Editorial: President Cristina Kirchner received Congressional approval this week for the Argentine government's announced takeover of YPF, an oil and gas company. The move will help pay for her government’s pricey social programs. But at what cos
SANTIAGO - What Argentina is doing isn't anything new. The government once closed all the banks and, for several months, prevented people from accessing their savings. Another time it decided not to pay its debts – and then complained later when no one wanted to loan Argentina any money.
The list goes on. Several years ago it began exporting natural gas to its neighbors, but then cut off supply when domestic demand rose. It cooked the books on inflation figures to trick not just the rest of the world, but the Argentine people as well. It made a show of privatizing pension funds only to turn around and exert state control over the private administrators of those funds. It privatized Aerolíneas Argentinas, before later placing it back into state hands.
Over the past 20 years the successive governments of Argentina have done all this and more. Who then, can really be surprised that the Cristina Kirchner administration just expropriated YPF? Argentina was the only country in Latin America to privatize its main raw materials industry – the YPF oil and gas company – and sell it to a bunch of deluded private buyers who took the government at its word and paid what they considered reasonable for the transaction. Now the government is snatching YPF back from those same deluded buyers and looking for a way not to pay what it's actually worth.
History, as the saying goes, has a way of repeating itself.
What's really going on here is that the Kirchner administration needs money desperately and sees the $1 billion that YPF pulls in every year as a cash cow it can use to keep subsidizing public services and transportation. That way Argentines will continue thinking they're rich and keep spending like they're rich, thus keeping consumption at the same heightened levels that have boosted economic growth in recent years.
The YPF seizure isn't Cristina's only heavy-handed move in recent months. In March, the Argentine Congress approved a government bill stripping the Central Bank of the little independence it still had and turning in into an automatic cash machine for the president. That's no doubt where the money will come from to pay Repsol – the Spanish company that owns YPF – whatever minimum indemnity Argentina can get away with.
One of the excuses Cristina used to justify the expropriation of YPF was that Repsol wasn't investing in the development of new deposits of shale gas that were discovered in recent years. With these deposits, Argentina is believed to have the world's third largest reserves of shale gas. But according to YPF's own studies, it'll take $25 billion per year – for a decade – to really develop the resource.
Where will that money come from now that the company is controlled by the Argentine government? Certainly not from the government itself, which says it wants to attract foreign investors. Among the names it has mentioned are the American firms Exxon and Chevron, Chinese energy giant Sinopec, and the Brazilian firm Petrobras.
Exxon, Chevron, Sinopec and Petrobras. Hmmm... Are they really going to be willing to fall into the same trap that snagged Repsol? Are they really going to risk history repeating itself, again. Come on people. Enough already.
Read the original story in Spanish
Photo – Alex E. Proimos