Argentina, the outcast
By Luis Felipe Lampreia (*) - The following piece is a picture of recent events in Argentina from a historic reference and enumerates the obstacles the country faces in developing its own hydrocarbons following the seizure of YPF from Spain’s Repsol
Roughly 20 years ago, an important Argentine minister startled a newly arrived Brazilian ambassador by telling him that “Argentina is prodigal in three things: meat, wheat, and insane gestures.” The decision to expropriate 51% of YPF, Argentina’s biggest energy firm, from the Spanish company Repsol is one of those gestures. Added to its contempt for foreign creditors, and to the growing and arbitrary protectionism that violates all global and regional rules, President Cristina Fernandez de Kirchner’s decision pushes Argentina closer to being deemed internationally as a lawless country.
Whatever their short-term benefits and popularity, gestures of such gravity always entail serious long-term consequences. In particular, they risk cutting a country off from the main flows of credit, investment, and commerce ― that is, all of the activities that generate economic opportunity and prosperity.
Bad governments are always guided by their yearning for an immediate surge in popularity, regardless of the future costs. Argentina’s governments have made this a habit ever since Juan Peron first came to power in 1946.
Indeed, as a result of Cristina Fernandez’s decision, Argentina now finds itself ostracized in international energy and financial markets. Unable to provide either the investment or technological resources and know-how to develop YPF resources, her government must invite others to fill the financial and technological void created by Repsol’s forced eviction. But any international corporation that participates in exploiting the assets stripped from Repsol would face serious legal problems.
Brazil’s energy giant Petrobras, one of the largest corporations in the world, was publicly invited to expand its production in Argentina through new investments. Petrobras, with its global interests, could never accept this invitation, particularly given its effort to obtain the financing that it needs to develop Brazil’s immense offshore oil reserves.
Sinopec, China’s second largest oil company was reportedly holding discussions with Repsol to acquire a substantial share of its assets in Argentina. Now all bets are off. As an unnamed Chinese source told Reuters, “this is a challenging situation for anyone, given the action taken by the government. For me, it would be political suicide to allow a Chinese company to prospect YPF control rights after the nationalization announcement.”
Repsol was gravely harmed by Cristina Fernandez’s action, having lost about 50% of its productive capacity and a third of its income. Spain’s government, outraged, promises strong retaliation, and will certainly have the European Union’s political support. But it is hard to imagine what measures could actually lead the Argentine president to reconsider. After all, given that all of this was predictable, and that foreign investors will now be even more reticent to enter the market, she has clearly calculated that the political benefits outweigh the economic costs.
But that depends on whether nationalization brings about an increase in production. It seems clear that it will not, unless the government decides to inject massive fiscal resources into YPF at the expense of other pressing needs. Given that this is unlikely, supply shortages are inevitable.
Oil stirs great popular fascination. For countries that possess it in abundance, it is one of the most solid and central pillars of nationalism. And, everywhere, it is the real or imaginary explanation for many wars, the “black gold” that fuels dreams and awakens greed. For rulers who don’t care if their victories are Pyrrhic, it is also an easily accessible resource for manipulating the public imagination with conspiracy theories and patriotic posturing.
The Cristina Fernandez government has been sending signals that it is determined to continue on its erratic course, not only creating chaos in the economy, but also marginalizing the country in the eyes of the international community. But decisions like this, which sometimes seem to start well, invariably end badly.
Personally, I am deeply sorry that Argentina has ventured into this realm of mistakes and delusions. It is a great country, with sophisticated and highly accomplished people in all fields. For Brazil, there can be no satisfaction in seeing so close a neighbour separate itself from international law and engage in dangerous adventures, to the ultimate detriment of its own people.
(*) Luis Felipe Lampreia was Brazil’s minister for foreign affairs in President Fernando Henrique Cardoso’s government (1995-2001)
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30 comments Feed
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an Argtards just gonna tard.
One day the Argentines will wake from their dream and realise it's a bit of a nightmare after all.
Now we know that INDEC are fiddling the inflation figures.
www.buenosairesherald.com/article/98453/boudou‘ypf-has-always-been-an-argentine-company’
Looks like lots of things has always been theirs. A common trait.
No doubt all the Artards will be on here later claiming how the Brazilians aren't acting as brother and are stabbing them in the back.
South American Unity
noun
1. Having one or more Argtards stab you in the back.
wonder how long it will be before theres an Argenswine oil disaster ultimately affecting The Falklands marine economy, which will be blamed on The UK for putting The Falkland islands on Argenweeners “continental shelf”
BUNCH OF COMEDIANS OUT OF THEIR DEPTH.
An individual would have failed in short order but it takes the world economy much longer to respond to such acts.
If Dorian believes his fantasy then let him cling to it. I can only assume it is comforting to him.
B (Foreign)
B (T&C Assessment)
(Standard & Poor's)
B = Bloody Awful
That on it's own makes me chuckle, then when i read it's written by an ex-Minister of Foreign Affairs of Brazil, it makes me laugh more.
Ah well, gotta remember, Argentina doesn't need the EU right? ;)
You can probably find loads of examples on the net, under 'fan-fiction'
There are none so blind as those who do not wish to see..
Whatever his policies were, who knows how well he would have done. One things for sure, Argentina will be scraping along rock bottom with the policies of the incumbent Peronists...
BK you pratt: it's DYED in the wool NOT died, though I think Conqueror could arrange it for you if you were wearing wool.
Argentina is quite alive, and on the rise, because the country is run in the interests of the PEOPLE. It's the US and Britain that are dying and collapsing, since they are run in the interests of BUSINESS.
By the way, you are a somewhat rude Anglo-Saxon. Too bad Britain never absorbed Roman culture.
In my ideal situation, Argentina would trade, and pay fair prices for others products, just like any transaction. Isolationism would entail not being friends of any nation or people, treat them with deserved suspicion, and never support their causes or alliances, stay out of all wars, and otherwise mind your own business.
This is not true. Most Argentines are more aware and anxious now about inflation and the economy than they were a year ago. The papers (not just el Clarin and La Nacion) are reporting these themes more and more.
May 09th, 2012 - 03:37 pm
I beg to differ when you say “...because the country is run in the interests of the PEOPLE. ” I don't see that the people come into it, it seems to me that all the Kirchnerist events are about more power for the ruling clique. For the last 9 years our trains, security, health care, and education have gone steadily down hill and whereas we were able to produce our needs in energy until last year it means that the Kirchner experiment is an utter failure. The “model” doesn't work for the people it works for the Kirchner mafia and no one else.
it exceeds it by x 8 - 10 times.
That is the only question now.
Interesting comments about Petrobras and Sinopec.
@23 Dorian
“Too bad Britain never absorbed Roman culture”.
It did, mass graves around every Celtic hill fort that resisted Roman conquest and rule.
Can you imagine that, not wanting to be robbed, murdered and enslaved, in the cause of Roman culture?
However Roman persistence and brutality prevailed and the surviving Celts were romanised, and then abandoned as the Anglo Saxons arrived.
The descendants of those Romano-British are today called The Welsh. I have met plenty that speak Welsh, but none that speak Latin.
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