Argentina’s partial renationalization of its oil company, Yacimientos Petroliferos Fiscales (YPF), has triggered a veritable frenzy of anti-Argentine sentiment. Ironically, this has been more pronounced in the British and American media than in the Spanish one, though it is a Spanish company, Repsol, that is affected. The Washington Post has gone so far as to suggest that Argentina should be expelled from the G20, the “steering committee of the world economy.” The Economist takes this one step further, proposing even more radical measures, like making it difficult for Argentines to travel abroad (a ban on all Argentine passports by the UN? Instant arrest by Interpol of any Argentine citizen found beyond the border?).
Such far-out proposals indicate two things: how low Argentina’s credibility has sunk, but also how far removed from the real world of 2012 some North Atlantic opinion-shapers are. An important point of the G20, a Canadian initiative spearheaded by Paul Martin, was to indicate that the time of the Washington Consensus was over, and that we live now in a much more pluralistic policy environment.
One reason Argentina was originally invited was because it was a heavily indebted “problem country.” It continues to be one. So what? Some leading members of the G20, like China, India and Brazil, have economic policies that are very different from those of orthodox Anglo-Saxon capitalism. Their leading oil companies are all state-owned. The notion that they would endorse an expulsion of Argentina from the G20 for something like this beggars belief.
And we need to distinguish between the opinions one might have about how sustainable Argentina’s economic policies are (most economists would agree they are not), on the one hand, and what the appropriate response from the international community should be, on the other. Argentina for the past nine years has had an enviable economic growth record, with several years at 7 and 8 per cent. The downside is that artificially low, government-fixed prices of oil and gas have meant no investment in the energy sector. Oil- and gas-rich Argentina last year thus had to import $ 9 billion in fuel products.
To keep its social spending going, a key source of government support that led to President Cristina Fernandez de Kirchner’s reelection last October with 54 per cent of the vote, the government engaged in a permanent scramble for cash. Before YPF, it was the Central Bank reserves (a paltry $ 6 billion) and the private pension funds (a more substantial $24 billion). YPF would bring a mere $ 1.3 billion a year, assuming it would continue to be run the way is has until now. None of this is wise, but the Argentine public supports it.
The international community should watch what Spain, the main aggrieved party, does. So far, we have heard a lot of huffing and puffing from Madrid, including threats of curtailing some Argentine imports, as well as a EU-wide boycott. Yet the sporting money is on nothing much happening. There are too many other Spanish companies making good money in Argentina to endanger their business, especially now that Spain, with a 25 per cent unemployment rate, is on its knees.
Some say that no one will ever again invest in Argentina, and particularly not in the third largest shale oil reserves in the world. The sad truth is that capital will go wherever there is oil, no matter how misguided government policies are. Argentina is an enormously rich country, with some of the best agricultural land in the world, and vast untapped oil and mineral resources. That is both its blessing and its curse.
But the G20 should not be in the business of handing good conduct certificates to its member states, let alone in expelling them for what some consider mischievous behaviour. That would be the beginning of the end of an entity the Economist itself referred to as the best thing to come out the Great Recession.
Jorge Heine is CIGI Professor of Global Governance at the Balsillie School of International Affairs, Wilfrid Laurier University. His book, with Andrew Cooper, Which Way Latin America? Hemispheric Politics Meets Globalization, is published by United Nations University Press.
This article was republished with permission from the author.
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