I've been enjoying Mark Weisbrot's piece in the Guardian about how Argentina's renationalisation of YPF is perfectly sensible and valid. It's a treasure trove of mutually contradicting statements. For instance:
When the government defaulted on its debt at the end of 2001 and then devalued its currency a few weeks later, it was all doom-mongering in the media. The devaluation would cause inflation to spin out of control, the country would face balance of payments crises from not being able to borrow, the economy would spiral downward into deeper recession.Oh look! it seems that defaulting on debt does have significant long-term economic consequences after all. Who'd have thought? Apparently not Weisbrot.
A favourable balance of trade has been very important to Argentina since its default in 2001. Because the government is mostly shut out of borrowing from international financial markets, it needs to be careful about having enough foreign exchange to avoid a balance of payments crisis.
He has no doubt about the underlying problem:
There are sound reasons for this move [the renationalisation], and the government will most likely be proved right once again. Repsol, the Spanish oil company that currently owns 57% of Argentina's YPF, hasn't produced enough to keep up with Argentina's rapidly growing economy.According to Weisbrot, Repsol clearly is refusing to make as much money as it otherwise could. This is interesting, because if true then its shareholders should be trying to fire its management. His solution is to get the government involved in the oil+gas prospecting and producing business. What could possibly go wrong?
Commentator peacefulmilitant picks up Weisbrot on one of his comments:
"Mexico nationalised its oil in 1938, and, like a number of Opec countries, doesn't even allow foreign investment in oil."
Because Mexico's oil production has skyrocketed from 2004 to 2011, right? In fact in light of the standards set by the state owned Mexican oil company (Pemex) the output of YPF looks positively fantastic.
But to answer Mark's central question:
So why the outrage against Argentina's decision to take – through a forced purchase – a controlling interest in what for most of the enterprise's history was the national oil company?Well, there's that word 'was', Mark. According to Wikipedia: "YPF was privatized in 1993 and bought by the Spanish firm Repsol". So the Argentine government sold YPF to Repsol, which made it (according to most property laws) Repsol's possession, no longer Argentina's. There's a word for taking what's not yours, Mark; do you know what it is? Repsol's shares fell by 9% on the news of the renationalisation, which implies (given a current market cap of 20bn Euro) it lost 2bn Euro of value on the renationalisation.
I do wonder if Argentina has shot itself in the foot somewhat here. In the (currently rather unlikely) event that it were to acquire the Falklands (or, as they are known in America, the "Maldives"), what firms would be willing to do the oil prospecting and production in the Falklands waters if this means an economic partnership with Argentina?
Update: How interesting, I'd missed this tidbit. The Economist has ceased publishing official Argentina inflation figures:
The Economist magazine has ceased publishing price statistics provided by Argentina's national statistical agency INDEC, on the grounds that these official figures are subject to political manipulation and lack credibility.Mark Weisbrot, any comment?
The exclusion reflects widely-held concern both inside and outside Argentina that INDEC's figures understate dramatically the real rate of inflation. For instance, while INDEC's current figure for inflation is 9.7%, independent observers put the true figure at between 24-30%.