海角大神

Spanish and European leaders directed fresh threats towards Argentina yesterday over the nationalization of Spanish-controlled oil producer YPF. But in a clear sign of Spain鈥檚 withering might in South America,聽their threats increasingly sound like pleas.聽Years of economic decline have diminished 厂辫补颈苍鈥檚 regional sway and there seems little Spain can do.

Last week the Argentina's President Cristina Fern谩ndez de Kirchner moved to nationalize聽YPF, expropriating 51 percent of the company controlled by聽Spanish company Repsol. YPF is Argentina鈥檚 biggest oil company and Ms. Kirchner accused Repsol of failing to invest properly in increasing oil production, which contributed to Argentina becoming a net oil importer in 2008.聽Repsol, like other foreign companies, has said regulations limit profits, and by extension how much it can investment.

鈥淲e have to avoid a train collision, but that depends on the Argentinean government,鈥澛牫П璨咕辈遭�檚 Foreign Minister Jos茅 Manuel Margallo said yesterday after a meeting of European foreign ministers. He said that if negotiations fail that all legal means will be considered 鈥渢o make Argentina reconsider.鈥�

鈥淲e don鈥檛 dispute Argentina鈥檚 right to chose energy sovereignty, although in my opinion that is a mistake,"聽Mr. Margallo said.

The priority, he said, is making sure Repsol is paid fair value for the YPF stake.聽Repsol valued its 57.4 percent stake in YPF at $10.5 billion, implying a $9.3 billion sale price for 51 percent of YPF. An Argentinean tribunal will determine the fair value.聽Repsol is seeking international arbitration聽and has threatened to sue any company that helps the Argentina develop its expropriated oil reserves.聽A 25 percent stake owned by Argentina鈥檚 Eskenazi family and the remaining share in hands of small shareholder will not be expropriated.

But his European counterparts offered little more than moral support, partly because much broader economic ties are at stake.

厂辫补颈苍鈥檚 Prime Minister Mariano Rajoy said last week the expropriation 鈥渟evers鈥� the historic good relations between the two countries.聽鈥淎fter what happened, you could think this could happen to anybody," he said.

But Spain stands to lose a lot more than Argentina.聽Many of 厂辫补颈苍鈥檚 biggest companies and banks are strongly rooted in Argentina, and they have privately warned Spain against a diplomatic fight that could endanger the remaining significant Spanish investment in the country.

The Spanish government didn't see it coming and then dithered over whether to negotiate or take a strong stance, says聽Jos茅 Ignacio Torreblanca, a senior policy fellow with the European Council on Foreign Relations. In the end, it overreacted.

鈥淚f your job is to defend Spanish interests, and companies are asking for restraint, than you can鈥檛 push much harder. Spain needs more of Latin America now than the other way around,鈥� Dr. Torreblanca says.

The end of the Reconquista

Repsol's聽$16 billion聽purchase of YPF from聽national and regional governments and private shareholders in 1999 was one of the biggest symbols of the Reconquista, the nickname given to Spain's massive foreign investment drive during the 1990s and 2000s. Spanish companies bought up controlling stakes in the region鈥檚 banking, energy, and telecom industries. As the second biggest investor in Latin America during that period, only the United States had more economic clout in the region than Spain.

Between 2006-2009, its share of foreign investment in Latin America was 10 percent, but in 2010 it decreased to 4 percent. The decline was聽partly due to 厂辫补颈苍鈥檚 economic troubles, but it was accelerateD by countries such as Venezuela, Brazil, Ecuador, and Bolivia moving to increase foreign ownership of their raw materials.

Spain聽has historically been聽very influential in Latin America,聽but聽it should聽鈥渂e happy that it now has partners it can treat as equals,鈥� Dr. Torreblanca said. 鈥淵es, there used to be a polarization between populists and pragmatists聽in Latin America, but we are seeing the end of that. This is a Latin America of middle classes.

Spain聽realizes its declining clout. 鈥淲hen you want to be taken seriously, you have to talk like a big country and you have to act like a big country,鈥� Foreign Minister Margallo said.聽On April 20,聽Spain聽announced it would revise regulations to make Argentina's biodiesel imports more expensive. These imports are equivalent to 厂辫补颈苍鈥檚 bilateral trade deficit with Argentina of nearly $1 billion in 2011.聽Argentina rebuffed the measure and said Spaniards would just pay more.

The European Parliament also overwhelmingly approved a motion condemning the expropriation of YPF, and asked the European Union Commission, the EU executive, to review Argentina鈥檚 preferential import duty terms using 鈥渁ll the available settlement tools within the World Trade Organization and G20," but the measures lack teeth.聽

A broader free trade deal with South American countries that also involves powerhouse Brazil could also be delayed by Europe at Spain's request.

Chinese investment fills the gap

This is not the first time Argentina has defied international investors, but it is significant enough to trigger warnings that Argentina鈥檚 credibility in international markets and with lenders will suffer, possibly leading to a decline in聽private聽foreign investment.

鈥淲e expect this to curtail foreign direct investment (FDI) in key sectors such as energy, utilities, and telecom,鈥� Fitch ratings agency wrote this week.聽鈥淢any foreign companies with long-standing investments in Argentina have navigated an often-challenging regulatory environment in recent years, particularly in resource sectors where government pressure to boost investment and production has been most direct. Still, this week's move to nationalize YPF, formerly majority-owned by Repsol of Spain, introduces another layer of uncertainty for foreign companies contemplating investment in Argentina. Foreign firms already face big hurdles related to foreign exchange controls and restrictions on dividend payments.鈥�

But that doesn鈥檛 scare away national oil companies flush with cash, namely from China, willing to accept long-term profitability and energy security, even if it means accepting capped economic benefit in the short term, as is Argentina鈥檚 case.聽Kirchner鈥檚 government subsidizes fuel costs and controls prices, meaning the return on investment for private companies like Repsol is limited.

But the chance of potential exports in the future seems to be enough to convince China. In聽2010 Chinese companies were the third biggest investors in Latin America, behind the US and the Netherlands 鈥� much of which went聽to Argentina 鈥� and in 2011 they are believed to have replaced the Netherlands as the second biggest investors, according to United Nations 蝉迟补迟颈蝉迟颈肠蝉.听

But the chance of potential exports in the future seems to be enough to convince China. In聽2010 Chinese companies were the third biggest investors in Latin America, behind the US and the Netherlands 鈥� much of which went聽to Argentina 鈥� and in 2011 they are believed to have replaced the Netherlands as the second biggest investors.

In fact, Spanish and Argentine media reports are flush with speculation that聽Sinopec, one of China鈥檚 biggest oil companies and investors in Latin America, has secured a deal to finance Argentina鈥檚 promised oil production recovery, although it鈥檚 not clear how.

At this point, it seems as if Spain's best option is working to win a fair settlement for the expropriation of YPF 鈥� a far cry from it's short-lived Reconquista.