59 State firms in Argentina targeted for Privatization by Milei

[earlyretirement]

59 state firms in Argentina targeted for privatization


The list of companies targeted for privatization includes notable entities such as Aerolíneas Argentinas, ARSAT (a satellite company), AySA (a waterworks company), and Banco de la Nación, among others like Intercargo, ENARSA, Fabricaciones Militares, and Banco Hipotecario.

The process is being overseen by the newly established Agencia de Transformación de Empresas Públicas, led by Diego Martín Chaher. A team of 30 members has already begun evaluating these firms.

The government is considering six potential outcomes for each company: privatization through an Initial Public Offering (IPO), concession sale, transformation, allocation to provincial governments, full closure, or association with strategic partners.

The privatization process is structured into 3 main stages: definition, preparation, and execution. The entire process for each firm is expected to take approximately six to eight months.

Each company will be assessed individually based on financial viability, business opportunities, and investor interest. For instance, the government aims to attract a strong operator for AySA to manage the company and potentially open its capital to the stock market. Meanwhile, ARSAT plans to privatize up to 49% of its capital stock by 2025.

The privatization of Aerolíneas Argentinas is particularly sensitive. While full privatization is not seen as feasible in the short term, specific areas such as ground services or parts of its fleet are under evaluation. Discussions are ongoing with Córdoba Province about acquiring the Embraer fleet to establish a provincial airline.

Despite potential challenges, the Milei administration is confident that privatization is essential for modernizing and enhancing the efficiency of Argentina's state-run enterprises. Even profitable companies like Aerolíneas Argentinas are considered at risk of becoming financially unsustainable if they remain under public control.

 

[Uncle Wong]

What I don't really understand is if these companies were losing tons of money how will a private company be profitable in them? I see the 6 potential outcomes above but is any of them really realistic? And full closure isn't going to be an option either for companies like the water company.

 

[Finance Prof]

What I don't really understand is if these companies were losing tons of money how will a private company be profitable in them? I see the 6 potential outcomes above but is any of them really realistic? And full closure isn't going to be an option either for companies like the water company.

The government will probably have to just take on partners in some of these projects. Some of these will be profitable especially now that the government is ending subsidies. And prices will probably keep going up on utility companies. That is one worry that once they become privatized it will be really expensive and people won't be able to afford their bills.

I doubt Aerolineas can be fully privatized. They should probably just fully close some of these companies and start over if possible. There are a lot of obligations of having long time employees under the payroll.

It is a big project to privatize so many companies but it is definitely necessary.

 

[Avocado]

The government will probably have to just take on partners in some of these projects. Some of these will be profitable especially now that the government is ending subsidies. And prices will probably keep going up on utility companies. That is one worry that once they become privatized it will be really expensive and people won't be able to afford their bills.

I doubt Aerolineas can be fully privatized. They should probably just fully close some of these companies and start over if possible. There are a lot of obligations of having long time employees under the payroll.

It is a big project to privatize so many companies but it is definitely necessary.

I worry for the high utility bills once they privatize. Already the gas, electricity and water bills are going up too much. If they can be free to raise it whatever they want we will have problems.

 

[Betsy Ross]

What I don't really understand is if these companies were losing tons of money how will a private company be profitable in them? I see the 6 potential outcomes above but is any of them really realistic? And full closure isn't going to be an option either for companies like the water company.

Many of these companies were losing money because there was a lot of corruption. They did an audit of the Water company and they found billions of dollars in fraud. If a private company is running it you can be sure that the amount of fraud will be cut down to almost nothing. I'd guess many companies can be profitable if the government isn't meddling in them.

 

[captain]

They’ve started privatizing, this time with the state-owned company Belgrano Cargas y Logística. As @Betsy Ross said, there was too much corruption, which caused huge losses, money that belongs to all of us. Esto aumentará la eficiencia,y mejorará los servicios.
This will increase efficiency and improve services.

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[Uncle Wong]

They’ve started privatizing, this time with the state-owned company Belgrano Cargas y Logística. As @Betsy Ross said, there was too much corruption, which caused huge losses, money that belongs to all of us. Esto aumentará la eficiencia,y mejorará los servicios.
This will increase efficiency and improve services.

View this content on Instagram

View this content on Instagram

But how do they expect someone to buy it? I read this in the BA Herald today. It basically says they are obscenely unprofitable with an oversized staff of 4,429 people and got $112 million in taxpayer money. Who would want to buy that???

Or can the government just let it go out of business and fire all of those employees and start all over? Sell the assets and get rid of all the liabilities?



The Presidential Press Office also announced the decision, describing the company as “obscenely unprofitable with an oversize staff of 4,429 people, as well as an inflated management structure that does not align with its functions.” It also stated that the company had received US$112 million in taxpayer money in the previous year. The aim of the privatization is to make the company more efficient, the statement added.

Milei to privatize major cargo train company - Buenos Aires Herald

Announcing that Trenes Argentinos Cargas would be put to concession, the government said it would ‘privatize anything that can be privatized’

buenosairesherald.com

 

[Finance Prof]

But how do they expect someone to buy it? I read this in the BA Herald today. It basically says they are obscenely unprofitable with an oversized staff of 4,429 people and got $112 million in taxpayer money. Who would want to buy that???

Or can the government just let it go out of business and fire all of those employees and start all over? Sell the assets and get rid of all the liabilities?



The Presidential Press Office also announced the decision, describing the company as “obscenely unprofitable with an oversize staff of 4,429 people, as well as an inflated management structure that does not align with its functions.” It also stated that the company had received US$112 million in taxpayer money in the previous year. The aim of the privatization is to make the company more efficient, the statement added.

Milei to privatize major cargo train company - Buenos Aires Herald

Announcing that Trenes Argentinos Cargas would be put to concession, the government said it would ‘privatize anything that can be privatized’

buenosairesherald.com

Probably much easier said than done. You nailed it @Uncle Wong. Private companies won't be interested in buying it unless they are just buying the assets and not all the baggage. Probably half of those employees are ñoquis. Unless the government fires them first it won't make sense. The government will probably always have to have a big stake in it. If they are transporting 8.4 million tonnes of cargo it is essential. Not going to be so easy just pawning it off on someone.

 

[CraigM]

Probably much easier said than done. You nailed it @Uncle Wong. Private companies won't be interested in buying it unless they are just buying the assets and not all the baggage. Probably half of those employees are ñoquis. Unless the government fires them first it won't make sense. The government will probably always have to have a big stake in it. If they are transporting 8.4 million tonnes of cargo it is essential. Not going to be so easy just pawning it off on someone.

It's not as difficult as you might think, there's a lot of precedent around the world. The best that comes to mind is CN Rail in Canada, which was a bloated government pig that cost taxpayers an obscene amount of money every year with no end in sight to the losses. They took it public in 1995 (the lead banker Goldman Sachs famously published a report "When Pigs Fly") and the stock rose 60 or 70x in the next 25 years. It's now a highly successful company with a much improved safety record. The government initially hung onto a large stake but sold it down over time.

These are important assets and whoever buys them is getting all that at a fraction of what it would cost to build from scratch today (some US companies are trying to build high speed railway lines, the right-of-ways alone are a nightmare). Then it's about getting costs down and slowly modernizing over time. Many employees will be let go but that was inevitable. I would bet Argentines get behind it almost immediately because they're sick of seeing the government funding endless losses, and that will only grow over time as service and safety vastly improves. If they offer stock to the public I will take a close look at it.

 

[Finance Prof]

It's not as difficult as you might think, there's a lot of precedent around the world. The best that comes to mind is CN Rail in Canada, which was a bloated government pig that cost taxpayers an obscene amount of money every year with no end in sight to the losses. They took it public in 1995 (the lead banker Goldman Sachs famously published a report "When Pigs Fly") and the stock rose 60 or 70x in the next 25 years. It's now a highly successful company with a much improved safety record. The government initially hung onto a large stake but sold it down over time.

These are important assets and whoever buys them is getting all that at a fraction of what it would cost to build from scratch today (some US companies are trying to build high speed railway lines, the right-of-ways alone are a nightmare). Then it's about getting costs down and slowly modernizing over time. Many employees will be let go but that was inevitable. I would bet Argentines get behind it almost immediately because they're sick of seeing the government funding endless losses, and that will only grow over time as service and safety vastly improves. If they offer stock to the public I will take a close look at it.

Thanks @CraigM for a real life example. That would be great if Argentina can do the same thing. I think the only way it will work is if they can get rid of many of the unproductive employees.

 

[Betsy Ross]

It's not as difficult as you might think, there's a lot of precedent around the world. The best that comes to mind is CN Rail in Canada, which was a bloated government pig that cost taxpayers an obscene amount of money every year with no end in sight to the losses. They took it public in 1995 (the lead banker Goldman Sachs famously published a report "When Pigs Fly") and the stock rose 60 or 70x in the next 25 years. It's now a highly successful company with a much improved safety record. The government initially hung onto a large stake but sold it down over time.

These are important assets and whoever buys them is getting all that at a fraction of what it would cost to build from scratch today (some US companies are trying to build high speed railway lines, the right-of-ways alone are a nightmare). Then it's about getting costs down and slowly modernizing over time. Many employees will be let go but that was inevitable. I would bet Argentines get behind it almost immediately because they're sick of seeing the government funding endless losses, and that will only grow over time as service and safety vastly improves. If they offer stock to the public I will take a close look at it.

You are right @CraigM. What you will find is most people, especially locals are so negative. They have lived through so many difficulties and no one like Milei has come along so they think everything is impossible. They don't want to invest in anything and they are missing out. I invested a chunk of my portfolio into Argentine companies after President Milei won and they. have all skyrocketed. I think this time is different.

These companies are worth a lot of money.

 

[Uncle Wong]

It's not as difficult as you might think, there's a lot of precedent around the world. The best that comes to mind is CN Rail in Canada, which was a bloated government pig that cost taxpayers an obscene amount of money every year with no end in sight to the losses. They took it public in 1995 (the lead banker Goldman Sachs famously published a report "When Pigs Fly") and the stock rose 60 or 70x in the next 25 years. It's now a highly successful company with a much improved safety record. The government initially hung onto a large stake but sold it down over time.

These are important assets and whoever buys them is getting all that at a fraction of what it would cost to build from scratch today (some US companies are trying to build high speed railway lines, the right-of-ways alone are a nightmare). Then it's about getting costs down and slowly modernizing over time. Many employees will be let go but that was inevitable. I would bet Argentines get behind it almost immediately because they're sick of seeing the government funding endless losses, and that will only grow over time as service and safety vastly improves. If they offer stock to the public I will take a close look at it.

Thank you. I will research CN Rail in Canada. 60 or 70 X. Wow, you totally turned my thinking around. When Pigs Fly is a great slogan! I am seeing what is going on in Argentina and I am very bullish. I am coming back in December and going to look for an apartment to buy because prices there are much much lower than here in the States. I want to end up in Buenos Aires and as long as I can find a remote job I will do it.

 

[Vince]

Many of these companies were losing money because there was a lot of corruption. They did an audit of the Water company and they found billions of dollars in fraud. If a private company is running it you can be sure that the amount of fraud will be cut down to almost nothing. I'd guess many companies can be profitable if the government isn't meddling in them.

Correct. Imagine the amount of cash that is going into someone's pocket. Once this goes private this will be cut down or totally eliminated. The key is to get the government out of it.

It's not as difficult as you might think, there's a lot of precedent around the world. The best that comes to mind is CN Rail in Canada, which was a bloated government pig that cost taxpayers an obscene amount of money every year with no end in sight to the losses. They took it public in 1995 (the lead banker Goldman Sachs famously published a report "When Pigs Fly") and the stock rose 60 or 70x in the next 25 years. It's now a highly successful company with a much improved safety record. The government initially hung onto a large stake but sold it down over time.

These are important assets and whoever buys them is getting all that at a fraction of what it would cost to build from scratch today (some US companies are trying to build high speed railway lines, the right-of-ways alone are a nightmare). Then it's about getting costs down and slowly modernizing over time. Many employees will be let go but that was inevitable. I would bet Argentines get behind it almost immediately because they're sick of seeing the government funding endless losses, and that will only grow over time as service and safety vastly improves. If they offer stock to the public I will take a close look at it.

This is what Argentina needs across many industries. I think many of these companies will probably do an IPO. Probably government partnership first and then the government sells off their position over time like Craig mentioned.

 

[CraigM]

Thanks @CraigM for a real life example. That would be great if Argentina can do the same thing. I think the only way it will work is if they can get rid of many of the unproductive employees.

This is where the devil is in the details, and execution is paramount. If there's an IPO the stock will probably do well regardless because it will be coming from such a low base, but turning it into a successful company and watching the stock rise 10x, 20x or 50x will depend on who's running the show. One thing the Canadian gov't got right was putting good people in place across management and the board (many of whom stayed a long time) and got the hell out of the way. They still have unions and pension funds but there was cooperation and top to bottom everybody is in a vastly better place today.

 

[Wally]

This is where the devil is in the details, and execution is paramount. If there's an IPO the stock will probably do well regardless because it will be coming from such a low base, but turning it into a successful company and watching the stock rise 10x, 20x or 50x will depend on who's running the show. One thing the Canadian gov't got right was putting good people in place across management and the board (many of whom stayed a long time) and got the hell out of the way. They still have unions and pension funds but there was cooperation and top to bottom everybody is in a vastly better place today.

Yes this is the key. But I would guess that Canada has a much better system than Argentina. Corruption there is probably no where near Argentina is so it might not be a good comparison. Yes same industry but totally different tax laws, union policies and many other things. They would need a good partner and part of the deal would have to be some favorable tax rates. They also need a partner with a lot of experience and giving them incentives for staying and turning it around. Golden handcuffs.

The biggest issue would be all those employees. No partner is going to want thousands of ñoquis they don't' need.

 

[CraigM]

You are right @CraigM. What you will find is most people, especially locals are so negative. They have lived through so many difficulties and no one like Milei has come along so they think everything is impossible. They don't want to invest in anything and they are missing out. I invested a chunk of my portfolio into Argentine companies after President Milei won and they. have all skyrocketed. I think this time is different.

These companies are worth a lot of money.

Good for you Betsy, wish I had done the same. I didn't see the potential of CN Rail until it was far too late, I was also too anchored to the past and all of CN's debacles over the years. It was just an awful company but less than 30 years later it's a powerhouse.

 

[CraigM]

Yes this is the key. But I would guess that Canada has a much better system than Argentina. Corruption there is probably no where near Argentina is so it might not be a good comparison. Yes same industry but totally different tax laws, union policies and many other things. They would need a good partner and part of the deal would have to be some favorable tax rates. They also need a partner with a lot of experience and giving them incentives for staying and turning it around. Golden handcuffs.

The biggest issue would be all those employees. No partner is going to want thousands of ñoquis they don't' need.

Different situation for sure, but Canada also had a Liberal government at the time, not like Milei who basically has a mandate to slash and burn everywhere. What we did have back then was bond markets forcing governments everywhere to tighten ship. Clinton actually ran budget surpluses by raising taxes and cutting military spending. Canada couldn't raise taxes much more and didn't have a military budget in the first place so it turned to government enterprises like CN Rail and Canadian Pacific (also a major pig-turned-stock market darling). In a less successful move Canada also sold it's entire gold reserve near the very bottom.

My point is that the situation for all these precedents was different, and they all faced pressures and challenges. Argentina can do it if they're really determined.

 

[Betsy Ross]

Different situation for sure, but Canada also had a Liberal government at the time, not like Milei who basically has a mandate to slash and burn everywhere. What we did have back then was bond markets forcing governments everywhere to tighten ship. Clinton actually ran budget surpluses by raising taxes and cutting military spending. Canada couldn't raise taxes much more and didn't have a military budget in the first place so it turned to government enterprises like CN Rail and Canadian Pacific (also a major pig-turned-stock market darling). In a less successful move Canada also sold it's entire gold reserve near the very bottom.

My point is that the situation for all these precedents was different, and they all faced pressures and challenges. Argentina can do it if they're really determined.

Great points. It sounds like you are Canadian @CraigM. My cousin lives there but looking to leave. It looks like things in Canada have deteriorated quite a bit. He complains about all the immigration there. Lately I see a lot of people complaining about Canada.

 

[Digital Nomad]

The biggest issue would be all those employees. No partner is going to want thousands of ñoquis they don't' need.

This is what I hear is one of the most difficult things here. My girlfriend's father who owns a few business always is complaining about 2 things. All the taxes and employees issues. He said this is the toughest country in the world to have employees. It's almost impossible to get rid of them or if you do you have to pay large severance packages to.

I asked him what % of companies work at least partly in black and he shocked me when he said probably 100% do at least something in black. He said they have to. Most difficult country he said with currency controls and restrictions and taxes and labor laws. I just saw that the World Bank did a study and calculated all the taxes an Argentine company would have to pay if they did everything in white and the total came to something like 106% of profits.

Shocking but he said there is black component to every single company here. He said impossible not to do at least part in black. Is that true? Anyone know?

 

[CraigM]

Great points. It sounds like you are Canadian @CraigM. My cousin lives there but looking to leave. It looks like things in Canada have deteriorated quite a bit. He complains about all the immigration there. Lately I see a lot of people complaining about Canada.

Indeed I am! I've heard similar things, mostly because the PM has done such a poor job. We've been here before though, and the bond market is always lurking about. When you owe that much money and need more every year, it really matters what the world thinks about your creditworthiness.