Suspended potash project top officials left Argentina following union threats
Top officials from the Brazilian mining company Vale which suspended a 6 billion dollars potash development project in Argentina left the country for Sao Paulo last Friday following “on instructions from the security department” of the corporation, according to reports in the Brazilian press.
Reports from O Estado de Sao Paulo and the financial newspaper Valor Economico indicate that the president of Vale in Argentina, Sergio Leite and another top official left Argentina based on a detailed report on “the prevalent exalted feelings and even unions’ threats“.
The Mendoza media speculates that this could be the reason for the absence of Leite to a conciliation meeting asked by the company and which was to take place last Friday morning at the Labour ministry in Buenos Aires.
On that day the Ministry of Labour enacted the compulsory conciliation four days after Vale announced the suspension of the potash project in Rio Colorado because of “macroeconomic conditions in the current context”.
The Rio Colorado project is Argentina’s largest investment in years and besides developing the mine included a railway to a port especially built to ship the mineral. It would have made Argentina one of the world’s leading producers and exporters of potash which is used as potassium fertilizer for agriculture.
In Mendoza lawmakers belonging to the ruling coalition aligned with Cristina Fernandez presented a bill before the provincial legislative modifying labour rules incorporating new sanctions to companies that do not abide regulations such as banning them from bidding for government financed projects or registering as government suppliers.
Meanwhile Vale sources revealed that the company may try to develop other potash projects in Brazil and Canada: the options are Carnalita in the north-eastern state of Sergipe and the Kronau mine in Canada.
Brazil’s giant agriculture sector and one of the world’s main food exporters needs the potassium fertilizer. Currently it imports 90% of its potash needs from Canada, Jordan and Russia, and in Brazil’s long term planning it was counting with the Rio Colorado project.
Vale, the world’s No. 2 miner, said on March 11 the Rio Colorado project was no longer economically viable inn the current macroeconomic environment in Argentina but the Argentine government argues Vale is demanding unrealistic tax breaks for the project.
Vale, which considers the project suspended, has invested 2.2 billion dollars in Rio Colorado to date and has completed work on 40% of the mine, railway and port.
The company last year rented mining assets in Sergipe from state-run oil company Petrobras for a 30-year period with the goal of developing Carnalita, but has so far made little progress.
Vale’s former Chief Executive Murilo Ferreira said last August that Vale was reconsidering the Kronau project in Canada, which requires an investment of 3 billion dollars in its initial phase.
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YOU COULD NOT MAKE IT UP!
Accidents happen in places like Argentina.
Translation: They are not letting us steal enough of their profits.
www.clarin.com/politica/Vale-costo-paso-millones-dolares_0_886111468.html
yet the agression between CFK and Brazil,
is growing,
hey,
you dont think ??
surley not lol.
Your friends in Canada.
Just imagine... Tasmanian She Devil was able to screw up yet another potential deal...
Every time the government is able to coerce someone into making a large investment into the country, for some inane reason they must also immediately try to put them over a barrel to squeeze them after the fact... Then the investor pulls out and the politician who tried to screw them claim its not their fault...
It is a truly amazing syndrome that Argentina has never been able to get away from... !!!
Does anyone know why this is? After years of dealing with them I have never been able to understand it. I speak from experience!
www.youtube.com/watch?v=smna8tI_PNE
'“Vale is demanding unrealistic tax breaks for the project”
Translation: They are not letting us steal enough of their profits.'
Sorry, I fail to see how Vale would be STEALING their own profits.
Who is 'us'?
Perhaps you mean that they might use their profits worldwide in their worldwide operations. And perhaps you think that this is unethical.
Vale might export some of its profits to (heaven forfend!)... Brasil!
It seems that Vale will move the whole of its potash operations to
i. Sergipe - exploiting the resources in agreements with Petrobras, or to
ii Canada - a *stable* country within the OAS.
“Who is 'us'?”
“us” is the Argie politicos. It is a good translation.
With 2 billion already invested it will be hard to Vale to walk away.
US$2 billion is an acceptable loss to sustain to avoid getting in so deep, with tens of millions invested and then to have it expropriated (a la Repsol).
Risk analysis becomes more important than straightforward cost-benefit.
This scale of write-off is common in the petrochemical industry (BP/Exxon/Chevron), and the giant Vale trades similar amounts each year.
It is impossible
The Ks have created a problem that won't be easily fixed. There will be a mass devaluation of the gov't rate, hyperinflation and Depression.
It is unavoidable and happening much fast than I predicted
Although I am pretty sure once the peso starts to fall it will speed up decline and they will lose all control of it.
That may be happening now
Funny timing with the NYC Court ruling right around the corner
Isn't it?
“With 2 billion already invested it will be hard to Vale to walk away.”
Hi Condo,
I expect they would be far better off losing the $2b than the $11b of the final investment, even if it stops there.
As with Repsol, a very large, profitable business with brand new physical infrastructure would sure be tempting for a takeover by CFK.
If it is very profitable, then Vale is “exploiting” Argentina's resources.
If the infrastructure is complete, but the company is not as profitable (due to high build costs), mayhap Argentina will declare it “mis-managed by a foreign company” - not enough of a cut for Argentina??
Just some thoughts.
Vale is right to bail, or wait for some guarantees.
I am newly grateful for living in the U.S.
All this stuff reminds me of what the opposition said back in 2005 or so, which was buried by the media which was bought by the K, so only the upper class who read Perfil knew about this. Many economists and planners (and some politicians, of course), said that inflation was getting out of hand, that the subsidies policy was unsustainable, and that Argentina would run out of oil soon. But Nestor Kirchner ignored them, saying “we won't freeze the economy”, and doubling down on everything like a true populist (and kicking out Lavagna, because he refused to obey Nestor). I knew the Kirchners would blow up everything, even before the boom started. The Kirchners got elected not only because they know how to manipulate people, but because as soon as Nestor got elected he bought almost all the media, including Clarin. The warning signs were there, but if you didn't buy Perfil (which only the educated read), then you wouldn't hear them.
But the biggest problem Argentina has, beyond the media getting bought is that people haven't realised that most of our problems are caused by populism. Most people don't know what populism is, or if they heard the word they think it's a word the neoliberals made up to discredit other politicians.
$2 billion is a lot.
I suspect they are playing hard to get.
Budgeting a project in a country where inflation is a moving target, there are import restrictions, the work force is inexperienced would understandable be a nightmare. Vale need to push for more concessions.
Vale know the only way to get through the thuggery of a corrupt system is to beat them with a big stick. Pulling the plug is the best weapon to hand.
The Argies will frantically be trying to get this project back behind the scenes.
I have been a director of a VERY large public company in the UK.
When operating at this level risk is paramount and MUST be got right (or you lose your job).
So some of the questions are:
1) Do you think the country / company you are going into business with is straight?
2) Have they been truthful with us in their dealings?
3) Have the Due Diligence Team (jokingly abbreviated to DDT) come up with anything that might alter our view?
4) Have we got enough money to withstand a serious amount of depleted cash flow due to unforeseen problems as well as foreseen ones (difficult that one)?
%) Does it still FEEL right?
Vale has Total Assets in excess of US$ 128.7 billion and a Net Operating Income of US$ 30.1 billion.
Given that the investment to-date could be considered an asset, the loss of the US$ 2 billion already invested is only 1.55%.
Even considered as income (bit weird to do that of course) it is only 6.64%.
So do you want to risk a further US$ 9 billion (assuming it is limited to that) making the figures 8.54% and 36.54%?
Bit of a no-brainer: cut your losses.
Of course there is a possibility that they have cut and run, but I am not convinced that is the case. Vale are Brazilian, they know the score in Argentina so they would have answered no, no and no to your first 3 questions.
If you consider that:
- This is the single biggest investment in RGland in years (that is a sad indictment).
- there is money to be made for everyone with this project
- Brazil has leverage in Argentina (it is not Spain)
Behind closed doors CFK is going to be doing everything humanly possible to get this project back. Just my opinion.
Mar 21st, 2013 - 05:44 pm
Remember, Cumpa, that Petrobras is also pulling out of Argentina. I think Dilma has told all the companies with large state holdings that the end is nigh and to pull up stakes and run home!!!!!!
I think you have nailed that on the head! :o)
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