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THE WALL STREET JOURNAL: Argentina Pres's Shell Bashing Raises Eyebrows: A day after urging Argentina's citizens to boycott the local unit of Royal Dutch/Shell Group (RD) for announcing plans to raise gasoline prices, President Nestor Kirchner called the company "one of the 10 worst" worldwide ( Posted 12 March 05


By Drew Benson



BUENOS AIRES -- A day after urging Argentina's citizens to boycott the local unit of Royal Dutch/Shell Group (RD) for announcing plans to raise gasoline prices, President Nestor Kirchner called the company "one of the 10 worst" worldwide.


Although Kirchner's ire over the previous two days focused on the inflationary concerns related to a price increase, Friday's tongue-lashing was aimed squarely at the company.


"We want a lot of investment to come, but we obviously don't want the worst in the world to come," he said. The president attributed the "world's worst" status to a 2002 report by a U.S.-based watchdog group, Multinational Monitor.


Verbal assaults against foreign companies are nothing new to Kirchner, who on Thursday urged citizens to join in a "national boycott" against Shell for announcing Tuesday that it plans to raise gasoline prices between 2.6% and 4.2%.


But nor are they welcome, and the campaign against Shell is raising some eyebrows in boardrooms across Buenos Aires.


Kirchner frequently blames multinational companies for playing a disruptive role in Argentina's economic crisis of 2001-02, which resulted in the government defaulting on more than $100 billion in debt.


Negotiations for new contracts with foreign companies operating the nation's utility companies have been contentious.


Some observers said they believe Kirchner's administration is trying to make operating in Argentina as unattractive as possible to encourage the sale of foreign-held assets into local hands - be them public or private.


"It's a style that worries businesses," said an official at a foreign-controlled company.


"You read between the lines in Kirchner's public speeches and see that he looks with favor on national companies," the official said. "It's a tendency that appears to be stronger everyday, especially since the debt swap (that was completed last month). Instead of calming down, it's like he's just gone on campaign."


Kirchner appeared to substantiate such concerns Friday.


In response to complaints that the president's boycott will only hurt Argentines who independently operate some 800 of the 900 or so Shell service stations here, the president offered another option.


"They can get a patent with Enarsa, with PdVSA, or the other oil companies that work here," he said.


Enarsa, Argentina's new state-run oil company, consists of some two dozen employees. As such, it has looked to develop projects with operating companies such as Venezuela's state-owned PdVSA (PVZ.YY).


Last month, PdVSA and Enarsa opened two service stations in Buenos Aires amid speculation, later confirmed by Shell , that PdVSA was in talks to buy Shell 's service stations in Argentina.


The negotiations fell through, however, with the head of Shell Argentina, Juan Jose Aranguren, later saying that the company decided to stick it out.


"It is obvious that our profitability isn't sufficient, but we think that the business can improve," Aranguren told local newspaper La Nacion last month.


Shell Argentina issued a statement Friday night explaining the financial reasons for the price increase and reiterating the company's intent to remain here after 90 years of operation.


A Shell spokesman told Dow Jones Newswires that 32 service stations nationwide, mostly in Buenos Aires, were briefly closed Friday to avoid conflicts with roving protester groups of 60 to 200 people. The financial impact of the brief shutdowns won't be known until early next week, he said.


Although Kirchner's Shell bashing might ease fears of rising prices among some citizens, analysts said it only made investors already worried about inflation even more skittish. Brokers said Kirchner's threat helped fuel a sell-off in the local stock market on Thursday.


"The last few inflation reports have showed that prices are rising," said economist Javier Alvaredo at MVA-Macroeconomia in Buenos Aires. "This creates worry, although it shouldn't be exaggerated; the government has instruments to counter inflation."


Argentine consumer prices posted another unexpected increase in February - up 1.0% on month and 8.1% on year - after month-on-month gains of 0.8% in December and 1.5% in January.


The news has sparked concerns that inflation could rise above 10% for the year after having been very mild in 2004.


But Kirchner's decision to pin inflationary woes on Shell , which only controls about 20% of the service station market, seems off target, Alvaredo said.


"It would be preferable for the government to concentrate on designing a set of policies aimed at correcting the (inflationary) problem in all its magnitude. Concentrating on just one company and making accusations doesn't seem to be the most adequate method."


Meanwhile, unions and social movements aligned with Kirchner continued to stick it to Shell on Friday.


Television news images showed a group of militant activists, known as "piqueteros," occupying a Shell service station in downtown Buenos Aires Friday and later in front of the company's headquarters. Some protesters held a massive Argentine flag, while others burned a red-and-yellow Shell pennant.


The protest came as the nation's umbrella labor group, the CGT, issued a statement in support of Kirchner's boycott.


"We must build a fence against the avarice of some companies that try to maximize their profits at the expense of the poor and indigent," the CGT statement read.


-By Drew Benson, Dow Jones Newswires; 5411-4311-3127;

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