(Lloyds List Via Thomson Dialog NewsEdge) IT WAS a cold night in the middle of the bleakest winter in Argentine history. At the height of a crisis that sent the country's economy into freefall, Claudio Gonzalez, Tandanor's president, returned to the Buenos Aires-based shipyard where he has worked nearly all his life to find the facilities in complete darkness.

'It was the worst moment. I remember it clearly. The whole yard was in darkness, the only light was the little red light on the telephone in my office,' he says.

When things could not get any worse he and the other two managers behind the shipyard's 1999 management'worker buyout formed a plan that somehow managed to keep the yard alive.

'We sat down and started thinking about how do we make it look as if we are still working,' he recalls. 'The first thing we did was to get the electricity back on and we put a welder out in the yard every night.

'You could see the sparks fly across Buenos Aires and that was when people started to think that not only were we working but we had a double shift.'

While in reality there was not enough work to keep the company's nominal 100 employees occupied in the day, Tandanor's solitary nocturnal welder acted as a beacon of hope that helped sustain the company in its most difficult times.

Four years later Mr Gonzalez can afford a smile as he recounts the story. In July, Tandanor delivered the first vessel constructed by the company, a barge that will be used by Argentina's largest shipping line, Maruba, to move containers up and down the River Plate.

A second barge is being built for Maruba and there are now nearly 400 full-time employees working at the company's facilities in Dock Sud and another 400 part-time contractors.

'It is a beautiful story to tell but not to have lived,' says Mr Gonzalez. He certainly does not want to go back. The completion of the Maruba barge, he says, is like the end of one painful cycle and the beginning of another. Mr Gonzalez hopes the next cycle will be as long and prosperous as the last cycle was long and painful.

Following its privatisation in 1991 and a worker buyout in 1999, Tandanor concentrated its efforts on shiprepair, patching up what was left of the Argentine merchant fleet and trying to win business from rivals in neighbouring Brazil.

But the policy by the Argentine government of Carlos Menem to peg the peso at parity to the dollar coupled with legislation that opened the door to foreign vessels to operate in Argentine waters without flying the Argentine flag made conditions near impossible for Tandanor and the rest of the country's shipyards.

'There were politicians that wanted to destroy the shipbuilding industry,' says Julio Urien, president of Ensenada-based shipyard Astillero Rio Santiago, the largest shipyard in the country.

'We have to reactivate this industry it if it is going to remain as a source of employment.'

It has become one of the main priorities of Nestor Kirchner's government, which has identified the shipbuilding industry as of strategic importance in the recovery from the biggest debt default in history, the devaluation of the currency to $3.05 to the peso and the contraction of the Argentine economy by more than two thirds.

A favourable exchange rate resulting from the devaluation has handed the industry a newfound competitiveness. Tandanor and its partners are now working hard to ensure yards have enough business to maintain production levels for the next three years.

Last week, Tandanor secured a contract for six barges to be built for inland waterway specialist Flota del Litoral for the movement of grain on the Paraguay-Parana river network.

An agricultural boom in Argentina, Paraguay, Bolivia and Brazil has created a demand for 1,000 similar barges, according to Jose Enrique Galetti, executive secretary of the federal committee for the Paraguay-Parana inland waterway, strengthening the prospects for Tandanor and other Argentine shipyards.

Mr Galetti estimates that 14m tonnes of cargo moved on inland waterways last year compared with volumes of 750,000 tonnes 10 years ago.

'If we had all the barges and the port infrastructure it would be more. It would be more than 20m tonnes,' he says.

The committee is looking to allocate $65m of funds allocated by the Andean Development Corporation to improve inland waterways in Paraguay, Bolivia, Argentina and Uruguay.

Argentine yards have designs beyond just barges, however.

Led by Astillero Rio Santiago a new alliance, the Group of Argentine Shipyards, has been formed to bid for larger projects.

The group includes ARS, which today accounts for 70% of the shipbuilding industry in Argentina, the Coserena, Tandanor, Mome Comodoro, Contesi and Corrientes shipyards and the National University of La Plata.

The alliance is an effort to market the combined facilities of Argentina's shipbuilding industry to construct rigs, tankers, fishing vessels, barges and tugs.

'The fact that we have united means we have more capacity,' says ARS president Julio Urien.

'We are not just one isolated yard but we will build projects between three yards. There is the global demand.'

Mr Urien says the initiative has helped to secure projects that will reduce its current reliance on state subsidies. The company currently depends on subsidies for 70% of its income but in the space of a year this will be reversed to 30% of its costs.

Its most important contract is a $200m project to build four tankers with Venezuela's state-owned oil giant PDVSA. The project will take its workforce up to 3,000.

The first steel was cut on the panamax tanker the first tanker to be built in Argentina in 25 years two days after Tandanor delivered its barge to Maruba.

The contract is for two vessels with an option for two more if the vessels are delivered on time. The first is due to be completed in 30 months and the second 18 months later.

It is also in talks with Abbey Sea to build three bulk carriers of 27,000 dwt in partnership with Tandanor using Leasing Naval funding.

The full employment of its three slipways will take its employment to 4,000, he says.

For Mr Martinez, the full recovery of the shipbuilding industry and primarily the creation of jobs is a fundamental element of the country's fight back from the worst crisis in its history.

'Today the president of the country describes the process that we are going through as the productive and competitive [economic] model, making the shipbuilding industry as one of its strategic motors,' he says.

'This is nothing less than an effort to revive the shipbuilding industry and to show it as the solution towards an Argentina with economic development but with social equality.'

Copyright 2006 Informa Martime Trade and Transport

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