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As the dust settles on Argentinean President Cristina Fernandez de Kirchner’s announcement that the state would seize control of assets owned by Repsol -backed energy company YPF, many are worried that other companies will shy away from investment in the South American country.
Argentina is famously rich in natural resources, but has been handicapped in the past by political and economic turbulence. Many international investors had their fingers burnt by the 2001 Argentinean default, when the country defaulted on $120 billion of sovereign debt, with a recovery value of just 35 cents in the dollar.
The Argentineans are known for their fierce pride in their country, which is what Kirchner is counting on in order to maintain solid domestic support.
Her actions have been applauded by Hugo Chavez, the left-wing president of Venezuela, which recently nationalized its gold industry and has a longer history of seizing other foreign-owned assets, particularly in the oil industry.
Spanish Prime Minister Mariano Rajoy said it lacked “any justification or economic reason.”
The plans come after Argentina has become increasingly vocal about the retention of British power in the Falklands Islands – known as Las Malvinas in Argentina – and a focal point of nationalistic fervor. Argentina has already made life difficult for oil companies prospecting in the seas around the islands.
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