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Monday, March 14, 2005

Argentina's National Boycott of Royal Dutch/Shell

The Times Online reports today about the effect of the national boycott of Shell Oil. Last week Argentina President Nestor Kirchner accused Royal Dutch/Shell of predatory pricing and called for a national boycott. He called for the Argentine people not to buy anything from Shell, "not even a can of oil." The piqueteros, eager for something to protest, have taken up the call and are setting up protest lines outside Shell stations.

If you've spent even a little bit of time in Argentina since the financial collapse, you're familiar with the piqueteros. If not, a little background: They are a militant group of the unemployed that generally roam the city and cause trouble -- setting up blockades to prevent access in/out of the city, disrupting the subway, and occasionally vandalizing McDonald's. What you may not know is that in recent months they've literally run out of things to protest.

Causing Trouble For the Sake of Trouble

Recently one of my Argentine friends told me about a talk show where they invited one of the leaders of the piqueteros to discuss the issues with the host. The host asked him what were the demands of the piqueteros. What would it take to stop the protests? What were their grievances? They guy had no response. He couldn't think of what he wanted changed. At this point, the piqueteros are just protesting and asking for a higher unemployment benefit from the government. They've lost any semblance of legitimacy and lost all their support from working people as well, who just see them as a nuisance now.

Kirchner Puts the Piqueteros Back To Work

The call for a national boycott has energized the piqueteros and given them something to do. They claim that they are not preventing anyone from crossing the picket lines, but this is a highly dubious claim -- they've always enforced their road closures with blockades and long wooden batons. Shell shouldn't expect the government to come to their aid either, if the piqueteros are enforcing the picket line. In the past piqueteros have vandalized businesses, regional headquarters of corporations, and even a police station with no response from the government.

With Argentina's head of state calling for the ban, it is extremely unlikely that the government will come to Shell's aid and allow customers to get through the protest lines. The effect is a de facto government shutdown of Shell stations within Argentina. I'll tell you this -- even if Shell stations were giving away gas for free, I would not go there if I knew piqueteros would be protesting there. You'd likely get your car vandalized, or worse.

We'll see what happens when the government resumes talks with the foreign-owned utility companies, which are trying to negotiate an end to the ban on price increases for gas, electricity, and water. Needless to say, its not looking good for them. There is at least one lesson for expatriates to learn here. If you're thinking about investing in a business in Argentina, carefully consider how much control and government oversight you will be subject to.



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