This story hasn’t been big news in the US, but it is a pretty big deal in South America and Europe, particularly Spain. Basically the Argentine government is going to steal majority control of YPF from Repsol and minority shareholders in retaliation for the failure of the government’s own energy policies.
Argentina has gone from being self-sufficient in energy to being a net importer in the past few years and somebody has to pay for that fact. Nevermind that it was the government’s own policies that led to this outcome.
Isn’t it amazing that the below market prices mandated by the government led to strong demand growth? And that those same low prices, combined with export tariffs, led to an environment in which energy companies weren’t excited about investing in more productive capacity? When the laws of free market economics can’t be tamed by government mandate, the only solution is legalized theft, right?
The further shame of it is that Argentina is, as it turns out, incredibly resource rich. But between the government policies and difficulties with local labor unions (the primary difficulty being to get them to show up for work at all), there have been strong disincentives to investment in exploration and production in Argentina for foreign firms.
And that was before the nationalization of YPF. What are the odds that Argentina will be successful attracting foreign capital and expertise now? I did see that Hugo Chavez has offered his support and the assistance of Petroleos de Venezuela to the Argentine government. That ought to do the trick…
I’d love to dismiss this as just the ridiculous machinations of some out-to-lunch Leftist government. Actually, that is still a pretty good description of it, but what scares me is that it sounds like something the current Administration would support in this country. That isn’t to say that it could happen; it can’t. But if the President and his closest allies in congress were given truth serum, I think they’d admit that they would like to have the option. Equally appalling is that some of the same policies (e.g. limits on exportation) that have been so disastrous for Argentina have proponents in the US.