Argentina’s energy industry

Fill ’er up

Cristina Fernández sacrifices her country’s relationship with its biggest foreign investor to satisfy her hunger for cash and nationalist symbolism

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Readers' comments



Will Argentinians take responsibility for the fact that YPF was sold and privatized, and that they voted for a Government who chose to do so, or will they blame foreigners for the privatization?
Now, if you sell something to someone, you can only take it back with the other one's agreement, can't you?


Well, at least Cristina managed to turn the media attention away from her vice president, Amado Boudou, who just got caught red-handed stealing 50m USD.


If I am a cheating slut, it may well be the case that there were legal and moral justifications. But regardless of the legality or morality of my actions, there will be consequences.

So even if Argentina / commentators below argue for the legality of morality of this action, be prepared for the consequences.

International relations is not based on legality, or morality, but rather reciprocity. If one is prepared to take unilateral actions, one must be prepared for unilateral actions taken against one in return.

latinaview in reply to edwardong

Stop making idle threats, you scare no one. If Spain wishes to take action for a perceived grievance when compensation has not been fully discussed it's likely to loose further commercial influence in Latin America. As to your pathetic "cheating slut" innuendo bit, stick it up where the sun don't shine.


For all its wealth in natural resources, argentina is missing the economic revival that is going on almost everywhere else in south america, thanks to its outdated brand of populism. It is always easier to launch xenophobic attacks against foreigners (American, Spanish or british "imperialism") than curb the country's institutionalized corruption. This country is actually run by a bunch of thugs under the control of the president and her son. No doubt they will mismanage YPF the same way they did with other assets they confiscated (rather stole) from their rightful legal owners.
In the specific case of Repsol-ypf, this article is right. On the economic side, little will change as argentina will just remain a mismanaged third world country. On the diplomatic level however, it could mean further isolation for argentina, as Spain (who just got rid of the tremendously corrupt zapatero regime and now has a real western style type of government) will take action to protect the rights of Repsol.
As any traveller can witness it, the derelict streets of buenos aires are testament of argentina's decadence and self-exclusion from globalization.

timshel in reply to Felipe359

Thank you Felipe.. After reading this article and some of these comments I was starting to think I had landed in some bizarro-world where basic economic math is ignored in favor of the grossly disingenuous headlines pushed by mainstream corporate media outlets.

VLCC in reply to Felipe359

Who knows what Argentina's growth rates are? Their government statistics are famously all lies. Argentina's inflation is 20-30% now and the economy will suffer the tragedy of stagflation. Water doesn't run uphill forever you know. Quite sad really.

FFScotland in reply to Felipe359

GDP per capita, Argentina, Chile, Spain, current US$. source:World Bank. As VLCC points out, there's doubt about the honesty of recent Argentine figures:
1962 1970 1980 1990 2000 2005 2010
Argentina 1,148 1,317 2,736 4,330 7,696 4,736 9,124
Chile 684 938 2,466 2,393 4,878 7,254 12,431
Spain 520 1,178 6,045 13,415 14,422 26,042 30,542
The important point is that Chile and Spain have grown steadily - Spain more than Chile - while Argentin has been all over the place. The Economist seems to expect more of the same as a consequence oof Kirchner policies

Felipe359 in reply to FFScotland


The date you are using is gDp per capita not adjusted for purchase power parity (PPP). I think a better indicator is gNi per capita adjusted for PPP, but the WB website gives us this indicator only for current international $ and starting in 1980. Still, if you calculate growth rates for the 1980s, the 1990s and the 2003-2010, you have:

80s growth 90s growth 2003-2010growth
Latin America 36.5 41.3 50.7
Argentina 9.7 56.4 90.3
Brazil 41.5 33.7 51.1
Chile 70.2 94.6 48.6
Spain 93.5 59.4 29.4

The conclusion is that Argentina has been doing better with the Kirchner (2003-10) than with neoliberals that privatize and "respect" foreign capital (1990s). The same for the rest of Latin America (except for Chile).

Also, the whole comparison with Chile is problematic. Yes, Chile has performed better over the last quarter of the 20th century. But Chile is the only country in South America that has performed better under neoliberalism/pro-capital policies (and worse than the rest of Latin America in the 2000s). So to use Chile as a vindication of these policies is not logical. Chile is the exception to the rule, which is neoliberalism diminishes growth. Moreover, since we are talking about natural resource wealth, Chile has not been quite "neoliberal" in the management of its main natural resource (copper). It has CODELCO, a state-owned company product of a nationalization made in 1971. Yes, a nationalization is in the roots of Chile's good performance.

I don't agree with the Eskenazi deal with YPF/Repsol, but Argentina might actually do better with a state-run oil company (just like Brazil with Petrobras and Chile with CODELCO). If Repsol is not satisfied with price caps (even if they still have allowed the company to produce profits), so let the state buy off their stake in YPF and produce oil not just for the sake of profit.

FFScotland in reply to Felipe359

Felipe, thanks for that. Here are the equivalent figures since 1980, PPP adjusted.

1980 1990 2000 2005 2010
Argentina 5440 5387 9114 10833 16012
Chile 2877 4721 9257 12168 15732
Spain 6848 13325 21321 27377 32070

I think I can still justify my comments above, although these figures are less erratic than the non-adjusted figures imply.

JohnCobra in reply to Felipe359

You're mixing figures in an incoherent manner. First, however bad the situation is in Spain, its figures are real or at least much more reliable that argentine notoriously manipulated statistics. If you look at GDP/Capita, Spain's is still more than twice as much as Argentina's. Over the last 50 years Spain's economic growth outpaced that of argentina in a constant manner. I would say this has a lot to do with institutional stability and rule of law. Spain might be far from perfect on this issues, but it still outclass argentina on these fundamental elements of long term economic growth. I predict that argentina will very soon face chaos (caused by irresponsible populist policies by cfk) while Spain will (albeit slowly) recover from the current situation. That recovery will be shaped by the extent of implementation of rule of law.


1) Interestingly, the article did not mention that the $10.5 billion Repsol has demanded in compensation for the take over is more than 51% of the what another article of The Economist said the company is worth ("$15 billion or so the company was worth before the Argentine government began harassing it"). So Repsol's demand (10.5 billion) is, according to The Economist's own numbers, 48% higher than what its stake at YPF is actually worth.

2) It would be helpful (or even necessary) to know the profit RATE of the company (the article informs only "$1.3 billion a year in profits"). This would help evaluate if price caps have really diminished the RATE of profit to the point of not stimulating further investment or if the problem is that the profits, even if high enough, had to be distributed in dividends because of the deal with Mr Eskenazi.

Felipe359 in reply to Felipe359

3) The nationalization will change the dividend policy to force re-investment in the country, which will force Eskenazi to sell his stake to REPSOL (because of a 2008 agreement, REPSOL has to buy Eskenazi's stake if it loses control of YPF). So if it was Eskenazi to prevent dividends from being reinvested, problem solved.


Surprisingly, there is no mention of both Kirchener and Fernandez's involvement in the original priviatisation of YPF as lawyers. A certain hint of hypocrisy, one might think?

Brigido Cadenasso

This measure could boost Spanish and European morale by inventing a new "enemy". Rajoy is exploiting the expropiation at the max. Calling for help to the Clinton mare and the EU is pathetic. Spain just as Greece and Eastern Europe are fake-developed countries that feeds on EU money and tourism from northern Europe. If they were not part of EU they would be living worse that the poor Argentines not so long ago (the 70s) Argentines were living better than Spaniards.

I agree, except about "poor Argentines". Anyway, I wouldn´t say I'm proud of being an argentine just because as the spanish filosopher Fernando Savater says, to be born in a certain nation is an accident, we are all human beings.


I'd like to know what kind of agreement YPF had with Argentina thus far. Did they pay Argentina a certain amount per barrel extracted, or could they extract as much as they wanted for a fixed fee, or ...? Once that has been answered, the next question is of course, was that a reasonable payment in return for Argentina's oil resources? Any takers?


The concept that a private Spanish company is likely to be more competent in the field of oil exploration than an Argentina state one has no basis in historical fact; state owned YPF was a successful enterprise long before the artificially created Repsol saw the light of day.
That Repsol used YPF revenues as a milking cow to finance low exploration cost venues like Libya made commercial sense for Repsol but not for the Argentine Republic under whose soil the oil is found.
The decision to nationalise is both rational and commercially sound. That it might lead to a further period of isolation from access to international capital can be counted as a blessing in disguise. Such isolation has done Argentina no harm at all since 2002, it's been obliged to run a yearly budget surplus and it has successfully done so while delivering the highest growth rate numbers in Latin America .
Now THAT is what really annoys Cristina's critics, that she's been doing the opposite to what the neoliberal mantra dictates and is somehow getting impressive results, while they - the masters of austerity and trickle up economics - wallow in austerity and recession.

calbearz in reply to latinaview

Indeed, but a decade is a very short time. Enough time however, get the benefits of cash infusions but not its consequences. I would be less concern about international isolation and more about internal inefficiency and corruption - which bigger governments tend to bring. Lets give it at least another decade to claim any victories.

Omricon in reply to latinaview

Argentinians are getting poorer every year with substantial inflation outstripping growth and a budget surplus based on thievery (from the central bank and from peoples pensions). The quicker this president goes the better everyone will be.

rogobosa in reply to latinaview

- high growth rate since 2002... after default and subsequent recession, starting from a low level
- budegt surplus ... taking private pension and cental bank reserves to pay the bill
- YPF changing the rules of the game in the MIDDLE of the game

Cristina and you are smart and the rest is neoliberal and stupid.


Supposedly 'neo-liberal' Chile has of-course its state-owned copper comppany Codelco, and copper still accounts for over 60% of its exports. Mighty Petrobras is 57% owned by the Brazilian State, and Pemex is fully owned by Mexico. YPF was State owned until not so long ago, so its privatization seems an anomaly.
Kirchner has done this all the wrong way, but an emerging country needs to have its own resource company nowadays.


Well that's the end of Argentinian oil production. I wonder how far she will run Argentina into the ground before she is forced to leave office?

Brigido Cadenasso in reply to jwc123

Was the nationalization of BP by Persia some 100 years ago the end of Iranian oil production? No.

If YPF succeeds in exploring and extracting oild reserves in the Argentine shelf (which includes the Falklands) we will have Argentine oil for a long time. But oil can't do miracles like saving countries from turmoils and bad govermance. Argentine political culture is at the bottom.

jwc123 in reply to Brigido Cadenasso

The nationalization of BP in Iran was not the end of Iranian oil production true. But they would have a much more efficient and successful industry if they had allowed foreign oil companies with their expertise to continue operating. They are lucky the oil is so easy to extract in the middle east. Argentina does not have the expertise or money to exploit its reserves properly. Now that oil production is in a mad Peronists hands I see things going the way of Mexico and Venezuela. Nut-job lady will no doubt use the oil revenues for everything but investment in the oil industry, such as buying political support.
Good luck with the Falklands, Argentina has no valid claim and if it tries anything stupid it will face a much more destructive war than before. The UK navy can shoot down the whole South American airforce and British people have the will to do it. If you believe your own propaganda about us you'd better be careful of the evil salivating imperialist killing machine that are the British/English. Plus Argentina couldn't extract the Falklands oil if it tried just like it can't tap it's own shale oil.

jwc123 in reply to Brigido Cadenasso

Britain is only a waning power compared to demographically large developing countries such as China and India. Compared to Argentina the UK is richer and more powerful than it was in 1982 and the gap was pretty big then. The UK does not have a big-dog attitude, but it will defend the right of it people to self-determination, especially in the face of a hypernationalistic, corrupt and jingoistic mad woman who would expropriate them in a similar way to Repsol. Argentinian leaders have abused the people of Argentina far more than any so called British imperialist domination of a cold island 300 miles off shore. I wouldn't be surprised if Cristina Fernández tried to make Falkland penguins Argentinian citizens so she could say they were being oppressed by the 3000 British farmers living there.

Brigido, may I suggest that references to Britain as a waning power is only valid if you are rising fast against it - such as China, for example. Argentina is far from being a China, and is certainly not rising fast.

One does not refer to Bill Gates in contempt just because he has failed to keep his spot as the number one billionaire in the world.

Of course power is relative. But having had the worlds most powerfull navy 100 years ago doesnt tell you anything about the current situation. Britain is in great need to improve the living conditions of its own people rather than sending warships and princesses to patrol a colonial outpost 8000+ km away.

Brigido Cadenasso

"What a hawkish attitude. Britain is a waning power, and at some point its big dog attitude might lead it face its own Goa."

First off, I would have to say that you are the one with a hawkish attitude after declaring the oil of the Falkland Islands Argentinian.

But I am not surprised considering you have fallen into the simpleton's trap of thinking that the UK is a declining power. Compared to who? We all know that you can't mean Argentina? Because let's face it, whoever you compare Britain against , it will always come out higher if you include Argentina in the equation.

Kristina is doing the same thing the junta did in the 80s, trying to distract the population from the real problems that are bankrupting the country.

It didn't work in the 80s and it won't work now. Just as some companies will continue to invest in Argentina after this nationalisation, other companies will continue to invest in the Falkland Islands no matter what pathetic rhetoric comes out of BA.

Brigido, Argentina still needs an investor willing to put in $5 billion / per year for up to 10 years until the shale oil is available for resale domestically and internationally. Given that Argentina has nationalized YPF (and other industries), what oil company wants to get into bed with CFK and her Kirchneristas and risk up to 50 billion USD?

Also, don't count on the Falklands, if (and that's a big IF) oil is produced, it will stay with the Falklanders, with taxed revenue paying for defense against the Argentines. Argentina is about as likely to regain the Falklands as Spain is likely to regain Argentina.

Is that your conclusion? Do you like Argentina's political history? Why don't you try reading some? You could star with the historian researcher Felipe Pigna, one of the bests.
"At the bottom"? Give me a break...You don't know what we lived until 2001.

Alextheok in reply to jwc123

I agree except for the part of "Argentina has no legal claim". Technically Argentina's legal claim is stronger than England's, whose main argument is the will of the 2,500 locals. It is in part because of Engalnd's claim legal weakness that the US has declared themselves neutral.

As for "trying anything stupid", if you mean starting a new war, that would not happen any time soon, but don't discount the long term. After all, the islands have been and will remain in Argentina's backyard for geologically-measured times. 30 years ago the war was a close call. 60 years ago, England was at the brink of destruction at the hands of Nazis. For all we know, in 100 years Argentina's military may outperform England's (maybe equipped with Chinese technology).

The real solution for the malvinas/falklands is stop ignoring that Argentina also has a valid claim and that they are going nowhere, and begin thinking on a long term, sustainable solution, satisfiable for both parties.

SalVal in reply to jwc123

You are confusing ownership with the ability to direct and hire competent contractors to do exploration and oil extraction. Mexico has for years driven PEMEX into debt but still has found the financial resources to hire american contractors to start digging one of the deepest platforms in the gulf of mexico.

The impression that private industry is holly and perfect is always up to discussion.

Brigido Cadenasso

As a former Chilean foreign minister named Walker put it Peronism is a disease that prevents Argentina to lift the quality of life of its citizens.
There is nothing wrong with taking control over the countries natural resources, but that has to be done cleverly just like Evo and Correa did.
Anyway, the "decadent Argentina" of The Economist continues to provide better education and helthcare than "succesfull" and neoliberal Chile. Naive Colombians, Peruvians and Bolivians continue to believe that Chile is the best South American to emigrate.
Unlike Chile that speds its copper money on warships and Leopard tanks Argentina is likely to spend its new oil money better, on things that really matters.

As a Latin American I would rather live in Chile than Argentina. They have higher standard of living and way less crime, not to mention inflation. Despite being a small country, Chile has survived massive earthquakes and tsunamis which completely destroy cities and towns. Probably less than half of Buenos Aires would be standing if it was hit with a 9.0-magnitude earthquake.

Once I knew a person who worked in Colombia. He told me that political refugees were desperate to leave for Europe in the face of death threats. Once the Europe option was ruled out they opted for Chile. When offered a safe place in Uruguay and Argentina they refused and insisted that they wanted to live exile in Chile. They where explained that with their limited resouces medical insurance and education for their children would be much better in the Platine countries than in Chile. They insisted in leaving Colombia for Chile.

Gray.juan in reply to Brigido Cadenasso

Brigido, Argentina has been a very safe haven for a few Colombians that have emigrated there recently. Most of these , or mainly all, are drug traffickers, who enjoy, who enjoy a very warm welcome in a very trade friendly environment. Hopefully Argentina will take them all, as thay have felt very much at home!

Penélope-7 in reply to FFScotland

I'm so sorry to hear such ignorant comments, looks education system is not doing so well in a couple of countries...
I recommend to review what happened last year in Chile with the claims of their students...which I truly support.
"International rankings"? Please...

FFScotland in reply to Penélope-7

Penélope. I don't have a horse in the race. I haven't been to either Argentina or Chile, although I would like to visit both sometime. Those were the two, apparently objective, reports I came across. Chile does somewhat better than Argentina currently - not hugely so - and both are as good as other Latin American countries in the surveys.


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