ECONOMY: Transnationals Quietly Swallow Argentine Firms

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Dec 4 1997 (IPS) - Six years some of Argentina’s top business firms faced a quandry: whether to go into debt to raise money and compete, or to sell out to transnationals. About 500 chose the latter option in deals with 20 billion dollars.

Today, that trend continues. National firms, even the most traditional companies founded by immigrants with minimum capital and many ideas, are changing hands without making any changes detectable to the firms’ clients.

The years between 1991-1997 saw the implementation of Argentina’s “convertability” plan and some 500 firms in such varied sectors as banking, retail, food, drink, communications and oil sold out to foreign investors.

The main buyer was CEI (Citicorp Equity Investment), the corporation with the largest shares in basic and cellular communications, which owns radio communication firms, several cable television companies, air channels, publishers and radios.

In the first 10 months of this year, 10 billion dollars worth of businesses were sold, almost half of the total sales since 1991 (20.435 billion). At the end of November, one of the most important transactions was the sale of the Etam chain of women’s clothing stores.

Etam was the classic brand of clothing for working women over 40 who like to dress formally. Since the German firm Klausse Steilmann – Europe’s oldest factory – took on its debts and purchased 88 of its stores in 13 million dollars, its products are changing gradually.

This transfer of firms, mergers and associations, does not include the 25-billion dollar public auctioning of state enterprises, the majority of which are now controlled by foreign firms and transnational corporations.

Bernardo Kosacoff, an economist at the Economic Commission on Latin America (ECLA), explained that there are mutually convenient reasons that justify the sales and which are independent of what is happening in each sector of industry, commerce or services.

Kosacoff believes that consumers benefit from the changes – in quality and price. And this, if technology and employment are taken into account – is positive for national development. “It is a bad thing if transnational corporations purchase only the supply network, and only for importing and assembling here”, he says.

Explaining the transfer phenomenon, he said “there is a group of top national firms that have advanced substantially in the past several years, but that are still far from the levels of competitiveness reached by other firms which produce the same goods in more developed societies.”

“These are firms that require investments in technology and research, but whose access to credit is double the cost of foreign firms’. They also suffer from the phenomenon of strategic uncertainty on what its prospects will be in the medium term,” he added.

The uncertainty over what kind of technology to acquire, which management techniques to employ, and where to target sales – locally, regionally or global – are questions that the branches of a transnational corporation tend to leave to the old firm.

Transnationals have the know-how, the technology and access to cheaper credit — an annual rate of six percent, or half of what even the most solvent of local entrepreneurs can get — explained Kosacoff

“They (transnationals) believe that national firms may be old, but they still have leadership positions in the market as well as good marketing and distribution networks with branches across the country. And those are great advantages”.

Last month, Argentine communications entrepreneur Alejandro Romay- the owner of Channel 9 TV who is known as the “czar of television” – sold 75 percent of his business to Prime Television of Australia in 150 million dollars.

Shortly before that, the Cisneros Group of Venezuela acquired the firm “Imagen Satelital”; TCI of the United States bought “Cablevision”, and Stet of Italy purchased Impsat. And all this in addition to the CEI acquisitions.

This year there were also large transactions in the banking sector. The Spanish Bilbao Vizcaya Bank acquired the Banco Credito Argentino and the Banco Frances, while its Iberian competitor, the Santander, purchased Banco Rio with all its branches. And those were only the most important sales.

In the early years, these transfers occurred mainly in the food business. The French firm Danone acquired Bagley, the U.S. Nabisco company bought Terrabusi, the Chilean Inversiones Transandinas acquired Bonafide while Cadbury of England purchased Stani.

Although the sellers are clearly the majority – to the extent that there is already talk of a new business class living off interest – there is a sector that is resisting the takeover trend, and is taking risks and banking on growing in a globalized world.

A handful of strong companies, like the steel firms Techint and Acindar, the food companies Arcor and Molinos, and the Clarin Editorial Group are examples of Argentine firms remaining in Argentine hands. But they are rareities, not only because they have survived, but because they have grown and adapted to the competition – at least for now.