Wednesday, July 23, 2008

Argie airlines back under gov’t control

Nearly two decades ago, Argentina’s flagship airline carrier- Aerolineas Argentinas- was sold by the government to Spain’s Iberia. Under then-president Carlos Menem, mass privatization of state industries was viewed as a necessary step in order to reign in an economy out of control.

The Washington Consensus mindset that pervaded in the Americas back then didn't pan out as planned, especially in Argentina. Aerolineas Argentinas has struggled under private control as the airline is mired in debt, half of its planes are grounded, and fuel costs have skyrocketed. Thus it was with great fanfare that the Kirchner administration made a deal to buy back the struggling airliner for an undisclosed sum.

National pride is at stake with the renationalization of the firm and it will be a massive challenge for the government to yank Aerolineas Argentinas out of the red. Moreover, the purchase of the airliner has been part of a renationalization of several firms in recent years:

Aerolineas will become the seventh company to return to the state stable under the stewardship of Ms Fernández and her influential husband and presidential predecessor, Néstor Kirchner.

The procession of renationalisations has opened the government to criticism that it is not doing enough to find other private-sector buyers for ailing businesses. Dante Sica, a former industry secretary, said: "The government should be opening the market much more to allow in more players. There's no guarantee that, in state hands, things will go better."

So if neither private control nor two eras of state control works to help Aerolineas Argentinas, then is it worth keeping around the troubled company?

Image- BBC NewsSources- BBC News, Wikipedia, FT.com

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