Argentine President Cristina Fernandez’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 said.
Frenandez said that the measure was justified because YPF crude production had dropped at a time that oil and gas imports doubled last year 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 last year — which is its only source of financing since foreign credit markets closed their doors after the 2001 debt default.
Spain, the US, the IMF, the EU and others lined up to take turns slamming Fernandez’s move.
Washington said on 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 Organisation 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 president Nestor Kirchner (2003-2007). Kirchner led Argentina as it emerged from its 1999-2002 economic crisis, which resulted in the largest sovereign debt default in history.
As president, Kirchner co-governed with his wife, and when she was elected president in 2007, her husband was a top adviser. Kirchner died in 2010, one year before his wife was re-elected 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 UN in the 1990s, said.
Several countries, including the US, Japan and European and Latin American nations, earlier expressed their concern over Argentina’s protectionist measures at the WTO.
“The YPF episode is going to increase these complaints,” said Cardenas.
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