Marín controlling a quarter of SESA shares reportedly leaned but not the rest of the consortium)?
Yet it was precisely this strategy which ran into the opposition of Deregulation & State Transformation Minister Federico Sturzenegger on rather deeper grounds than the consortium’s technical objections to submitting offers after the tender deadline. Sturzenegger had already dismissed the initial Techint bid on price grounds, arguing that the more money absorbed by costly tubing, “the less profit, the less investment, the less job creation and the less exports.” But he was also unimpressed by Rocca’s offer to match the Welspun bid because if he pulled it off, he would be sending a message to the outside world that there was no point in making investment bids in Argentina because the “red circle” business establishment would find ways of keeping them out and jack up their prices again once the foreign competition was discouraged. The lower price thus made Sturzenegger even more determined to deny Techint the contract.
Sturzenegger, with the full backing of President Javier Milei, would thus see Rocca’s defeat as a strident way of sending a completely opposite message to the outside world – that if a superior bid is offered, there is a level playing-field with total transparency for even Asian companies, never mind North American or European. A level playing-field denied them, many local manufacturers would argue alongside Rocca as they complain of their tax burdens and severance lawsuits – Milei has pledged to reform those areas, moving with institutional gradualism, but meanwhile seems to be opening up the economy to the world a lot faster and if this free market approach is pursued with the purism to which both the President and his minister are prone, Argentina might start entering a deindustrialisation process on the scale of the 1976-1983 military dictatorship.
One very simple but slightly malicious question here – does any of this bear any resemblance to what Milei’s idol Donald Trump would be doing in this situation?
Once might be an accident but this month has seen another example of the libertarian government’s intensified drive against the semi-feudal industrial privileges of a protectionist Argentina. Tierra del Fuego’s attention has been absorbed this month by the national trusteeship so abruptly slapped on the port of Ushuaia at the peak of the cruiser season, as well as the somewhat overblown fuss over the surprise landing of a United States military aircraft carrying a US Congress delegation but January 15 also saw the removal of the tariffs on imported mobile telephones, thus leaving Tierra del Fuego’s hothouse industry of electronics assembly plants completely unprotected.
Techint has broad shoulders and deep pockets although even these did not suffice to win the day – how much more vulnerable are PyME small and medium-sized companies going to feel in the face of imports and foreign competition? If “Made in Taiwan” overran local industry half a century ago in the times of former economy minister José Martínez de Hoz, many now fear “Made in China” – even if the fact that Techint tubing is made of Brazilian steel mostly purchased in Uruguay turns self-sufficiency into something of a myth. Rocca’s remedy is “smart opening” contemplating local costs as part of an “industrial policy” which he accuses the Milei government of lacking, also even questioning the RIGI major investment incentive scheme as giving overseas investors unfair advantages.
This battle may only just be beginning with Milei escalating the conflict last Tuesday by calling Rocca a “Don Chatarrín” (“petty scrap dealer”) and opining that his iconic company deserved to go bankrupt for overpricing. In the light of the presidential performance that same night at the Derecha Fest in Mar del Plata, we might call this battle the rocker versus Rocca.
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