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Argentina's New Economic Patriotism May Send Spanish Energy Giant Packing

Thanks to recent changes from the Argentine Central Bank Charter, the Kirchner administration has access to lots more cash. How will the government spend it? An increasingly likely option is a public buyout of YPF, the affiliate of Spanish energy company

Kirchner busy cheering on the home team (Roberto Filho)
Kirchner busy cheering on the home team (Roberto Filho)
Gonzalo León

BUENOS AIRES – Like her late husband before her, President Cristina Fernandez de Kirchner has left an indelible stamp on Argentina's economic policy. By skilfully shifting the terms of debate, Kirchner has significantly increased the state's role in managing the economy.

"Everyone used to talk badly about subsidies," says an insider at a large Argentine conglomerate. "Now everyone argues against getting rid of them."

Kirchner's preference for greater public control of the economy was on display once again during last month's opening session of Congress, when her administration presented its plan to modify the Charter of the Argentine Central Bank (BCRA), which would extend its mandate. The most controversial element of the bill, since approved, was a proposal to transfer $9.5 billion of BCRA's $47 billion in reserves to the Treasury.

The supposed rationale behind the money transfer is the government's desire to promote "socially equitable economic development." But the Kirchner administration may actually have something else in mind for spending the funds: a state buyout of YPF, an Argentine affiliate of the Spanish energy giant Repsol.

The Argentine government has spent much of this year stoking patriotic fervor among would-be voters by reviving the country's sovereignty claims over the Malvinas islands, as the Falklands are known in Argentina. The Falklands, however, are by no means the suddenly patriotic government's sole target. Repsol YPF has also come under fire. In Chubart province, Governor Martin Buzzi said he would cancel the Spanish company's concessions in order to recover "sovereignty over our oil fields." Deputy Roberto Feletti, president of the Chamber of Deputies' budget and finance committee, recently spoke about sovereignty as well, saying the BCRA charter needed to be modified in order to recover "sovereignty of monetary policy."

"Elegant deterioration"

José Antonio Díaz, editor of the economics magazine Noticias, says the person most responsible for the sovereignty push is Ernesto Laclau, a philosopher and adviser to President Kirchner. According to Díaz, Laclau has "launched a Malvinazation campaign" that includes numerous tactics ranging from artificially sharpening tensions with London right up to trying to take over the Argentine branch of Repsol YPF.

The government's plan to alter the BCRA charter is another part of the same overall strategy, according to Díaz. "This is about transferring money without the limitations formerly in place under the previous charter, and without parliamentary oversight. It amounts to creating a virtual ATM for advances and loans that the government can use at its complete discretion."

Carlos Melconian, a banking consultant who formerly served as the BCRA's deputy manager of foreign affairs, insists that "Argentina is moving towards Venezuela." Melconian, who also had a not very successful political career as a senator for the right-wing PRO party, describes Argentina's current situation as "elegant deterioration" – just like the old, elegant buildings lining some streets in Buenos Aires.

Dwindling reserves

Joining Laclau and Feletti in pushing the "sovereignty" agenda is Deputy-Minister of the Economy Axel Kicillof, another of the young, unorthodox economists in Kirchner's cabinet. The same day, and at almost exactly the same time as the BCRA bill was being passed in the Senate, Kicillof and a pair of other deputy ministers spent two hours meeting with the director of Repsol YPF at the company's offices in Buenos Aires. During that meeting, the ministers urged the company to places its profits from 2011 ($1.22 billion) in an investment fund to compensate for the serious deficit of YPF's gas and oil production, instead of distributing the money to shareholders. The Repsol YPF director ignored the proposal, deciding instead to use the money to increase the number of shares available.

According to economist Alieto Guadagni, a former energy minister, YPF's most recent earnings report sheet, published Dec. 31, showed that oil production fell 7% the previous year. The report suggested dwindling gas reserves as well. Guadagni says YPF, which holds one-fifth of Argentine oil reserves and one-sixth of the country's gas reserves, is no longer the business it was in the 1980s. The economist blames these results on a lack of investment in exploration and production. The company's balance sheet shows $5.772 billion invested.

This diagnosis is shared by the authorities. Kicillof said that Repsol's business "is not in extraction, they are merely speculating with the international price of crude oil." He added: "We asked the company to fulfil its obligations."

Mounting frustrations

Tensions between the government and Repsol YPF first began to build six years ago, when the company's president, Spaniard Antonio Brufau, announced that Argentina would have to go back to importing oil in order to meet its energy needs. The country had been energy independent since 1992. On that occasion, Brufau said that Argentina was a large producer but also a large consumer, and he called on Argentine refineries "to prepare themselves, in the medium term, to process crude oil from other areas."

The Argentine government accused Repsol YPF of being apathetic. The company responded by barring state representatives from a recent board meeting. The government, in turn, has followed a strategy of trying to inconvenience YPF by removing its concessions: Chubut, Neuquén and Santa Cruz provinces have already taken away the company's concessions in these regions.

This year Argentina will spend $10 billion on importing gas and oil, about what it would cost the government to nationalize YPF. That's also close to the same amount of BCRA money being transferred to the Treasury. The temptation is already clear to see. As Alieto Guadagni explained, the only thing that would need to be done "is to send money from the BCRA to the Caja de Cataluña, the final Repsol shareholder."

And it is here that the BCRA reform and the conflict with YPF meet. Is it a good idea to reform the Charter of the Central Bank in order to pass money to a financial entity in another country? Can the political and economic costs be justified? We will soon find out…

Read more from América Economía in Spanish.

Photo -Roberto Filho

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Olaf Scholz: Trying To Crack The Code Of Germany's Enigmatic Chancellor

Olaf Scholz took over for Angela Merkel a year ago, but for many he remains a mysterious figure through a series of tumultuous events, including his wavering on the war in Ukraine.

man boarding a plane

Olaf Scholz boading an Air Force Special Air Mission Wing plane, on his way to the EU-Western Balkans Summit in Tirana.

Michael Kappeler / dpa via ZUMA Press
Peter Huth


BERLIN — When I told my wife that I was planning to write an article about “a year of Scholz,” she said, “Who’s that?” To be fair, she misheard me, and over the last 12 months the German Chancellor has mainly been referred to by his first name, Olaf.

Still, it’s a reasonable question. Who is Olaf Scholz, really? Or perhaps we should ask: how many versions of Olaf Scholz are there? A year after taking over from Angela Merkel, we still don’t know.

Chancellors from Germany’s Social Democrat Party (SPD) have always been easy to characterize. First there was Willy Brandt – he suffered from depression and had an intriguing private life. His affected public speaking style is still the gold standard for anyone who wants to get ahead in the center-left party. Then came Helmut Schmidt. He lived off his reputation for handling any crisis, smoked like a chimney and eventually won over the public.

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