海角大神

A little more than a year ago, the Argentine government expropriated Spanish firm Repsol鈥檚 shares in oil company YPF, making Argentina the majority stakeholder. The move, together with other unorthodox economic policies, unnerved foreign investors.

Last night, however, American oil giant Chevron ended 10 months of negotiations 鈥� and a foreign investment chill 鈥� by signing a $1.2 billion deal with YPF, now state-run, to develop Argentina鈥檚 vast shale reserves. The pact came just a day after another government decree granting significant benefits to companies who invest in oil and gas in Argentina. But analysts question whether the decree is enough to make others follow Chevron and end distrust of President Cristina Fern谩ndez de Kirchner鈥檚 left-wing administration.
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鈥淭he Chevron deal is a step in the right direction, but what Argentina really needs is to overhaul the way it handles itself internationally,鈥� says Alieto Guadagni, a former energy secretary here. 鈥�That would bring a flood of investment.鈥�

'Investment is essential'

The Vaca Muerta shale formation in the southwest of Argentina holds most of the country鈥檚 770 trillion cubic feet of recoverable shale gas. Only the US and China have larger volumes, according to the US Department of Energy.
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YPF, meanwhile, has estimated there are 23 billion barrels of oil and gas in the Vaca Muerta. Its joint venture with Chevron, which will initially see the companies dig 100 wells across 5,000 acres of the formation, is the first that has been struck since the expropriation in April last year.
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But given the risk of investing in Argentina, the government had to make important concessions: Monday鈥檚 decree allows energy firms that put up more than $1 billion to export 20 percent of their production tax-free after five years (all oil exports are currently taxed).听Furthermore, the government will not oblige them to repatriate those earnings.

鈥淭he decree represents a strong contradiction with the government鈥檚 nationalist discourse,鈥� says Horacio Lazarte, an economist that specializes in oil and gas at Abeceb, a Buenos Aires consultancy. 鈥淏ut YPF鈥檚 needs are more important than rhetoric. The investment is essential.鈥�
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The renationalization of YPF was colored by the nationalist rhetoric of President Kirchner and Axel Kicillof, her deputy economy minister. They accused Repsol 鈥� which has still not been paid the $10.5 billion compensation it seeks 鈥� of failing to invest in production, and said expropriating its shares would result in Argentina鈥檚 鈥渆nergy sovereignty.鈥�
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YPF says it requires $37 billion over the next four years to achieve energy independence. This year, it will spend an estimated $13 billion on energy imports.

'Meaningful change?'

Given the Argentina's volatile economic policies under Kirchner, raising the money to reach Argentina's energy goals has proved difficult.
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It is effectively shut out of international capital markets because of high borrowing costs, a result of its $100 billion default a decade ago, and its battle with holdout creditors is ongoing.

听Meanwhile, Brazilian mining company Vale recently abandoned a $6 billion project in Argentina because of the difficult economic climate. Inflation is estimated at 24 percent, though the government says the rate is much lower; currency controls have resulted in听a black market for the dollar; and import restrictions have brought a slew of complaints from the US, Japan, and the European Union.
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Mr. Lazarte says the rushed decree is a sign of the government's long-term instability. And international analysts believe it will do little to alter investors鈥� negative view of the Kirchner administration. Taking into account government restrictions on the remittance of profits abroad, which forces foreign companies to reinvest here, overseas investment dropped by 10 percent in Argentina between 2011 and 2012, according to the United Nations Economic Commission for Latin America and the Caribbean.
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鈥淯ntil Argentina normalizes relations with trading partners and global capital markets [鈥�] there鈥檒l be no meaningful change in foreign direct investment,鈥� says Josh Rosner, managing director of Graham Fisher & Co in New York and an analyst who follows Argentina鈥檚 debt restructuring.
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鈥淸The decree] looks pragmatic,鈥� says Claudio Loser of the Inter-American Dialogue, a policy group in Washington. 鈥淏ut companies won鈥檛 be rushing into Argentina just yet.鈥�