Business Group Urges Calm As Argentina, Siderar Turn To Courts
April 20 2011 - 5:30PM
Dow Jones News
While a clash between the Argentine government and leading
steelmaker Siderar (ERAR.BA, SDDFF) over government efforts to vote
for company directors makes its way to the courts, the chief of a
powerful manufacturers chamber urged calm and dialog to smooth over
the dispute.
"This isn't an issue that should get tied up in the
courts...consensus should be reached through dialogue," said Jose
Ignacio De Mendiguren, president-elect of Argentina's UIA chamber
told Dow Jones Newswires.
However, Mendiguren said the government had clearly changed the
rules of the game and the UIA has urged the government to
reconsider. "This is bad for everyone, because there's a positive
[economic] climate right now."
On April 14, President Cristina Fernandez issued a emergency
decree giving the government more power to name board members to
companies in which it holds shares. The state's voting rights at
such companies were previously capped at 5% even if its actual
ownership in a firm exceeded that.
Anses acquired stakes in 42 companies after Congress
nationalized the private pension system at the peak of the 2008-09
financial crisis. The government has a 26% stake in Siderar through
the national pension agency Anses, and has its largest stake at
over 30% in Banco Macro (BMA.BA, BMA).
Last week, Argentina's securities regulator, the CNV, voided
Siderar's shareholder's meeting, in which the existing directors
approved an ARS1.5 billion ($370 million) dividend and blocked a
government attempt to put its man on the board.
Anses director Diego Bossio hinted Wednesday that it wanted to
see higher dividends from the steelmaker. "There's another 6.5
billion pesos that they haven't said what they're going to do
with," Bossio was quoted as saying in state news agency Telam.
Siderar has filed suit challenging the government move, while
the government has counter-sued.
Daniel Novegil, chief executive of steelmaker Ternium SA (TX),
Siderar's parent company, said in a radio interview the executive
branch overstepped its authority by issuing a decree rather than
turning to congress.
The courts are faced with determining the constitutionality of
the move and much will hinge on which judge the case comes before.
"I think many judges would say it's unconstitutional, while some
others would not," said Marcela Basterra, Constitutional Law
Professor at the University of Buenos Aires.
In the professor's view, the government move is clearly illegal.
"The constitution allows for these kind of decrees only when there
is a situation that is so grave that the government cannot wait for
Congress to pass laws. We are not in such a situation now,"
Basterra said. In any case, it will be a long, drawn out legal
tangle, with a good chance of winding its way to the supreme court,
she said.
In the meantime, markets are taking the dispute in stride.
"At the end of the day, things haven't changed much," said Diego
Martinez Burzaco, Portfolio Manager at brokerage Puente. "The
strong prospects for the economy are more important to
investors."
Since the plan was announced on April 13, the Merval Index of
leading shares has risen 0.1% and was trading at 3,409.13 points on
Wednesday afternoon.
Rating agency Moody's Investor Services says the move is
credit-negative for Argentina's companies, as it signals the
government will have greater influence on their commercial and
strategic decisions. However, Moody's isn't contemplating any
ratings downgrades at the moment.
"The government doesn't have a majority in any of the banks
rated by Moody's, and there's no imminent risk of the government
being able to exert undue influence," said Moody's Senior Credit
Officer Andrea Manavella in an interview. "There could be more
negotiations and decisions could take more time [but] we don't see
complications," she said.
Moody's senior analyst Daniela Cuan focuses on the ratings of
many of Argentina's top utilities providers and also sees no
immediate impact. For companies providing utilities services rated
by Moody's, tight government regulations which block them from
raising rates is far more important and has hit their profits, Cuan
said.
-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738;
shane.romig@dowjones.com
--Alberto Messer and Taos Turner contributed to this
article.