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Standing before a mural of Eva Peron Duarte (wife of Argentina’s legendary strongman Juan Domingo Peron and the “first lady of populism”) Argentina’s recently re-elected President Cristina Fernandez de Kirchner unveiled a plan to seize majority ownership in Argentina’s chief energy company YPF and return it to state control.
“We are the only country in [the Americas], and nearly the world, that doesn’t control its own natural resources,” she said. “This is the recuperation of the sovereignty of Argentina’s natural resources.”
The country would take over majority control of YPF, which currently has as its majority owner REPSOL, a Spanish energy firm. The chief complaint lodged against REPSOL is that it has made insufficient investments in energy development. Like her friend and patron Hugo Chavez—and like Evita—President Fernandez believes a nation’s resources, savings, and property exist to serve partisan ends.
Senior European officials warned that the nationalization would have a chilling effect on foreign investment in Argentina. For example, Catherine Ashton, the EU’s high representative for foreign affairs, was “alarmed to note that the president referred in her speech to investments in other sectors such as telecoms and banking.” Mexico’s President Felipe Calderon was even blunter: “No one in their right mind is going to invest in a country that expropriates investments.” Spanish conservative Prime Minister Mariano Rajoy, battling major domestic economic challenges, promised justifiable retaliation as Madrid struggles to preserve financial calm.
The move against REPSOL comes at a time when Argentina has pursued a similarly nationalistic and predatory strategy, applying diplomatic and economic pressures in an attempt to force Great Britain to abandon the Falkland Islands. In addition to long-standing Argentine nationalism, one of the underlying factors motivating the current aggressiveness has been oil exploration around the Falklands.
The impact of the move remains uncertain. Some commentators recognize the capacity of energy-possessing nations to nationalize, break contracts, or punitively tax with relative impunity given heavy demand and vast amounts of global capital seeking a home. The Economist observed that President Fernandez “had already ruined Argentina’s reputation as a safe place to do business long before the nationalization of YPF.” The Wall Street Journal termed the action “thuggish” and called for Argentina’s expulsion from the G-20.
Like its neutrality stance on the Falklands, (Malvinas or Maldives—oh, whatever!) the Obama Administration’s first inclination is to deny that a problem exists. Intoned the State Department’s press spokesperson on April 17: “The importance that we subscribe to—or ascribe to diversity of energy resources. We believe that’s the best route to go.”
While the Administration tangos with another thorny Argentine issue, of one thing there is relative certainty: When it comes to running economies, both Fernandez de Kirchner and Obama share a belief in their ability to defy economic laws of gravity.
Argentina, and Obama, Make Us Want to Cry,Source material can be found at this site.
Although I am against populism, I would applaud Cristina´s initiative against REPSOL, considering the Spaniard´s policies; like what they did in Chile. They “acquired” all of the public services from the local “Socialist” government and then fired most of the employees, who were earning a certain amount of money, which they considered as excessive. he next step was to outsorce the replacing employees, which they hired at a 50% inferior salary rate, that most of the ex employees had to accept, considering the fact that there existed no instance of defense against this abusive system, applied by banks, the telephone company, energy generating and distribution companies, etc., since the synicates had been practically eliminated by the “Socialist” governments. Thus, an unfair and company benefitting system was implanted in Chile by the Spaniards. So, bravo Cristina!
Am against socialism, but the total lack of interest in the workers´income implied by the content of the article, is something to cause more worry than the eventual loss of the investors´interest in countr4ies, such as Argentina and Chile, where the Spaniards have lowered the salaries of the workers to “survival” levels. No country should be interested in investors who are looking for Asian like low labor costs. A country´s administrators should favor a financial policy that would generate its workers´income to be of a level that shluld make them “consumers”, which is another manner of creating “riches” and quality of life.