Sunday, April 15, 2012

Argentina and the fight against the neoliberal "financialized playground"

Marcy Wheeler has an provocative Economic Big Picture post, based in part of Jamie Galbraith's new book, Inequality and Instability: A Study of the World Economy Just Before the Great Crisis (2012). (Amazon tells me my copy should get to me Thursday or so; maybe I should have gone for the Kindle version.) Her post is called The US Attempts to Retain Control Over the Financialized Playground Emptywheel 04/14/2012. She quotes Galbraith:

The financial crisis (and the world economic crisis it engendered) thus represented not so much the natural outgrowth of rising inequality as a further phase; it was the consequence of a deliberate effort to sustain a model of economic growth based on inequality that had, in the year 2000, already ended. By pressing this model past all legal and ethical limits, the United States succeeded in prolonging an "era of good feeling," and in ensuring that when the collapse came, it would utterly destroy the financial sector.
Marcy's long post gives some idea of the diverging economic models in the world, and the discrediting of the so-called "Washington Consensus" also known as neoliberalism among some of the countries with the strongest developing economies.

One front in the conflict between the neoliberal model and alternatives is in Argentina. I don't know that it has or needs a distinct name, though the political thinking and policymaking behind the current version is known as kirchnerism. President Cristina Feranández (de Kirchner) is positioning the Argentine federal government to begin taking a major ownership stake, maybe even a controlling one, in the country's largest oil company YPF (pronounced e-epe-efe in Spanish). YPF stands for Yacimientos Petrolíferos Fiscales. It is currently a majority-owned subsidiary of the Spanish oil company Repsol. Reuters reports, "Repsol, which holds a 57 percent stake in the company, has been gradually reducing its holdings as it frees capital to invest in other emerging markets such as Brazil. Argentina's Eskenazi family holds 25.5 percent." (Uncertainty over fate of Argentina's YPF persists 04/12/2012) The Eskenazi family's holdings are via Grupo Petersen (the Petersen Group).

This English-language report by Raphael Minder in the New York Times gives some background, Spain Cautions Argentina on Takeover of Energy Firm 04/13/2012. Minder notes accurately that "the government in Buenos Aires [has] gradually intensified its criticism of Repsol, accusing the company of not investing enough in Argentina and instead paying too much of its profits in dividends."

In its public demands, what Cristina's government is demanding is that YPF behave more responsibly and make more investments in oil production in Argentina. But she has also been acting in conjunction with the state (provincial) governors to revoke some of YPF's oil concessions, which no doubt has contributed significantly to recent drops in YPF's share prices, making the government threat of acquiring its shares more credible. As one might guess, the conflict has provoked speculation in YPF shares.

Spain's conservative government under Prime Minister Mariano Rajoy, currently enthusiastically applying Angienomics, the currently dominant variant of neoliberalism in the EU, to impoverish its own people, further deregulate businesses, reduce government services and weaken labor unions, is leaping to the defense of Repsol in its drive to maintain its current level of control over YPF, in a way that the current Spanish government can never be expected to defend the well-being of ordinary Spanish workers. That's the neoliberal creed. And, given the difficulties of implementing national economic suicide in a democratic system, Rajoy's government surely doesn't mind exploiting the moment to get a tiny bit of nationalistic cred. As Minder reports:

The Spanish government warned on Friday that it would take unspecified retaliatory measures against Argentina if it proceeded with plans to take back control of YPF, the large oil and gas producer, from Repsol, its Spanish parent.

The warning came as José Manuel Garcia-Margallo, the Spanish foreign minister, also announced that Spain had called on the European Commission, the United States Treasury and other governments in Latin America to support Spain in its efforts to prevent the nationalization of YPF.
Of course, the symbolism of Spain trying to ran stuff down the throats of Argentina isn't very good elsewhere. That ship pretty much sailed for good in 1816 during the reign of Fernando VII. Atilio Boron characterizes the reaction of Rajoy's government as "una virulenta reacción de funcionarios del gobierno ultraconservador español" ("a virulent reaction by functionaries of the ultraconservative Spanish government") (España, ¿cuál España? Página 12 15.04.2012). He also refers to them as "ardent functionaries of the Crown"; Spain is a constitutional monarchy. From the point of view of Argentina's strategic energy interests, writes Alfredo Zaiat, "los españoles de Repsol son parte del problema; no una opción de solución ("the Spaniards of Repsol are part of the problem; not an option of the solution") (Chiste catalán Página 12 15.04.2012). Repsol has been using YPF largely as a "cash cow", neglecting the development of reserves and further exploration in Argentina itself. The Great God Free Market is mainly concerned with the enrichment of shareholders, not with how it helps or hurts the general public or particular countries.

Trying to rally the EU, which of course includes Great Britain, around the cause of attacking Argentina is complicated by the fact that Rajoy's own government has piggy-backed on Cristina's diplomatic push to force Britain to the negotiating table over the status of the Malvinas Islands, illegally occupied by Britain since 1833, to press Spain's claims for sovereignty over Gibraltar. European colonial oil interests are also at play in the controversy over the Malvinas, because Britain claims offshore mineral rights through its colonial occupation of the Malvinas/Falklands.

Raúl Dellatorre looks at the issues surrounding the status of YPF in Por qué y para qué una YPF del Estado Página 12 15.04.2012. Cristina's government rejects the neoliberal theology of the Great God Free Market (my formulation, not her government's or Dellatorre's). In the case of oil and natural gas, her government views them as strategic assets that cannot be treated simply as commodities in a global free market. Having sufficient petroleum production at home and their availability at affordable prices are critical to the larger health and international competitiveness of the Argentine economy. As The Economist noted in its series earlier this year on "state capitalism", the thirteen largest oil firms in the world are state enterprises of some sort or the other.

Dellatorre cites the examples of PDVSA and Petrobras, the state oil companies of, respectively, Venezuela and Brasil, as models in which the extraction of oil and gas can be shared with private companies but the priorities and uses of the product are under the direction of the state. PDVSA is fully state-owned, Petrobras partially so.

See also: Andrés Asiain y Agustín Crivelli, La explotación de hidrocarburos en Argentina - Estudio de caso; YPF S.A. Feb 2012

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