The Argentine government has unveiled a plan to take over a troubled grains company during the COVID-19 emergency in a move that lawyers and critics say shows a concerning overreach of legal powers—one that could discourage investment in Argentina at a time of dire need.

The executive branch issued a decree June 9 stating that the federal government would intervene to oversee Vicentin, Argentina's top soybean processor, for 60 days in an effort to keep the company running and save jobs while it seeks congressional approval for a state takeover.

Critics slammed the decree by President Alberto Fernández, who took office Dec. 10 amid a deepening economic crisis and a need to restructure $65 billion in foreign debt. The decree cited COVID-19 multiple times as a reason to leapfrog congressional authority and nationalize.

Manuel José García-Mansilla, a law school dean at the Austral University in Buenos Aires, said governing by decree is not constitutional—even during a pandemic.

"Under our constitutional system, the president cannot do what he did, under any circumstance," García-Mansilla wrote in a column for Argentine newspaper La Nación.

Wobbling under $1.4 billion in debt, Vicentin stopped paying creditors in December and filed for bankruptcy in the province of Santa Fe on Feb. 10. Lenders include Argentina's state bank, Banco de la Nación Argentina. Local farmers, meanwhile, say they have been reluctant to sell to Vicentin for fear of nonpayment.

Founded in 1929, Vicentin is Argentina's top exporter of processed soy and an iconic brand in the domestic food market. Government data shows the company accounted for 9% of all Argentine agro-industrial exports during the last harvest.

The government argues that the pandemic has slowed bankruptcy proceedings for Vicentin, putting thousands of jobs at risk in the country's core agro-industrial sector. The company's role in feeding Argentines, it said, has also become more critical due to the health emergency.

Company officials at family-owned Vicentin say they're in talks to reach an alternative agreement with the government, and that they weren't notified of the decree beforehand.

Last week's decree pointed out that among the country's top 10 grains exporters, only Vicentin and four others are domestically owned. Government officials have since emphasized that they prefer Vicentin not be sold to a foreign interest.

Déjà Vu for Investors

Critics say the attempt to nationalize Vicentin could dissuade investment in Argentina at a time of dire need. With the arrival of the new coronavirus and strict quarantines, private sector analysts expect the Argentine economy to contract 9.5% this year.

Federico Pinedo, a former Senate leader in Argentina who is a lawyer specialized in public policy and regulation of public services, commented on the move via Twitter.

"Intervention in a private company by decree without an expropriation law sends a tragic signal when investments must be generated to create jobs," he said.

The attempt to expropriate Vicentin echoes Argentina's 2012 nationalization of the country's top oil company, YPF, under President Cristina Fernández de Kirchner. Spanish oil major Repsol filed a complaint with the International Center for Settlement of Investment Disputes over that asset seizure, while also suing Argentina through a U.S. court and threatening legal action against companies that invest in YPF.

Repsol reached a $5 billion settlement with the Argentine government in 2014. Fernández de Kirchner is now vice president of Argentina.

Officials who served in the administration of President Mauricio Macri, who lost a reelection bid to Alberto Fernández, also panned the intervention in Vicentin as bad for investor confidence.

Laura Alonso, who was the head of the government's anti-corruption office under Macri, wrote on Twitter: "We all lose in these populist adventures … only the lawyers win!"

And Luis Miguel Etchevehere, a lawyer who was agriculture minister under Macri, wrote: "The state gets involved in a business adventure that we already know ends with all the Argentines paying for the party."