Argentina Renationalizes Its Largest Oil Company

A blog about business and economics.
April 16 2012 4:14 PM

Argentina Renationalizes Its Largest Oil Company

Argentine PRESIDENT Cristina Fernandez de Kirchner attends a ceremony at the presidential palace in Lima on March 22. 2010.


Argentina's President Christina Kirchner launched the Kirchner Era's latest heterodox initiative by announcing that the country's largest oil company, YPF, will be forcibly nationalized. A public sector takeover of a privately owned firm is always a big deal, but this is a particularly big deal for three reasons. One is that YPF's majority owner is a Spanish energy company called Repsol which has managed to turn this into an international issue. A second is that YPF was a publicly owned firm for decades after its founding in 1920, and only privatized in the 1990s as part of a big wave of Washington Consensus reforms, so this is read as a sign of a larger shift in the winds. The third reason is that I'll be flying to Argentina on Friday for my honeymoon so if accelerated capital flight and precipitous decline in the value of Argentina's currency are going to occur I'd like them to occur quickly.

More seriously, Argentina's trajectory over the past couple of years tends to highlight what I think is some of the reasoning behind insistence on policy orthodoxy even in situations where it's counterproductive. The logic is basically that a country that uses currency devaluation and debt repudiation as a policy tool risks falling into a "once you pop, you can't stop" trap. Argentina got a nice growth pop out of its devaluationa and default about a decade ago but now seems arguably addicted to policy measures like pension nationalization, capital controls, and now seizing whole foreign-owned companies all of which will tend to reduce savings and investment in the country and stifle long-term growth. Then there's the Big Mac funnybusiness designed to hide inflation.


As a counterpoint, I would say the lessons of Argentina aren't that you should stick with orthodoxy even when it's inappropriate. The lesson is that you should do the right thing all the time. It was addiction to hard money orthodoxy that killed Argentina's neoliberal era and now it's addiction to these expedients that will ultimately kill off its populist era. The European concept of pairing labor market reform in Spain and Italy with misery-inducing fiscal austerity and too-tight monetary policy mostly serves to ensure that reform will be an unpopular political failure. Successful countries like Sweden manage to zig when you should be zigging and zag when you should be zagging.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



The Ebola Story

How our minds build narratives out of disaster.

The Budget Disaster That Completely Sabotaged the WHO’s Response to Ebola

PowerPoint Is the Worst, and Now It’s the Latest Way to Hack Into Your Computer

The Shooting Tragedies That Forged Canada’s Gun Politics

A Highly Unscientific Ranking of Crazy-Old German Beers


Welcome to 13th Grade!

Some high schools are offering a fifth year. That’s a great idea.


The Actual World

“Mount Thoreau” and the naming of things in the wilderness.

Want Kids to Delay Sex? Let Planned Parenthood Teach Them Sex Ed.

Would You Trust Walmart to Provide Your Health Care? (You Should.)

  News & Politics
Oct. 22 2014 9:42 PM Landslide Landrieu Can the Louisiana Democrat use the powers of incumbency to save herself one more time?
Continuously Operating
Oct. 22 2014 2:38 PM Crack Open an Old One A highly unscientific evaluation of Germany’s oldest breweries.
Gentleman Scholar
Oct. 22 2014 5:54 PM May I Offer to Sharpen My Friends’ Knives? Or would that be rude?
  Double X
The XX Factor
Oct. 22 2014 4:27 PM Three Ways Your Text Messages Change After You Get Married
  Slate Plus
Tv Club
Oct. 22 2014 5:27 PM The Slate Walking Dead Podcast A spoiler-filled discussion of Episodes 1 and 2.
Oct. 22 2014 11:54 PM The Actual World “Mount Thoreau” and the naming of things in the wilderness.
Future Tense
Oct. 22 2014 5:33 PM One More Reason Not to Use PowerPoint: It’s The Gateway for a Serious Windows Vulnerability
  Health & Science
Wild Things
Oct. 22 2014 2:42 PM Orcas, Via Drone, for the First Time Ever
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.