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Argentine President Cristina Fernández has increased her appeals to nationalist sentiment to build domestic political support, which has dropped since she started her second term in December.
In Cartagena, at the Summit of the Americas, the subject was Argentina’s claim to the Malvinas. Back in Buenos Aires, Fernández seized a 51 percent stake of YPF from Spain’s Repsol. Behind both cases, politics was the primary factor.
It is tempting to see the expropriation as part of a wider trend in Argentina, and perhaps Latin America, towards greater government control of key sectors like energy. But there are no grounds for such an interpretation.
Fernández took a big gamble. She knew that the YPT takeover would, as polls have shown, be politically popular at home and would also give the Argentine government more money to carry out its policies.
Yet, the long-term economic and political costs of the decision are uncertain — and could be enormous. The reaction from the Spanish and other European governments has been strong. Some Chilean and Mexican political figures have been critical. Expropriation was not part of the spirit of Cartagena’s business Forum.
It is unlikely that the YPF nationalization will help attract foreign investment to Argentina. The country, rich in resources, offers many potential rewards. With this move, however, the risks have greatly increased.
If the sales and price of soybean, Argentina’s principal export (mainly to China), remain high, then the country may be able to continue its path of economic growth. There is a chance that other companies (including Chinese) and investors will help Argentina and explore the country’s vast oil reserves.
Fernández may benefit from luck and rely on her customary political skill. But there is also a possibility that Argentina is headed for severe economic problems, even if not as profound as the 2001crisis.
YPF will probably not be the first in a wave of nationalizations in the country. Its situation is sui generis. It is true that most energy companies in the region are state-controlled, though some are performing better than others.
Still, the fact that the move was carried out in a clumsy, even hostile, way, will add to the perception that Argentina is unpredictable. Other countries – Colombia and Brazil, for example – offer more attractive environments for investors. And there is little confidence that the nationalization will result in greater efficiency.
Like some other countries in the region, Argentina does not seem to be moving forward. It is stagnant, without a sense of an alternative vision. Instead, decisions are made, often in unpredictable ways, for short-term, political gain.