YPF-smoke screen for Argentina’s bad economy?
The YPF story is receiving a lot of attention in Spain. Argentina is accused of stealing assets in order to hide the Argentinian bad economy. Let’s see how this plays out. Wonder what people would say if Spain “seized” peoples euros and gave them new pesetas instead? From El Pais.
Repsol on Tuesday accused the government of Argentinean President Cristina Fernández de Kirchner of seizing control of its YPF unit in order to distract public attention from the Latin American country’s social and economic crisis.
At a news conference, Repsol chairman Antonio Brufau confirmed the leading Spanish oil firm would seek redress with the World Bank’s International Center for Settlement of Investment Disputes. Speaking in Mexico, Prime Minister Mariano Rajoy expressed his “profound discontent” at the move, while his government, which has the backing of the European Union in the dispute, warned of reprisals.
YPF and Government hostile take overs
As they say, when it rains….Spain doesn’t need this, but such is life. Argentina is just only taking what belongs to the country, or? What’s next, governments taking your gold and giving you freshly printed pesetas for it? From El Pais on the latest out of Argentina.
After weeks of speculation, Argentinean President Cristina Fernández de Kirchner announced on Monday that her government is going to nationalize the Spanish Repsol subsidiary YPF, declaring that her country’s hydrocarbon industry was a sector of “public interest.”
In a speech made in Buenos Aires after returning from the Americas Summit in Colombia, Fernández de Kirchner explained that she will send a law to Congress that proposed giving 51 percent control of YPF to the federal government and the remaining 49 percent to the country’s provinces.
In the coming days, the country’s appraisers will decide how much it will reimburse YPF for its shares.
“When one makes decisions in the interests of national management […] one also expects that managers understand the interests of the state,” Fernández de Kirchner said.
“We are the only country in America and one of the few in the world that doesn’t manage its own natural resources, but there were stronger arguments in favor of us taking this decision,” she said.
Armageddon-Greece is Lehman times 1000
Keith Barron Audio Interview. Sit back and enjoy with the Friday beer. Link here.
What happens to growth if Greece defaults?
From Argentina to Athens.
Will Greece follow the same path as Argentina?
Chart presented without comment.
Lessons from Argentina
While Europe, in the eye of the storm, faces great challenges regarding the future of the Economy, currency and ultimately the Union, there are lessons to be learnt. Argentina experienced similar problems to what Europe is facing now. By taking extreme actions, Argentina proved it is possible restructuring the Economy, and coming out “cleaner”. The question is, whether Europe is able to pull itself together, and come up with a credible plan of action? UK has already shown where it stands…From Spiegel;
But today, this emerging market stands as a shining beacon when compared to crisis-ridden countries in Europe. In the past, European and American politicians were only too happy to lecture Latin American countries on good budget management and debt control. Now, the question when European diplomats visit Buenos Aires is quite the opposite: Can Europe learn from Argentina?
Two American economists, Nobel Prize winner Paul Krugman and crisis prophet Nouriel Roubini, have advised Europe to take a close look at the Argentine debt crisis. “It seems as if they still haven’t learned anything from our crash,” Lavagna says, pointing out that Europe has prescribed its debt-ridden member countries the same austerity measures that brought down Argentina. “That creates a long-lasting recession,” he says, “and the region spirals further and further into decline.”
Argentina’s Economic Crisis
Good summary of the Argentinian Default. What caused the collapse, and what lessons are to be learnt for the current Greek situation?
In 1998, Argentina entered what turned out to be a four-year depression, during which its economy shrank 28 percent. Argentina’s experience has been cited as an example of the failure of free markets and fixed exchange rates, among other things. The evidence does not support those views. Rather, bad economic policies converted an ordinary recession into a depression. Three big tax increases in 2000-2001 discouraged growth, and meddling with the monetary system in mid 2001 created fear of currency devaluation. As a result, confidence in Argentina’s government finances evaporated. In a series of blunders that made matters even worse, from December 2001 to early 2002, succeeding governments undermined property rights by freezing bank deposits; defaulting on the government’s foreign debt in a thoughtless manner; ending the Argentine peso’s longstanding link to the dollar; forcibly converting dollar deposits and loans into Argentine pesos at unfavorable rates; and voiding contracts. Achieving sustained long-term economic growth will involve re-establishing respect for property rights. By The Joint Economic Committe.
Full report Joint Economic Committee-Argentina, causes and cures
Will Greece be another Argentina?
Remember Argentina and when it Defaulted? What are the similarities, and what choices does Greece have? Below from Athens News;
ARGENTINA defaulted on almost $100 billion euros of external debt in December 2001, the largest such sovereign default at the time. The reasons that led to this were multiple and went back 30-40 years.
The Argentinian peso had been pegged to the US dollar for 11 years and in the efforts to defend the peg, the country’s foreign reserves were depleted. As the crisis unfolded, there was a massive exit of capital from the country by both foreign investors and domestic depositors. Eventually, the government put a limit on withdrawals. It led to riots, but people still lost their money.
After ceasing all payments on foreign debt, Argentina was shut out by the capital markets. There was an agreed debt exchange with a 76 percent haircut in 2005. However, a large number of creditors refused to participate, arguing that Argentina was asset-rich and they were entitled to their money.
Full article here.
Greece reaching the Inflection Point
Partial Default, Full Default with return to Euro or Full Default with return to Drachma?These are the options Greece faces. People compare the Default of Argentina and Russia to the Greek situation, but remember Greek Debt is 500 billion USD, while Argentina and Russia had levels of around 80 billion USD. Greece is a part of the Euro, so things are slightly more complicated, and require delicate handling. With S&P downgrading Italy, things are getting new twists to the Euro zone problems. Full NYT article here.
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