In her boldest move to date, Argentina's president Cristina Fernández announced the renationalisation of the country’s biggest oil company, YPF. An emergency decree issued in mid-April 2012 puts a 51% stake of YPF, valued at $ 5bn, back into state hands. The move is the latest in a series of protectionist measures introduced by the Argentinian leader. Recently investors in the country have witnessed the introduction of a number of non-tariff trade barriers, lessening the central bank’s independence and leading to a slowdown in the resolution of claims against the country in the International Centre for the Settlement of Investment Disputes.
According to greenfield investment monitor fDiMarkets, Argentina was the second most popular South American destination for crossborder ventures in 2011. But renationalisation of YPF may shift investor sentiment in the county.
“With YPF’s being nationalised, Ms Fernández shows that politics and fighting for her own popularity, rather than the economy, is her priority. In that sense Argentina joins the club of countries such as Bolivia, Ecuador and Venezuela,” says Carlos Rojas, CEO of Andino Capital Management. According to Mr Rojas, Argentina has been playing an unfair game with investors for a long time, but up until now, her actions have not prompted a major change in investor confidence.
Before Mrs Fernández’s decision regarding YPF, the Spanish oil and gas producer Repsol was in control of the majority stake in the company. Spanish investors are among the most active in Argentina, having invested more than $20bn in greenfield projects in the past eight years, according to fDiMarkets. Mr Rojas says that the deterioration of trade relations between Argentina and Spain is not a cause of concern for Mrs Fernández, as it may increase her popularity in the country. “Such behaviour can bring applause in Argentina. Investors from [other countries] are still welcome though,” he says.
The fact that Spanish investors may start looking away from Argentina may be beneficial for countries such as Peru, Colombia and Chile. “Although in the long run I expect the issues between Argentina and Spain to be resolved, at the moment other countries in Latin America can receive more investments from Spain, as betting on Argentina [has become] very risky,” says Victor Hugo Rodriguez, director of the Latin American chapter at the Hedge Fund Association.
In distancing their own economic policies from those of Argentina, countries such as Peru, Colombia and Chile can try to attract those investors put off by Ms Fernández's unpredictable policy changes. Speaking to fDiimmediately after Mrs Fernandez's announcement regarding YPF, Luis Miguel Castilla, the Peruvian minister of economy and finance, said: “We are very concerned to see what is happening. [At the same time] I would like to state that anything like that would not happen in Peru.”