Argentine President Cristina Fernandez de Kirchner shocked the global business community this week by announcing that she would essentially be nationalizing YPF, the country’s dominant energy company, by having the government take a 51 per cent controlling stake. Kirchner says YPF has failed to produce enough oil, even though the country is sitting on some of the world’s largest reserves of oil and shale gas. The problem is that YPF’s majority owner is Repsol, a private Spanish company, and the Spanish government has threatened retaliation for Kirchner’s actions. “This president isn’t going to respond to any threats,” Kirchner shot back, “because I represent the Argentine people.” The move is giving rise to fears that no foreign company in Argentina is safe from a state takeover, and investors widely agree that Kirchner’s power grab will kill off foreign investment. But Kirchner, 59, is confident Argentines will continue to support her as they did another female populist leader: Eva Peron. Is Kirchner the next Evita?
She is certainly following in Evita’s footsteps: At fiery rallies calling for Argentine ownership of businesses, Kirchner can be seen standing “beside an image depicting” Evita, say Helen Popper and Hillary Burke at Reuters. Her takeover of YPF is being hailed “as virtually heroic” by the Argentine public, which blames privatization of businesses in the 1990s for Argentina’s spectacular economic crash in 2001 and 2002. Kirchner recently nationalized $30 billion in private pension funds and took over the airline Aerolineas Argentinas — both moves “won broad support.” Her populist, nationalist positions have only strengthened her “political capital at home.”
“Argentina’s defiance on YPF strikes chord at home”
She’s not Evita. She’s Hugo Chavez: Kirchner is taking leadership lessons from Venezuelan President Hugo Chavez, who “has practically turned expropriation into a sport,” says Robin Farzad at Bloomberg Businessweek. She can deliver “fire-and-brimstone” speeches “blaming foreigners for the energy shortages plaguing the country,” but it’s more likely she took over YPF because of the profits that would come from “soaring commodity prices.” She is riding a wave of “nationalist-fed popularity” now, but she might not survive the inflation and high international borrowing costs that will come.
“Argentina tries the Chavez way”
Evita-like or not, Kirchner will regret this: The YPF takeover is a “shabby act of economic piracy,” and “nationalization is likely to deepen” the energy company’s problems, says Britain’s Financial Times in an editorial. “A state-owned YPF will have neither the technical expertise nor the capital to exploit huge reserves of shale gas on Argentine territory, let alone the country’s offshore oil prospects.” It’s hardly likely at this point that other foreign investors will be willing “to lend a hand.”
“A shabby act of economic piracy”
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