Sideco Americana S.A. History

Key Dates:

1961:

Demaco S.A., a builder of small homes, is founded.

1969:

Demaco becomes Impresit Sideco, a firm building silos in Mar del Plata.

1976:

Now Sideco Americana, the firm is working on many large-scale public works projects.

1990:

Sideco wins the right to operate and maintain a system of Argentine toll roads.

1992:

Sideco takes a stake in three natural gas distribution companies but later sells out; the company begins a residential housing development.

1994:

Sideco becomes Argentina's largest toll road operator; the company holds shares in four privatized electrical transmission and distribution companies; the company acquires four companies involved in garbage and industrial waste collection, in addition to Iecsa, which provides engineering and construction services.

1997:

Sideco has grown sixfold since 1992 and has 14 subsidiaries; the company takes a majority stake in the nation's privatized postal service.

1999:

With the addition of Correo Argentino, Sideco's revenues reach $1.6 billion a year.

2000:

Debt-ridden Correo Argentino stops making concession payments to the government.

2002:

Sideco defaults on its debts, which are restructured the following year.

2003:

Correo Argentino is seized and renationalized by the government.

Company History:

Sideco Americana S.A. is an Argentine holding company engaged in public services and infrastructure development, by means of subsidiaries and affiliates, in five areas: engineering and construction, toll roads and highways, environmental services, generation and transmission of electricity, and real estate development. It is the largest enterprise in Socma (Sociedad Macri S.A.), the holding company established by Francisco Macri, an Italian immigrant who rose from poverty to become one of Argentina's wealthiest men. As the nation's economy has weakened, Sideco has increasingly turned to Brazil for business.

Construction Firm and Public Works Contractor: 1961-89

Francisco Macri was born in 1930 in Rome and emigrated from there with his brother and sister to Argentina in 1949, where they reunited with their father, who had settled earlier in Buenos Aires. Francisco found work as a bricklayer and studied engineering at night for two years. During the mid-1950s he became a subcontractor for construction jobs and road work, and in 1961 he and two others established Demaco S.A., a construction firm that built small homes cheaply. Demaco's big break was a contract to build the structures that housed pressure pumps for a gas pipeline stretching between Patagonia and Buenos Aires. Next, Demaco became a subcontractor for Impresit, a subsidiary of Fiat Argentina S.A. that was making silos in Mar de Plata. The company took the name Impresit Sideco (standing for silos of Demaco) in 1969.

Between 1971 and 1979 Impresit Sideco and other Macri companies took part in more than 30 public works projects expending a total of $1.8 billion. Its construction work included a bridge between Argentina and Paraguay and several residential towers in Buenos Aires. Eventually it was renamed Sideco Americana S.A. By 1976, when various Macri companies were placed within the holding company Sociedad Macri (Socma), Sideco was active in several South American countries, participating in industrial projects. Manliba S.A. and Aseo S.A., which would later be integrated into Sideco, were involved in sanitation projects, and Iecsa S.A., also later integrated into Sideco, was assembling electromechanical devices and instruments. By 1985 Sideco ranked 53rd in size among Argentine enterprises. Economic recession in the late 1980s, however, created deficits that significantly reduced its opportunities to gain government contracts for the public construction work that was its bread and butter.

Benefiting from Privatization in the 1990s

The years following the election of Carlos Menem to the presidency in 1989 brought about an enormous change in Argentina's economy. Sideco and other units of the Macri empire took an active part in the bidding for state-owned enterprises being privatized by the new administration. By means of several strategic alliances formed to bid on public sector concessions, Sideco acquired, in 1990, the right to operate and maintain a system of toll roads through Servicios Viales S.A. Concesionaria de Rutas por Peaje, a 77 percent-owned subsidiary that took in three highways north of Buenos Aires. Upgrading of the 1,173-kilometer (729-mile) network by the concession partners was completed in 1996. In 1994, Sideco took a one-third interest in Autopistas del Sol S.A. and thereby became Argentina's largest toll highway concessionaire. Autopistas del Sol, the busiest single such concession, encompassed the chief peripheral route bypassing Buenos Aires. Sideco also built a toll bridge extending over the Paraná River east of Rosario. A few years later Sideco's Brazilian subsidiary won a concession to build, maintain, and operate toll roads in the state of Paraná, and in 2000 it signed a contract to do the same in the state of Sao Paulo.

In 1992, Sideco entered the privatized field of natural gas distribution by taking a stake in three companies, but it reduced its interests in this field in 1997 and sold its shares in the three to Societé Italiana per il Gas S.p.A. for $182.5 million in 2000. Sideco was and remained involved, however, in the privatized electrical power market through various consortiums formed to obtain concessions to construct, operate, and maintain transmission and generation facilities. Between 1991 and 1994 it took shares in four such companies, the most important being Lineas de Transmisión del Litoral S.A. (Litsa), and Central Térmica San Miguel de Tucumán S.A. In addition, through Profingas S.A., it agreed in 1998 to construct a natural gas pipeline--later completed--that would distribute natural gas to certain municipalities in the state of Cordoba.

Sideco's participation in providing municipal solid waste and industrial waste services dated back to 1983 but gained impetus in 1994, when it acquired from Socma the latter's holdings in Manliba, Aseo, Saframa S.A., and Transmetro S.A. Manliba, the most important, was, until 1997, the concessionaire for the largest portion of the garbage collected in Buenos Aires. As part of a strategy of intensifying its activity in industrial waste services and expanding to the area of hazardous waste services, Sideco, in late 1995, began operating industrial waste management services in Brazil through an indirect interest in Sistemas Ambientais Comercio Ltda. (Sasa). By 1997 Sideco was conducting its waste management businesses jointly with a subsidiary of Waste Management, Inc., the world's leading company in the field in terms of revenue. This subsidiary, Waste Management International, purchased, with Sideco Americana, 80 percent of Enterpa Ambiental S.A., Brazil's largest solid waste collection and disposal company, in 1998. This company, which later became Qualix Servicios Ambientales (and still later Qualix S.A.) was responsible for 30 percent of garbage collection and 50 percent of sanitary fill in Sao Paulo, Brazil's largest city. In 2000 Sideco exchanged its share of Sasa for Waste Management's stake in the company controlling Enterpa.

Also in 1994, Sideco acquired Socma's interest in Iecsa. This subsidiary, now engaged in the design, construction, and maintenance of industrial plants, telecommunications projects, highways, and other projects requiring the joint application of basic and integrated engineering, had dedicated itself to the telecommunications sector but, beginning in 1995, diversified its activities to include a focus on oil, gas, petrochemicals, refineries, and other high-technology construction. It also continued to engage in telecommunications construction in Chile, where it became active in 1990. In addition, to capitalize on favorable conditions of economic stability and increased credit availability, Sideco selectively extended its activities to housing development between 1992 and 1996, when it established Creaurbán S.A. By the end of 1999 this subsidiary had completed three residential projects in the Buenos Aires metropolitan area and was at work on three more.

The transformation of Sideco Americana into a concessionaire required better management and a break with corporate culture geared to deal with one client only--the state. Speaking to Rasul Ferro of America economia in 1997, Executive Vice-President Luis Graziani said, "At the highest management levels there were very few functionaries of the traditional structure of the construction enterprise that had the elasticity to adapt themselves to the new reality. ... Today, Sideco's clients are people, they have faces, they have names, they have complaints, they demand quality. A gigantic change of mentality was needed. ... There were moments in which one had to cut loose people who had been with the enterprise for many years; this creates traumatic situations, generates doubts, instability." The period of transition lasted for about a year and a half. By 1997 Sideco was a conglomerate with 14 subsidiaries and annual revenue of about $600 million, or six times its size in 1992.

During 1997 Socma entered a new field by taking a 73.5 percent share of a 30-year concession to operate Empresa Nacional de Correos y Telegrafos S.A. (Encotesa), the national postal service. What was described as "peripheral privatization" had, since about 1980, eliminated Encotesa's more profitable areas, leaving annual revenues approaching $500 million, but also more than 20,000 employees to pay, an operating deficit of $23.2 million in 1996, and a debt of $258 million. Nevertheless, Socma and its partners agreed to pay $103.2 million a year for the concession to operate the system, which was renamed Correo Argentino S.A. Sideco took a one-third share of the enterprise, while Itron S.A., a Socma company founded in 1983 and dedicated to information and communications, took 40 percent.

Itron soon turned over its holding in Correo Argentino to Sideco. The new company inherited about 1,500 branches and some 4,000 other points of sale in other locations, and it pledged to spend $250 million upgrading postal service, including installing a new British-imported system expected to save postal workers at least an hour a day in manual sorting and a new processing facility--which was built at a cost of $40 million--outside Buenos Aires to handle 85 percent of the mail. It also pledged to establish a new telecommunications network to integrate the branches in order to allow them to offer services such as telegrams via the Internet and instant money transfers (through an existing Sideco service, Pago Fácil). Among Correo Argentino's technological innovations were a web site for writing and distributing messages and software that allowed small businesses and professionals to send, by personal computer, formatted documents. The former outside points of sale were converted to franchised units offering most postal services in such locations as copy shops, bookstores, and telephone kiosks. Correo Argentino also franchised space in its branches for the sale of books, stationery, office supplies, gift and philately items, and special services.

Postal and Other 21st-Century Woes

Sideco had consolidated sales of $999.2 million in 1998, when it recorded net income of $26.2 million. With the addition of Correo Argentino, revenue reached $1.6 billion a year. Sideco's debt ballooned, however, from $176.2 million at the end of 1997 to $692.5 million in September 1999 as Correo Argentino remained submerged in red ink, even though labor costs had been reduced by cutting employment to 13,000. The company lost about $50 million in 1997 and continued to lose money in subsequent years. Macri tried vainly to persuade the government to renegotiate the concession contract and finally stopped making payments in 2000, when a new, unfriendly administration had taken power.

Three days before leaving office in December 1999, Menem had awarded to Correo Argentino all of the nation's Internet domains, in return for an annual payment of $50 million. The incoming president annulled this measure and also wounded Sideco by cutting highway tolls by 8 percent. His successor refused to allow Correo Argentino to merge with Organización Coordinadora Argentina (Oca), its chief competitor. The company was seized in November 2003 for nonpayment of debt and renationalized. Another blow to Sideco at this time was the termination of the Servicios Viales toll road concession. In addition, Macri's son Mauricio failed in his bid to become mayor of Buenos Aires, losing to a candidate backed by President Nestor Kirchner.

When Argentina defaulted on its debts in late 2001, the value of the national currency, formerly at parity with the dollar, fell to less than 30 cents. Sideco's dollar-denominated debt suddenly increased by more than threefold, leading to a similar default. With the national economy in deep recession, all of Sideco's important Argentine holdings lost money in 2002, as did Qualix in Brazil, in which Sideco held a 48 percent stake. The company made a profit, however, on its Brazilian road concessions. Also in that year it took a 34 percent share in Socma Alimentos do Brasil Ltda., a food products manufacturer. In addition, Iecsa had secured a share of private telecommunication systems in southern Brazil. By this time some 65 percent of Sideco's revenue was coming from Brazil.

With the loss of Correo Argentino, Sideco's revenues for 2003 fell from ARS 1.23 billion ($416.95 million) to ARS 759.58 million ($257.48 million). Of this total, the company's Brazilian enterprises accounted for 63 percent. Sideco lost ARS 286 million ($96.9 million), but this sum was about a third less than in 2002, and its long-term debt was reduced by a restructuring agreement with its creditors, followed by an issue of new debentures in 2004. Seemingly unfazed by its troubles, the company was seeking to win contracts for such infrastructure projects as roadwork in Bolivia and the construction of high-tension electricity lines between Bolivia and Brazil. Sideco executives traveled to China in the summer of 2004 to seek financing for such projects.

Principal Subsidiaries: Aseo S.A. (89%); Creaurbán S.A.; Iecsa S.A. (98%); Manliba S.A. (89%); Profingas S.A. (98%); Saframa S.A.; Servicios Viales (77%); Sideco Brasil Ltda. (Brazil; 67%); Urugua-I S.A. (50.2%).

Further Reading:

• Biacchi, Mario, "El cartero electronico," Mercado, September 1997, pp. 95-96.
• Canton, Marcelo, "El Correo recorto sueldos por 650.000 pesos mensuales," Clarín, November 30, 2003, p. 18.
• Esquivel, Natacha, "Macri cambia de perfil," Mercado, January 2000, pp. 56-58, 60.
• Ferro, Raul, "Demoler y reconstruir," América economia, July, 1997, pp. 40, 42, 44.
• Friedland, Jonathan, "Argentina's Macri Takes on Post Office," Wall Street Journal, September 8, 1997, p. A15.
• Galeano, Pablo, "Franquicias en estereo," Apertura, August 2000, pp. 23-25.
• Majul, Luis, Los dueños de la Argentina (5th ed.), Buenos Aires: Editorial Sudamerica, 5th ed., 1995.
• Mandel-Campbell, Andrea, "Putting a New Stamp on the Postal Service," Financial Times, September 10, 1998, p. 24.
• Pipano, Pablo, "Un cartero del siglo XXI," Mercado, June 2001, pp. 73, 75.
• "Postales argentinas," Mercado, July 1997, pp. 75-76, 78.
• "Socma: Treinta anos despues," Mercado, July 15, 1982, pp. 54-55.
• Stok, Gustavo, "Macri, otra vez," América economia, September 10-23, 2004, p. 19.

Source: International Directory of Company Histories, Vol.67. St. James Press, 2005.

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