Arab Today, arab today argentina\s kirchner defies world in ypf takeover
Last Updated : GMT 21:25:08
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Argentina\'s Kirchner defies world in YPF takeover

Arab Today, arab today

Arab Today, arab today Argentina\'s Kirchner defies world in YPF takeover

Buenos Aires - AFP

Argentine President Cristina Kirchner's seizing control of oil firm YPF, owned by Spain's Repsol, is part of her bid to build economic growth on the back of protectionism and consumer spending, observers here say. Kirchner says that the measure was justified because YPF crude production had dropped at a time that oil and gas imports doubled in 2011 compared to 2010, and are forecast to triple by the end of the year. The government blames Repsol for failing to properly invest in YPF, which was an Argentine oil company until it was privatized in the early 1990s. Argentina also faces a drop in its trade surplus -- down 11 percent in 2011 -- which is its only source of financing since foreign credit markets closed their doors after the 2001 debt default. Spain, the United States, the IMF, the European Union and others lined up to take turns slamming Kirchner's move. Washington said Wednesday it was "very concerned" by the move, and urged Argentina to "normalize" its relations with investors. Spain's industry minister said the country will take "all measures it considers appropriate" to defend the interests of Repsol and Spanish businesses abroad. "It is definitely not good news for anyone," added Jose Angel Gurria, the head of the Organization of Economic Cooperation and Development (OECD), at the World Economic Forum on Latin America in Mexico. The Argentine president inherited the current economic model from her husband, the late Nestor Kirchner (2003-2007). Nestor Kirchner led Argentina as it emerged from its 1999-2002 economic crisis, which resulted in the largest sovereign debt default in history. As president Nestor Kirchner co-governed with his wife, and when Cristina was elected president in 2007 her husband was a top advisor. Nestor Kirchner died in 2010, one year before his wife was reelected president. The Kirchner economic model relies on price controls, protectionism to bolster the internal market, and more recently tight controls on capital flight. It also offers subsidies to sectors like public transportation, water and energy. Argentina also "has a behavioral problem in its relations with the rest of the world that has deteriorated in the last years," Emilio Cardenas, who represented Argentina in the United Nations in the 1990s, told AFP. Several countries, including the United States, Japan, and European and Latin American nations, earlier expressed their concern over Argentina's protectionist measures at the World Trade Organization. "The YPF episode is going to increase these complaints," said Cardenas. Political scientist Edgardo Mocca told AFP the the WTO complaints "are related to a certain degree of belligerence from the most developed countries that are hoping to unload part of the burden of their crisis abroad," so developing countries are developing "defensive strategies." But not only rich countries are upset: as of mid-March, Peru, Chile, Mexico and Colombia were looking at filing action at the WTO against Argentina. Even fellow members of the Mercosur trade bloc -- Brazil, Paraguay and Uruguay -- complain about the heavy red tape they must cut through to export goods to Argentina. Argentina also has rocky relations with Britain, in part due to an increase in angry rhetoric on the 30th anniversary of the Falklands War, and in part fueled by a call by Argentine Industry Minister Debora Giorgi on firms importing British products to find substitute goods elsewhere. In 2011, Argentina exported goods worth $779 million to Britain and imported goods worth $664 million, official data show. Argentina exported mainly soybeans, soy oil, corn, chemicals and peanuts, while its imports from Britain were largely chemicals, pharmaceuticals and cars. "Repsol did not invest what it should have and made an enormous distribution of benefits," said Argentine ex-finance minister Roberto Lavagna (2002-2005). "That must be taken into consideration at the time the expropriation value for the company is set." Lavagna however was lukewarm on the expropriation decision. "Many times Argentines celebrate something that we later regret," he said, pointing to the 2001 default as an example. A full decade after the $100 billion default, Argentina still faces lawsuits against its US-based assets, straining relations with Washington and the International Monetary Fund. In the latest twist to the saga, a US judge in February ordered Argentina to pay interest on bonds affected by the 2001 default, in what could deal a new blow to the South American nation's efforts to restore its access to credit.  

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