CFK to Nationalize Argentina's Largest Oil Company

In a move that the Wall Street Journal says “marks a watershed in expanding the state's grip on the economy,” Argentine President Cristina Fernandez de Kirchner has unveiled a plan to nationalize the country’s largest oil company, Yacimientos Petrolíferos Fiscales (YPF). In televised address yesterday,  Fernandez said she would call upon lawmakers to approve a bill which would nationalize a 51% controlling interest of YPF, owned by Spanish company Repsol.  The president did not immediately say how the government could compensate Repsol for its shares.

As the L.A. Times reports, the announcement has caused a diplomatic crisis between Argentina and Spain, with Spanish Foreign Minister Jose Manuel Garcia-Margalla warning that his government would take "clear and convincing" retaliatory measures as a response.

While the bill authorizing nationalization will likely have to wait several weeks before it is approved by Congress, which Fernandez’s party controls with a working majority, the president took over management of YPF immediately. In an executive order, Fernandez replaced YPF CEO Sebastian Eskenazi with Planning Minister Julio De Vido, who will run the company with the help of Deputy Economy Minister Axel Kicillof.

The jury is still out on the effect that the nationalization will have on the Argentine economy. The government, for its part, claims that the move is necessary because Repsol has failed to invest in domestic production. As The Guardian points out: 

“Governors of oil-producing Argentine provinces have withdrawn about 15 oil leases, representing 18 percent of YPF's crude production, alleging the company failed to keep its promises to develop them. YPF has countered that it has invested millions in those areas and plans to increase production, but Argentine officials have said that still falls short.”

The Fernandez government claims that the nationalization is only a matter of “energy self-sufficiency,” pointing to the fact that the country has become a net importer of energy despite the fact it has the world's third-largest reserves of shale hydrocarbons.

However, others say that this is due to the government’s more interventionist approach to the economy, which they say discourages investment.  The Economist supports this view, and adds that the move will likely dispel investment further, hastening the decline of domestic production.

News Briefs

·         Although President Barack Obama wrapped up his visit to Colombia by certifying the country’s labor protection efforts and allowing the US-Colombia FTA to take effect on May 15, unknot everyone is convinced that Colombia has met its obligations under the Labor Action Plan. AFL-CIO President Richard Trumka said the announcement was “deeply disappointing and troubling,” noting that some two dozen labor organizers were killed in the country last year alone. Colombia Reports profiles a similar response by Colombian union leaders, and Upside Down World takes a look at the links between anti-union violence and neo-paramilitary groups.

·         Speaking at a press conference following a meeting with Brazilian officials in Brasilia on Monday, Secretary of State Hilary Clinton seemed to voice more support than usual for the idea of Brazil gaining a permanent seat on the UN Security Council. Clinton told local press "it would be hard to imagine a security council without a country like Brazil," but stopped short of endorsing the country’s immediate entrance.

·         Although the Peruvian government managed to pressure Shining Path guerrillas into releasing the 36 oil workers held hostage last week, the rebel group may have taken two police officers prisoner during an armed confrontation over the weekend.  While the government has not confirmed this, the AP claims that relatives of the officers were told that they were lowered from a helicopter that came under fire and was forced to retreat.

·         The BBC reports that a 24-hour standoff between police and inmates in Brazil’s Aracaju prison came to an end with the prisoners releasing their hostages and officials promising to investigate reports of mistreatment. As with so many other Latin American prisons that have seen riots in recent months, the Aracaju facility is vastly overcrowded, holding twice its intended capacity of 2,000 prisoners.

·         The US and Haitian governments, along with the help of international institutions, have launched an ambitious vaccination drive on the Caribbean island this week. AP reports that the campaign seeks to vaccinate 90 percent of Haiti's youth population, and is part of a broader push to encourage Haitians of all ages to seek immunizations.

·         The L.A. Times highlights the growing “generational gap” in Cuba. Although President Raul Castro’s economic reforms have benefited older Cubans, many youths report feeling frustrated by a lack of economic and political opportunities.

·         AP with an update on Josefina Vazquez Mota’s unsuccessful efforts to muster a comeback in Mexico’s presidential race. Despite shaking up her campaign last week, it seems the PAN candidate shows no signs of cutting into the widening 20-point lead held by the PRI’s Enrique Peña Nieto.

·         After Mexico’s Chamber of Deputies passed a national climate-change bill last week, the country is poised to impose binding emission reduction goals on successive governments. The Executive Director of Berkley’s Center for Law, Energy & the Environment offers a helpful breakdown of the legislation, noting that “Mexico’s natural abundance of sun and wind make it well-positioned to develop renewable energy technology.” La Jornada says that some in the country have criticized the bill, claiming that it paves the way for privatization of the energy sector.

·         The Miami Herald claims to have gained access to internal memos which show that the Venezuelan government’s decision to close its consulate in Miami earlier this year was intended as retaliation against wealthy Venezuelans in the area, most of whom are fervently anti-Chavez.

·         The BBC highlights the first-ever Harley Davidson motorcycle convention in Cuba, where “having a gathering dedicated to these icons of American engineering…would have been unthinkable 20 years ago.”