59 State firms in Argentina targeted for Privatization by Milei

[earlyretirement]

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?

Anyone that owns a business in Argentina will probably always be complaining about these things. Fortunately, I've always had great employees. There are occasions when you will get a few rotten eggs too. I've also had situations like that and the labor laws are very bad in Argentina. President Milei has changed a few things and working to change other labor laws that will help.

On the white/black issue that is probably true at least some black. Even companies that want to do everything all in white, it is almost impossible. With strict currency control laws in place, often times it is impossible not to do something in "black". But these are all things that this current administration is working to fix. They need to get rid of the currency controls as soon as possible.

 

[Piranha]

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.

So many of these companies in Argentina look like they just needed someone like Milei to step in, restructure the laws and regulations, get some tax efficiency and get rid of the corruption. Many companies and the economy in general should be able to fly if this continues.

 

[Finance Prof]

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.

Yikes. Just saw this chart. Under Justin's open border policy, Canada went from 24% foreign-born to 34% in just a few years. Looks like what Biden was doing for the USA.

 

[Vince]

Yikes. Just saw this chart. Under Justin's open border policy, Canada went from 24% foreign-born to 34% in just a few years. Looks like what Biden was doing for the USA.

View attachment 7903

But at least in Canada it is mostly legal immigrants. What is going on in the USA is crazy. NYC is full of illegals they let into the country. Same as other sanctuary cities.

 

[import export]

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.

CN Rail is a great example but I believe it was also the most successful privatization in Canada's history. My father invested in that many decades ago. Lots of parallels to Argentina's railways. CN was struggling and the government always had to bail it out. Just totally bloated and hemorrhaging cash mostly related to the same problems in Argentina. Totally inefficient, high operating costs and especially terrible labor laws.

They can use that as a case study. My dad made a lot of money on CN Rail. Argentina is totally inefficient and they need to replace the leadership at all of these companies they are thinking about privatizing. Argentina needs to do the same thing. Get very aggressive about cutting down on corruption and cutting costs. Basically take a chainsaw and downsize the bloated payroll, getting rid of unproductive assets and prioritizing on what they are making money on.

Anyone that has done business in Argentina, especially with the government knows that there are layers and layers of employees and management that don't really do much. Milei needs to do more to modify labor laws before someone will invest or take a big stake in the company.

Even if the company is losing money, if they fix some of these things above they can do an IPO. Right now Argentine companies and bonds are very hot with local and foreign investors. That was Canada's largest IPO in history and when my dad got in. He worked for railroads and understood the potential.

Argentina would need to follow the same path. CN had a really generous share ownership program where the employees got ownership in the railroad. They knew how valuable it was. Almost 50% of the union workers bought stock in the company. Canada and Argentina are completely different but they would need to follow the same game plan.

My dad told me he made 320% in the first 5 years of the IPO. Argentina needs to do a lot of preparing before they privatize these companies. But lots of potential if they can get these changes made to labor laws and cutting expenses and shedding useless employees.

https://muse.jhu.edu/article/263112/pdf

 

[CraigM]

CN Rail is a great example but I believe it was also the most successful privatization in Canada's history. My father invested in that many decades ago. Lots of parallels to Argentina's railways. CN was struggling and the government always had to bail it out. Just totally bloated and hemorrhaging cash mostly related to the same problems in Argentina. Totally inefficient, high operating costs and especially terrible labor laws.

They can use that as a case study. My dad made a lot of money on CN Rail. Argentina is totally inefficient and they need to replace the leadership at all of these companies they are thinking about privatizing. Argentina needs to do the same thing. Get very aggressive about cutting down on corruption and cutting costs. Basically take a chainsaw and downsize the bloated payroll, getting rid of unproductive assets and prioritizing on what they are making money on.

Anyone that has done business in Argentina, especially with the government knows that there are layers and layers of employees and management that don't really do much. Milei needs to do more to modify labor laws before someone will invest or take a big stake in the company.

Even if the company is losing money, if they fix some of these things above they can do an IPO. Right now Argentine companies and bonds are very hot with local and foreign investors. That was Canada's largest IPO in history and when my dad got in. He worked for railroads and understood the potential.

Argentina would need to follow the same path. CN had a really generous share ownership program where the employees got ownership in the railroad. They knew how valuable it was. Almost 50% of the union workers bought stock in the company. Canada and Argentina are completely different but they would need to follow the same game plan.

My dad told me he made 320% in the first 5 years of the IPO. Argentina needs to do a lot of preparing before they privatize these companies. But lots of potential if they can get these changes made to labor laws and cutting expenses and shedding useless employees.

https://muse.jhu.edu/article/263112/pdf

It was the most successful probably anywhere, but Canadian Pacific was a good one too and there are numerous other examples worldwide. If you're looking at privatizations purely from a citizen's perspective, you just want the subsidies/red ink to end and service to improve, which is the low hanging fruit in these things. Anything beyond that is gravy. Argentina should easily be able to accomplish these things.

 

[Larry]

It was the most successful probably anywhere, but Canadian Pacific was a good one too and there are numerous other examples worldwide. If you're looking at privatizations purely from a citizen's perspective, you just want the subsidies/red ink to end and service to improve, which is the low hanging fruit in these things. Anything beyond that is gravy. Argentina should easily be able to accomplish these things.

Agree if they can stop the red ink and improve service there should be a great opportunity. I have not been a fan of Milei but I have to admit he is doing some great things. I like getting rid of some high paid unproductive employees and also closing AFIP!