Tag Archives: Spain

Morales Expropriates Electricity: Evo Shows Kirchner How It’s Done

Evo Morales announces expropriation of TED
Source; La Razón

Bolivian President Evo Morales announced yesterday that he was nationalising Transportadora de Electridad (TED) owned by the Spanish company Red Eléctrica Española (REE). Certain new sources, such as El País, have made a direct comparison between Morales’ actions and the expropriation of YPF a few weeks ago. There are, however, important differences between the two.

First, Morales used the same justification as Kirchner: that the Spanish company had not invested enough in Bolivia. ‘This company was profitable, but there was almost no capitalisation, almost no investment. In 17 years they had only invested $81 million,’ he said. Whereas Kircher’s claim that Repsol had not invested enough is difficult to sustain, Morales’ statement seems much more credible. Second, the tone that Morales used was much less aggressive than Kirchner’s. In his original announcement he said that he would be negotiating with REE to ensure that an agreement will be reached. Kirchner’s aggressive rhetoric and the poorly managed expropriation has caused significant tension between Argentina and Spain, and now Spain wants to impose economic sanctions. Third, Bolivia has the necessary expertise and capital to run and expand the country’s electricity network; the country does not require large quantities of foreign investment to ensure a good supply of electricity. On the other hand, the Argentinian government, by deterring foreign investment, has jeopardised the country’s future ability to fully exploit its reserves of shale oil and gas.

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Kirchner and YPF: Why She Was Wrong

Source: BBC

On 16th April Kirchner announced that the Argentinian government was taking control of 51% of Yacimientos Petrolíferos Fiscales (YPF), and said that it would pay the compensation that it deemed to be approriate. Argentinian President Cristina Férnandez de Kirchner justified the move by accusing the Spanish company Repsol, who owned the majority of YPF, of failing to invest enough in domestic production. She framed the nationalisation in nationalistic and emotional terms, stating that her late husband Néstor Kirchner had ‘always dreamed of recovering YPF for the country.’ Although the nationalisation might buy Kirchner some cheap political points domestically, it is likely to make worse, rather than solve, the problems that Argentina faces.

The nationalisation of YPF was the wrong move for four reasons. First, Argentina does not have the expertise or the capacity to exploit the potentially huge reserves of oil and gas that have been discovered in the past few years. Argentina currently spends more than 7% of GDP on the importation of energy, a figure that is now unlikely to improve. Second, Argentina already struggles to get international credit as a result of the huge 2002 default, and the arbitrary and sudden nationalisation of a branch of a large multinational company is likely to make that harder. Third, the nationalisation comes at an especially bad time for the Spanish government; just this week Spanish debt rose to 430 basis points above German debt. As Spain leads European Union policy toward Latin America, Kirchner’s actions could have potentially severe consequences for Argentinian-EU trade. Fourth, the nationalisation of the postal service in 2003, water in 2006, and of Aerolíneas Argentinas in 2008, already discouraged foreign direct investment in the country, and the nationalisation of YPF is likely to be a further disincentive to investors. The Financial Times wrote that ‘Argentina can kiss goodbye being treated seriously again by investors for another generation.’

I support the Argentinian state’s right to take control of its natural resources, but I question the manner in which Kirchner chose to carry it out. If Argentina is to prosper then it must play by the rules of the international community; if it does not then it will be consigned to insignificance while other Latin American countries take their rightful place on the world stage.

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