The bill to nationalise currency printing company Valores de Sudamerica (CVS), formerly Ciccone, was passed yesterday in the Chamber of Deputies. This means the state will now control the printing of money in Argentina. The bill was passed last night after nine hours of debate. It received 145 votes in favour, 77 against and four abstentions.

The law declares the printing of money a matter of state interest and awarded President Cristina Fernández de Kirchner the power of executive intervention in money printing.

The bill’s success owes to its widespread support across political parties. As well as receiving support from Kirchnerist allies such as the Frente Cívico Santiagueño, Nuevo Encuentro and Movimiento Popular Neuquino, many opposition members also voted in favour. These included members from traditional opposition parties Proyecto Sur, Unión Peronista and Frente Cívico de Cordoba.

However there was also much criticism of the bill, focused on the allegations of corruption surrounding vice-president Amandou Boudou. Boudou is accused of using his influence to favour the former owners of CVS, which was saved from bankruptcy in 2010 by Investment company The Old Fund. Critics claim Boudou’s links with The Old Fund are suspect and the current investigation into the deal brokered between them is still underway.

A key aspect of the investigation aims to uncover the owners of the Old Fund. Yesterday, opposition members both accused the government of trying to cover up the Boudou-Ciccone scandal with this law and also lambasted the government for taking over control of a company without knowing this information.

“Those who vote for this bill will be voting blindly,” said Deputy Patricia Bullrich from Unión Por Todos. “They could be voting for a company paid for with money from drug trafficking or money laundering.”

Frente para la Victoria deputy Agustín Rossi Rossi spoke out against these views last night, saying there had been many cases where businesses had “sought to disrupt democracy with accusations of corruption.”

Many supporters of expropriation spoke out in favour of the bill, claiming the ongoing investigation into Boudou and Ciccone was not relevant to the nationalisation of money printing.

Leader of opposition group Proyecto Sur, Fernando “Pino” Solanas said expropriation “would not interfere with the current judicial investigation.”

For more information on the history of Ciccone, CVS and ‘Boudougate’ read our in-depth news feature

Yesterday, Congress passed a bill to nationalise currency printing company Compañía de Valores Sudamericana. According to the government, the printing of money should be the responsibility of the state. However vicepresident Amado Boudou is currently mired in a scandal with the company formerly known as Ciccone, prompting many to doubt the motives behind the decision.

We took to the streets to ask what the Buenos Aires public think about the controversial bill.

Portraits by Felipe de la Fuente.

Guillermo Godoy, 56, agricultural expert, Bragado

There are two main reasons I’m against the expropriation. First, we need to recognise the corruption of the government in relation to inflation which is increasing every month and galloping out of control. We need to understand what’s happening with inflation are recognise that there are problems and that we can’t rely on the mint to print money as is necessary.

Second, there is the issue of the corruption of Boudou which we saw yesterday in the national congress in the Senate. This was a situation which proved the hypocrisy of the government – it seems unbelievable that Boudou presided over a session about the expropriation of a company which he is thought to be guilty of having corrupt links to.

Maria Pecaldi, 61, retired, Saavedra

The Ciccone issue is another example of scheming behaviour from this government at an infamous level and has been done to disguise bigger scandals within the government. The only role that we as the public can play in this, the only thing we can do is to think carefully about how to vote in the future, it’s the only power we have here.

The Boudou scandal is yet another thing, I don’t think much else could surprise us in relation to him now. Unfortunately we are getting too familiar, and this is the worst thing, to the fact that everything is a mess. Look wherever, health, education, trains. Instead of increasing things we are cutting them. It all makes me very angry.

Fabián Acevedo, 46, architect, Zona Norte

I think that this is all very strange. It gives me the impression that things are being covered up, that this is an effort to hide something else that is happening behind the scenes. This is a political move to cover up the scandal with the economy minister Amandou Boudou.

I don’t think that the state should be taking control of a company which has had very shady links with the economy minister. I trust private companies a lot more to handle the printing of our money. I don’t think this is a good thing at all.

Christian Dojosoba, 26, anthropologist, San Telmo

Politics is all very complicated, particularly this. It’s difficult to know whether it’s a good or bad thing. In general completely agree with the principle of the state taking control of its own industries. It seems right to me that the national government should manage the printing of its own money. It shouldn’t be the responsibility of private companies.

I was in favour of the nationalisatoin of YPF. I think all countries should be able to manage their own resources and I thought that was a good thing. Though the situation here is a bit different. There are all the issues with Boudou and I’m not sure what I think about that scandal.

Cristina Uranoa, 43, music teacher, Microcentro

I think that this has been done to cover other things. It isn’t clean and it isn’t transparent. I don’t think the printing should be in the hands of the state. Maybe if it was done in a clean and transparent way and if it was handled well then yes, but this isn’t good. It seems very suspicious. It’s not that I think private companies should be trusted more in general but in this case I don’t think the government should have control.

The bill to expropriate currency printing company Compañia de Valores Sudamericana (CVS) could become law this afternoon if it is passed in the Chamber of Deputies. The session began in the lower chamber at midday today in the presence of 146 deputies.

The law has already progressed through the Senate and was passed on 16^th August. Today, the Chamber of Deputies will discuss whether the printing of money is a matter of “national interest” as well as the accusations of corruption surrounding vice-president Amando Boudou.

Boudou is accused of using his role to favour the current owners of CVS, however Frente para la Victoria deputy Diana Conti said that Boudou was not implicated in a “relevant” way in the current decision. Boudou remains supported by President Cristina Fernández de Kirchner’s party

The bill has gained both support and opposition from senators. Luis Juez, a Frente Ampio Progresista senator was one of the opposition members who voted in favour of the bill, similar to one he had submitted in April.

However many are still against the bill, including opposition deputy Elisa Carrió who today sent a letter to the Lower Chamber demanding the law was stopped.

In the letter Carrió said “(the intervention) not only constitutes a ploy to cover up crimes which are currently under investigation but also amounts to a serious institutional precedent as if approved, the law will… constitute a usurpation of functions and a serious violation of the republican government.”

The government argues that the printing of money should be the state’s responsibility and according to the bill it is “a matter of public interest and subject to expropriation”

The verdict is due later today.

The Spanish oil giant Repsol has written a letter to Argentina’s president, declaring the country’s 51% share takeover a “dispute.”

The letter, written to President Cristina Fernández de Kirchner, says Argentina’s new law expropriating Repsol’s shares of YPF – giving Argentina majority shareholder status of the company at 51% – is against the Treaty on the Promotion and Protection of Investments between Spain and Argentina.

The company said in the letter it wants to take the dispute to the International Centre for Settlement of Investment Disputes, an institution of the World Bank.

“Repsol formally announces the immediate commencement of legal action under international law for [ … ] Argentina should be condemned to pay for reintegration and/or reparation for the damages they have caused,” the letter reads, according to Página12.

This is the first step to open the process. Argentina and Repsol have six months to try to resolve the issue on their own.

On 3rd May, the bill passed in the Chamber of Deputies with 207 votes in favour, 32 against and six abstentions. The presidents signed the bill into law on 4th May.

If president Cristina Fernández de Kirchner has a flare for political drama, she does not hide it well. After turning last Thursday’s forecast “announcement” of renationalising oil giant YPF into a broadcasted tease, President Fernández lit up airwaves and web pages early Monday afternoon with the news the country had been waiting for: YPF would be in the hands of Argentina once again.

President Cristina Fernandez de Kirchner with Governors of petroleum producing provinces. (Photo: Casa Rosada)

A new, mixed capital structure will replace the current majority control that Spain’s Repsol currently holds. According to Monday’s announcement, 51% of YPF will be managed by the state, and 49% will remain in private hands. Out of the public share, 51% will be owned by the national state and the remaining 49% will be distributed amongst the provinces.

Many Argentines will tell you that YPF’s tale is bigger than simply financial push and pull. In a country that has been rocked by as many political and economic crises as any, many view the company’s evolution as a metaphor for the sovereignty of Argentina itself.

The History of YPF

Few companies are as deeply rooted in Argentine history as Yacimientos Petrolíferos Fiscales (YPF; in English, “Fiscal Petroleum Fields”). It was founded in 1922 under the administration of radical president Hipólito Yrigoyen, and has become a source of political scrutiny and power tug-o-war nearly ever since.

It was the world’s first state-owned oil company. As such, it was an instrumental source of power and a strategic card to be played by the different governments. In 1928, the state approved a law that established the country’s monopoly on petroleum, resulting in Argentina owning the cheapest oil in the world.

The oil debate was reignited in the Perón years, when the president initiated a consolidation model “based on the nationalisation of the sites”. According to the 1949 constitution, in its article 40, oil fields, gas, coal, and other energy sources were declared “inalienable and permanent property of the nation”.

An economic recession was apparently enough to make the president change his tune just a few years later. In May 1955, Perón approved a contract with Standard Oil of California (today’s Chevron) that allowed the company exploration rights in a nearly 50,000-square kilometre area of Santa Cruz.

The decision did not fare well in the eyes of YPF and the president’s detractors, however. The contract was never implemented, but the privatising policies were continued by Arturo Frondizi’s administration. Despite his initial criticisms of Perón, he eventually signed contracts with foreign oil firms, which allowed them to maximise production without paying taxes.

Still, many believed Perón set the privatisation wheels in motion. His actions were described later by Julio Canessa, the engineer who ran the company during the first years of Perón’s presidency, as “one of the most humiliating contracts contemporary oil history has ever known”.

Or, some would say, until the 1990s.

Menem’s Privatisation

The nation’s oil fell in accordance with former president Carlos Menem’s penchant for privatisation. In an effort to answer to the state’s economic instability and to refill the holes left by billions in national debt, Menem set to privatise YPF in 1991.

Private companies were quick to react to the announcement. In 1993, 160 million shares, or about 44% of YPF was sold to international and private shareholders. According to Kang Wu and Cynthia Obadía’s ‘Energy in Latin America: Production, Consumption and Future Growth’ the sale “allowed YPF to gain US$3.04 billion in cash” and additionally sold “one of its important oil pipelines” – a 900-kilometre, 35-centimetre diameter line from Neuquén to the port of Rosales in Bahía Blanca to a “consortium of Argentine companies”.

But perhaps the most important sale came in 1999 when Spain’s oil giant Repsol acquired full control of YPF; the merger effectively creating what is now known as Repsol-YPF. Repsol is 100% privatised and is one of Argentina’s largest corporations. Prior to Monday’s announced, the corporation owned 57% of YPF, and 42% of Repsol’s total reserves—roughly 2.1 billion barrels of crude—came from Argentina’s YPF.

Félix Herrero (Photo: Beatrice Murch)

A “Total Failure”

Energy expert and member of political movement Proyecto Sur, Félix Herrero told the Argentina Independent that he opposed the decision to privatise from the beginning. “It was a very bad idea, and turned out to be a total failure,” he says. “You have to analyse the situation leaving ideologies aside.”

Herrero said that in the year 2000, Argentina had 300 million barrels of oil on reserve, and by 2007 that number had dropped to 250 million. “Repsol is the concessionaire,” he says. “They have a contract that specifies what the investments are.”

In the case of Repsol’s contract, the company has agreed to invest in such a way that maintains the level of oil reserves and extraction, and ensures that the company does not impose any “malicious effects” on the environment.

But Herrero says statistics make it clear that the Spanish company has failed to uphold their end of the bargain. According to the expert, the numbers prove that “there has been no investment in exploration”. Indeed, president Fernández’s announcement on Monday was accompanied by a detailed presentation about the decline in investments and the subsequent increase in oil imports, which doubled between 2010 and 2011.

Provinces React

Word of Repsol’s deadbeat reputation has not fallen on deaf ears. In March of this year, Chubut and Santa Cruz governors Martín Buzzi and Carlos Peralta, respectively, announced that they would expire the contracts of five of the eight YPF concession areas. According to La Nación, this accounted for 7.4% of the company’s production in 2011, however excluded three of the more productive sites. The provinces of Neuquén, Mendoza, Río Negro and Salta were soon to follow.

Oil well in Santa Cruz Argentina (Photo; Nestor Galina)

At the time, governor Martín Buzzi issued what most called a warning to the sites maintained in Repsol-YPF’s control. “Enhance these remaining areas,” he said. “Do what you have to do, or we will go for them as well.”

Officials said that the areas forfeited would be up for grabs by “new private investors,” and that the expiration of the current contract would take place within 90 days of the announcement.

Energy secretary Daniel Cameron maintained that the decision had not been “on a whim” and assured that it had the “explicit backing” of the national government.

“This is not to exploit or remove rights,” he said. “This is a time when the country needs the support of all economic sectors … [we need to make] every effort to return to self-sufficiency to sustain growth and continue to give dignity to the people.”

Rodolfo Lopez, supervisor and engineer of drilling oil and gas wells in Chubut and Santa Cruz, says he wholeheartedly agrees with the government’s decision. “If the question is whether Repsol has complied with the agreement, the answer is a resounding ‘no,’” he says. “Repsol did its business, but did not help Argentina.”

“It has not accompanied in the necessary examinations, and was supposed to have an aggressive exploration campaign,” he continued. “Repsol was devoted almost exclusively to exploiting [the land], and has done little to no exploration, and no policy for conservation of hydrocarbons was ever in its plans.”

With these announcements, talk of renationalising Argentine oil immediately began to dominate headlines, and re-established a megaphone for long-time privatisation critics, such as Herrero.

According to the expert, myriad benefits will be bestowed to Argentina now that the government has decided to take control of “black gold” once again:

• Self-sufficiency for Argentine oil.
• Lower oil prices for the Argentine public.
• Economic benefits will remain in the country. “It’s much cheaper than importing,” Herrero says.
• The national government will invest in the areas where there is the largest prospect of national income.

Herrero points out that countries that went private around the same time as Argentina, including Russia, Venezuela, Bolivia and Ecuador, have all returned to nationalisation.

Additionally, he says, in a feature by The Economist on the top 50 oil and gas companies, it was mentioned that 16 of the top 20 were state businesses.

“These are the natural things that are occurring now in the petroleum business,” he says.

Spain Steps In

Repsol-YPF has remained relatively mum in the wake of the political turmoil, and is currently refusing interview requests from the Argentina Independent along with various other news sources.

At the time of the Chubut/Santa Cruz announcement, the company issued a statement saying that it has “proven reserves in fields operated by YPF have reported excellent results,” and noted that “the wells completed during 2011 increased 14% over the previous year and 83% since 2007”.

Amid speculations of a potential lawsuit, the Spanish government stepped in on Repsol’s behalf. The country has made their support of Repsol abundantly clear, warning that “hostile gestures” against Spanish companies could mean “economic and fraternal rupture” between the two countries”.

“Breaking the rules comes with a cost and Argentina could turn itself into an international pariah,” said Spain’s secretary of state for European Affairs Inigo Mendez de Vigo, in an interview aired on Onda Cero radio network.

After Monday’s announcement, officials from the Spanish government maintained their stance and met with the Argentine ambassador in Madrid to formally announce their discontent. Meanwhile, Repsol is demanding a payout of more than US$1 billion. Further developments are nearly certain to be presented in the days ahead.

“This arbitrary measure breaks the atmosphere of cordiality and friendship that historically have held relationships,” said Spanish chancellor Garcia Margallo.

Lopez says he understands why Spain would be concerned of Argentine nationalisation. “It affects their interests, and they don’t want to lose a source of income,” he said. “This should be more worrying for Spain and across Europe as it needs foreign exchange to [aid] the growing crisis in the European world, and particularly in Spain itself.”

Despite a scorned ally, Argentine officials contend that the decision will provide for economic stability and prosperity in the years to come. Although the movement still must be approved in Congress, the action is near certain to be approved, as the ruling party enjoys a majority in both houses.

“The model chosen for the future of YPF is not nationalisation,” said Fernández, “but recovery of sovereignty and control of hydrocarbons.”

To see what the locals think about the nationalisation of YPF, click here.

Lead image by Nestor Galina

The years of Menem’s wave of privatisation gone wild are still fresh in Argentines’ minds.

In an attempt to ‘regain energetic sovereignty’, President Fernández has now launched another takeover bid on the privatised national oil company, YPF, which is majority owned by the Spanish multinational Repsol.

While diplomatic and commercial skirmishes between Argentina and Spain are mounting on a daily basis, the Indy reporters found out what people think about the state reconquista of the energetic assets.

Should YPF be re-nationalised? Will this exacerbate commercial relations with a strategic partner like Spain? Will an aggressive takeover bid scare foreign investors away? Has Repsol been investing enough in exploration (meaning: does it deserve to be nationalised)? And finally, what do Argentines think about the benefits of privatisation vs nationalisation?

Catch a glimpse of what the mood in the streets of Buenos Aires is here, with our weekly vox pop.

Photos by Allison Kate Cherkis

[Note: opinions were collected before Monday’s nationalisation announcement] 

Hugo Rodriguez, 38, journalist, province of Buenos Aires

Argentine oil can’t be owned by anyone else, it has to be Argentine. I don’t know much about it, but generally speaking I think that fighting with someone is always a bad thing. We should always try to get along with everyone, but at which cost? If the price to pay is Argentine minerals being the property of someone else, it doesn’t seem right to me. Anyway, it all seems a bunch of lies to me: the president saying she will be nationalising everything. She won’t do anything. It just creates an atmosphere.

Amilse Somosa, 60, graphic designer, Capital Federal

I don’t know if it shall be nationalised or not, on one hand I think so; on the other here everything that is owned by the state has always been in crisis. Privatisations done properly are good things, as it happens with everything. I think we should not have problems with any country in the world, not only Spain. But, yeah, I think Repsol did not invest enough though.

Andrés Chesini Reniz, 27, IT technician and student, San Martin

  If the state wants to re-nationalise something, it should within a legal and commercial frame. Expropriations in such a Chavez fashion are no good.

It is all a move to plunge the value of the company’s shares, so the state could take over the company for less. This fight with Spain is all about personal ego, but yet it damages the whole country. Being enemy with a country and having a rough and bullyish behavior like the one we have against the UK for the Malvinas is just high-handed. I don’t know about Repsol, but generally speaking all the foreign firms invested less than expected in the country, but it is also because there is a lack of trust in the country to make big, long-term investments. What if Repsol invests millions and then the Government starts pushing forwards ownership claims for not having complied to this or that guideline? I’m not saying privatisations are good. No extreme is good. National companies are corrupted and often bureaucratic elephants that don’t go anywhere. The best scenario would be a mixed administration in which the state regulates the service provided, and the private ownership offers the service in the most efficient way.

Martín Lerena, 24, law student and political activist, Buenos Aires

The selling of YPF in the 90s was one of the worst things that happened to our country. During the Menem era, Argentina sold national companies that worked just fine, like YPF, a company we are proud of. It was terrible. YPF shut down almost everywhere, oil price skyrocketed even if we are a oil-producing country, it’s absurd, it’s crazy. I dream about YPF being property of all the Argentines, but we also have to say that Cristina’s husband participated in the selling of YPF to the Spaniards. We have to remember that he signed the agreement in Santa Cruz. What I don’t like is that this government uses this to feed the bunch of satraps that are freeloading off the state. I think that the Spanish government should dedicate itself more to solve people’s problem, find jobs for the jobless etc. rather than defending four multimillionaires who never gave anything back to the Spanish people.

Emilio Guzmán, 25, student and hostel receptionist, Puerto Iguazú, Missiones

I think nowadays each country should guarantee a bunch of basic assets for the country. We are living in a society in which oil is vital part of daily life and a nation should have its own energy sources to develop. Nationalisation is not the most correct way to go, but yet a state needs somehow to control its energetic assets. I don’t think a direct clash with Spain is an appropriate diplomatic policy; we could have obtained a similar score in other ways. A lack of investment by Repsol is not the quid of the issue; it is just used to justify the government’s moves. 

Neus Zoto, 36, actress and customer service, Buenos Aires

It is a good thing that YPF comes back to the Argentine states. It is a way for the state to be somehow richer, not only as a constitutional entity, but as a nation in the whole. It’s super-positive. Generally speaking, Argentines have a really bad opinion about Menem and every decision he took in his mandate. I think that state companies should not seek profit, especially in education and public health. Privatising them is to deny the state the constitution of its own corpus, on a financial level or on a national identity level. The diplomatic row won’t scare investors away. Investors can’t be scared away, they are interested in investing so they learn how to deal with changing scenarios. The country should not seek to open its borders to any investor though; otherwise it will lose its identity. I think [what the government is doing] is a way to produce respect towards what are our state assets. We became poorer during the Menem era, it is important to re-take what is ours.

Planning Minister Julio De Vido has denied claims issued by Clarin that a meeting was held between himself and the governor of the Chubut province to acquire shares of Reposol-YPF.

The national newspaper published a story in today’s paper, noting that the minister met with governor Martín Buzzi to discuss the possibility of using social security funds to buy as many shares as necessary to renationalise the company.

Clarín later reported the governor’s response, which included the claim that the report should be considered as “misinformation.”

According to Clarín, Buzzi stated that the project to purchase YPF would make use of social security funds from the National Administration of Social Security (ANSeS) and private equity. The project allegedly has the backing of ANSeS director Diego Bossio.

The Clarín article claims that the governor of Chubut consulted the Ministry of Planning at every stage. However, the ministry has denied that the minister was aware of the issue.

“De Vido has not received any such offer and has not met for that reason with the governor Martin Buzzi or ANSeS executive director, Diego Bossio, neither jointly nor separately,” said the Ministry of Planning.

Talk of nationalising the Spanish-owned oil company is not new. On 21st March, the head of Repsol YPF met with national government representatives to discuss the country’s role as a shareholder. At that time, the head of the Cabinet, Abal Medina, told journalists that “if YPF’s path is nationalisation, then nationalised it will be.”

Rumours were rife in February, affecting the price of shares in the company.

Antonio Brufau, the head of the Repsol, met with representatives of the national government earlier today to negotiate its capacity as a shareholder in the Argentine oil and gas market.

The meeting will determine the distribution of last years profits after the government representative, Robert Baratta, opposed the approval of the accounts of 2011 at the previous meeting on 8th March.

Baratta has proposed ”a reserve investment for the exploration and extraction of hydrocarbons” instead of distributing dividends. The reserve would be created with the profits from the fiscal year 2011, totaling 6 billion pesos.

Speaking to the news agency Telam, the Head of the Cabinet, Abal Medina confirmed that “if YPF’s path is nationalisation, then nationalised it will be.” But he added that there is as yet “no course of action regarding YPF.”

While he did not refer to any specific course of action regarding the government’s relation with YPF, he took the opportunity to emphasise that “what does matter is that there is investment.”

Medina’s announcement comes in the midsts of the controversy which has arisen in recent days over the removal of concessions from oil production in Santa Cruz, Chubut and Neuquén. The provinces, which are home to vast, untapped reserves of shale oil and natural gas, have allegedly received insufficient investment.

In a note sent to the Buenos Aires’s stock exchange, William Reda, the head of YPF market relations, confirmed that the company is committed to “assessing the scope of these decrees and defend their rights in all the relevant areas.”

Reda added that the sites mentioned together accounted for 2.76% of YPF’s total production in 2011.

YPF face increasing pressure from the government to increase its productivity in the face of mounting fuel prices that are hampering the trade surplus.

Speaking on his radio and television programme “Aló Presidente” yesterday, Hugo Chávez, president of Venezuela, threatened the three biggest banks in the country’s private sector with nationalisation if they fail to finance the country’s agricultural production, “as they should”.

Chávez addressed Banesco, el Provinicial and Mercantil, stating that he had “no problem” with nationalisation”. Chávez specifically addressed Juan Carlos Escotet, president of Banesco: “If you cannot [respond to the demands of the agricultural sector], tell me how much the bank costs, and we will nationalise at once.” He also addressed vice-president and minister of land and agriculture, Elías Jaua, to organise a meeting with the bankers in order to discuss the issue.

Chávez insisted that he would rather work in conjunction and cooperation with the banks, but that if they failed to comply, measures were in place. He insisted that the banks must uphold the law and Constitution of the country, which received applause from his audience.

Private banks, according to Venezuelan authorities, often evade legislation in the agricultural sector, by only granting funds to the bigger producers in the agro-industrial department, therefore often missing out small producers.

The president added that this policy is the same for the construction of housing. Credits are transferred to a central government fund, and then the money is distributed where it is needed.

Chávez’s government has already nationalised the Bank of Venezuela, which was bought from Santander. The president stated that they could do it again with any institution.

A country with such a large territory like Argentina has always needed a reliable transport mode to connect its regions and different provinces. Today, motor transport has almost entirely taken over from the railways and most Argentines prefer the bus to the train for long distance journeys across the country. In 2008, bus services in Argentina welcomed around 65 billion passengers when only two billion used the train. The decline of what was the world’s tenth largest railway network after the Second World War has left many scars in the country’s demography. Indeed, it has dried out many economies which were geographically far from Buenos Aires – what were once prosperous towns have now become ghost villages.

The railway has been an important factor in Argentina’s development. The train allowed the most remote regions of the country to be reached, and allowing passengers and merchandise to get to Buenos Aires’ port, the main connection with the rest of the world. Pino Solanas, the Argentine director behind ‘La Próxima Estación‘, a documentary on Argentina’s declining railway network, strongly supports the return of the Argentine train. He claims that the railway costs “seven to eight times less than motor transport” as a locomotive can carry as much as 50 lorries’ load and an average sized train can carry as many passengers as 19 buses. Moreover, one of the best advantages of the train is that it can be run in any weather conditions. So why did such a great form of transport suffer such a significant collapse in Argentina?

Bad Management

In the late 19th century, the success of the first train lines, which ran between Buenos Aires and the west, attracted vital foreign capital, mainly from the UK and France. These investments allowed a major expansion of the railway between 1870 and 1914, and Argentina was soon on the way to the 47,000km of track it had by the end of the Second World War.

Photo by Brian Funk

An Old Dining Car left for restoration in the Argentine Ferroclub in the Remedios de Escalada neighborhood in the province of Buenos Aires.

This situation remained so until 1940, when Juan Domingo Perón decided to nationalise the network to renew the one hundred years old tracks. Perón asked US general Thomas Larkin to undertake a study on transport in Argentina, with the results known as ‘Plan Larkin’. The nationalisation proved popular among some influential people at the time. Argentine writer, Raul Scalabrini Ortiz strongly defended the move saying, “The most powerful instrument of the English hegemony on us is the railway. The railway weapon is the fare. It can wipe out industries, create privilege zones, organise regions, stimulate particular cultures but also destroy growing cities.”

The plan essentially consisted of eliminating 32% of existing tracks, sacking 70,000 workers and renewing the locomotives and carriages by buying new material from abroad. By the 1970s the network was only 30,000km long.

At the end of the 1980s the situation of Ferrocariles Argentinos was at its worse. Only half of the locomotives were in use while the rest of them were left abandoned. The wave of privatisation instigated by President Carlos Menem at the start of the 1990s did not spare the train, and the quest for profit influenced the closure of a number of unprofitable lines in remote provinces. This was a fatal move for many of the towns wherethe railway was the actual raison d’être and had boosted the economy in such parts of the country.

In 1993, Ferrocariles Argentinos cancelled all the long distance passenger services, which were handed over to the provinces. Only the nationwide freight service remained privately owned: the network in Buenos Aires region was split between four private companies.

Photo by Brian Funk

Train tracks in Belgrano exiting toward the provinces of Greater Buenos Aires.

Today, the network consists of 7,000km of track, and only 17,000 workers remain.

“In our country, ‘Plan Larkin’ cancelled train lines to save money, but its real target was to weaken regional economies and the national industry. What have we saved? Nothing!” says Pino Solanas.

“By choosing motor transport, the state is paying one of the most expensive transport systems in the world. It equals to 27% of the country’s GDP when other big countries like Canada and Australia only spend 9% of theirs on this mode.”

Lorry Workers Union Domination

Jorge Felipe Ruffa is a 61-year-old train enthusiast working for Ferroclub, an association to preserve the memory of the Argentine train. He believes the decline of the train to be due to Argentina’s geography, saying “The reason to this is the political proximity with the US.”

The large number of motor companies in the US pushed Argentina to use the road more than the rail as a transport mode. Moreover, the motor industry is really powerful in Argentina. As an example, the leading union in the country is the lorry driver’s union. For a transport company it is also cheaper to work on the road – the company only has to buy the lorry; the road is maintained by the state. A rail company, on the other hand, has to take care of both the trains and the tracks.

Photo by Brian Funk

Old freight train now resides in a walk through museum in the Argentine Ferrclub in Remedios de Escalda, Buenos Aires.

“When I was younger, we used to travel from Buenos Aires to Mendoza in 16 hours on the train. Today, for the same distance, a train would take 25 hours because the tracks are not maintained correctly. It is obvious that the bus is winning the competition, even though it is more dangerous,” says Jorge.

“North America has many more motor companies than railway ones. It was then much easier to trade with them if Argentina was using the road as a transport mode,” he continues.

A study of responde.org a specialist group who went through national statistics in 2007 found that 40% of villages in the countryside are threatened with extinction. The study counted about 800 villages with less than 2,000 inhabitants. An article in newspaper Clarín  claims that the suspension of the train had pushed people to migrate to big cities to work or study, and preventing them from coming back to their home town.

“The village extinction favoured the exodus to big cities which are not prepared to receive these people, and they end up living a really precarious life,” says Marcela Benitez, founder of Responde.

The Case of Mechita

Mechita is a small town situated at about 200km away from Buenos Aires. The town was first built in 1906 when Manuel Quintana, a Buenos Aires entrepreneur, gave two parcels of his land to build a railway warehouse. Historically, close to 95% of the active population directly lived from the railway industry. Until the 1990s the majority of the town’s income was coming from the railway industry which was the only work available.

Photo by Brian Funk

Old cargo trains in the Argentine Ferrclub in Remedios de Escalada, Buenos Aires.

Often referred to as the “railway colony”, the village had around 5,000 inhabitants in 1950. However, the railway crisis strongly hit the life of the village.

“During the railway era, you could find people on the street at anytime in Mechita. The warehouses were operated 24 hours a day,” remembers Ismael Sánchez a former train carpenter. “When we had to leave, because of the privatisation, we tried to keep an activity through recycling carriages and many of us had to leave for the a big city.”

The population went down to 2,400 inhabitants in 1980 and just,850 in the last census in 2001. Sixty percent of the population is over 65, many of them are unemployed while those with jobs dedicate their activity to the services sector. Nowadays, only one train a day stops in Mechita passenger station, 60 years ago there were about 20.

Many of those villages are trying to find a new way to get their place back into the country’s social economic space. Responde set up a plan to use the past of the village as a tourism advantage, build a museum and organise visits of the warehouses.

Since Menem’s privatisations, 800 train stations have been shut. Therefore, the case of Mechita is not an isolated one. In the last two presidential mandates, a few projects have been proposed regarding the train, though most are poorly targeted. For example, instead of refurbishing existing tracks, the government pays large subsides to private companies.

Photo by Brian Funk

A once important cargo car transported around the country is now just an historic antique in the Argentine Ferroclub in Remedios de Escalada, Buenos Aires.

Néstor Kirchner’s government also bought a large number of second-hand locomotives and carriages from Europe when only 86 out of 298 local vehicles are used. The cost was estimated at $1,5bn. A couple of years later, his wife and current president Cristina Fernández de Kirchner, proposed the installation of a high speed train, the ‘Tren Bala‘, to unite Buenos Aires, Rosario and Córdoba, Argentina’s the three biggest cities.

Pino Solanas claims that with half of the budget planned for the Tren Bala project, the government could buy 11,000 km of tracks for cargo trains, 7,000 km for the five biggest services to the provinces, more than 300 locomotives and hundreds of new carriages to bring back the average speed to 120km/h.

Government Policies Today

On 15th January, Pablo Schiavi, Argentina minister of transport, inaugurated a double decker train at Retiro station. “The railway service grew up in a bestial way,” he commented. “Trains are becoming more reliable and therefore people use them more.” Unfortunately, those trains are only set to run in Buenos Aires Province and yet, nothing is done to renew passenger inter city trains.

Regarding the cargo network, things seems to be moving since the minister of transport recently travelled to the Santiago del Estero province, in the north of the country. Schiavi joined local governor Gerardo Zamora to sign an agreement to renew the Belgrano Cargas services (currently working at only 30% of their capacity) in the province. The $650m investment is meant to reactivate a transport pole in the province that would benefit to the whole north of the country. “This will clear the roads and also reduce transport costs,” says local producer Pablo Karnatz. “The railway is really important for our region. Lorries should only be a link to the railway and not replace it.”

Works on the Belgrano Cargas were meant to be part of the 2004 Plan Nacional de Inversiones Ferroviarias. The $300bn investment plan implemented by Nestor Kirchner aimed at renewing the whole railway network by 2007. When today, long distance trains cannot run faster than a 40m/h speed, many worry about the speed of the works on Belgrano Cargas lines.