Argentina Freight Transport Report Q2

On December 17 2008 the Argentine Senate voted 42-20 to expropriate Aerolineas Argentinas, the country’s flagship airline owned by Spain’s Grupo Marsans. Austral, a domestic airline 97% owned by Marsans, was also included in the measure. The two airlines are responsible for around 80% of Argentina’s domestic flights and employ 9,000 staff. Congress removed a clause in the first draft of the bill allowing for later re-privatisation, and gave itself the power to determine the final sale price. The vote came after months of negotiations between the government and Marsans had failed to settle a price for selling the airline back to the state. ‘It is the only way to ensure these two companies keep flying’, Transportation Secretary Ricardo Jaime told local reporters. The government said the airline was heavily in debt and a state valuation court estimated it to have a negative net worth of around US$800mn.

Officials said the most they would pay for Aerolineas would be a nominal one peso – about US$0.30.

Marsans on the other hand argued that the airline was worth between US$350mn and US$450mn.

Following approval of the expropriation bill Marsans said it was filing a claim against Argentina at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in Washington. A company spokesman described the expropriation decision as ‘absolutely scandalous’, and said that the Argentine authorities were ‘behaving like Venezuelan President Hugo Chávez’. BMI expects a period of upheaval in the domestic airfreight sector, which, coupled with low investor confidence and the emerging recession, will depress the sector’s growth. For the 2009-2013 period we are now expecting average annual airfreight growth measured in million tonnes-km (mntkm), of only 1.2%.

Various factors support the core prediction. Across our 2009-2013 forecast period, we now expect average annual GDP growth of 0.9%, a pretty dismal performance when compared to the 8.3% annual average registered in the preceding five-year period. The government of President Cristina Fernández de Kirchner will find it more difficult to keep the growth rates up in a less supportive international economic climate, and the transport sector will remain constrained by patchy infrastructure. On the plus side, the aviation industry is now experiencing much more manageable jet fuel prices, but this contribution to the bottom line will not be enough to dispel the gloom caused by slumping demand. We also have to say that we are not confident that a state-run Aerolineas will be managed significantly better than previously.

The outlook for the overall freight industry is that it will keep pace with, rather than lead the muchreduced general rate of economic expansion in the country. Road haulage will continue to be the dominant freight transport mode. Investment is still needed in both the highways network and truck fleets, but recession will ease bottlenecks. Over the forecast period annual average growth in road freight carried will be 1.0%, down sharply from the preceding five years. BMI now forecasts 1.2% annual growth in rail freight over the next five years, with some new investments still expected to go ahead. We are forecasting maritime traffic to grow by an annual average of 0.9% with lower grains exports this year playing a part.

Argentina Freight Transport Report Q2 2009 We have awarded Argentina a freight transport rating of 53.0 (out of a theoretical maximum of 100.0), which places it in the medium range of key Latin American markets that BMI monitors. Positive factors contributing to the country’s score include the country’s long-term economic and political risk assessments and potential for growth in infrastructure. The total value of transport and communications GDP will rise to US$64bn in nominal terms by 2013, representing 9.9% of Argentina’s GDP. The transport and communications sector employed around 666,000 people, or 7.1% of the labour force, in 2008. We see the figure rising to 701,000 by 2013, although as a proportion of the labour force it will remain unchanged at 7.1%.