News In The Usa Is Argentina Might Default Again

[Montauk_Project]

A lesson in perspective for us all:
To my dear friends and family, living in the "democratic"/western world As I am currently in Ukraine, quite close to the events that are unfolding at the moment (our office is 2 blocks away from the first barricades) and although I moved to, I believe and hope, a safer place away enough from Kiev's center where the events are happening, I have been thinking quite a bit about what these events meant and felt I should share, succinctly, my thoughts with you. Many of us complain often about the situation in our countries, about the bad politicians, about the economy, etc... here, these people on EuroMaidan (where the protests are taking place) are fighting for their basic freedom. After two months of peaceful protest, Ukraine just passed laws that will send to jail (for up to 15 years) any person protesting outside of governmental buildings... which basically means all these protestors are now up for long jail terms. This is what sparked the rise in violence these last few days. Ukraine is not yet Syria or any of these other places where years of war have a heavy human toll, there are "only" 2 to 5 dead people so far, but I am right now sitting with these people (whom I have been spending a lot of time with for the last few years and several of them I now consider close friends) sharing their worries and fears. It is heartbreaking and a stark reminder of how lucky we are, despite our discontent, to live in a "free" society. I am dreaming of a peaceful and democratic denouement for Ukraine and my Ukrainian friends.

 

[CarryOn]

That's a lovely theory, but unfortunately has nothing to do with the facts. Argentina closed 2013 with a USD 9b trade surplus, and is one of the world's leading commodity exporters: number 1 in soy, 2nd in corn...

If you want to look at an area for improvement, it would be in exports of finished products (maybe what you were referring to?), but its finished goods exports have increased steadily over the last decade, even though there is a deficit in that item.

Insofar as energy goes, the nationalisation of YPF was a huge step forward in that regard, since Repsol was vastly underinvesting (in default of its contractual obligations, thus the nationalisation).

Not to mention Argentina produces far more consumer products domestically than most modern economies in the developed/near-developed space. These of course are more expensive than in other countries with less restrictive import/export policies, but a devalued peso may make these products more attractive in some Mercosur countries, thus increasing exports of consumer goods in addition to agricultural products.

Energy is the big offset to Argentina's trade balance, one that frankly barring incompetence (which seems very possible) will likely turn around in the next decade from natural gas exploitation.

 

[John.St]

Insofar as energy goes, the nationalisation of YPF was a huge step forward in that regard, since

Repsol was vastly underinvesting (in default of its contractual obligations, thus the nationalisation).

Why didn't YPF/Repsol invest more than they did?

 

[camberiu]

Why didn't YPF/Repsol invest more than they did?

Because they are evil captalists and they derive sexual pleasure from watching Argentinians getting poorer.

 

[John.St]

Because they are evil captalists and they derive sexual pleasure from watching Argentinians getting poorer.

I am looking forward to EdRooney's explanation - it will be really 'interesting'

 

[EdRooney]

I am looking forward to EdRooney's explanation - it will be really 'interesting'

I wasn't going to respond, because this thread has taken more U-turns than the kirchner government, but since you asked:

Various reasons, and you'd have to ask the Board of Repsol to get a definitive answer, but the most probable explanation is that it is doing what most major international companies have been doing since 2008: sitting on cash because it's more profitable than investing now. Over the last 5 years Repsol (like many other corps) has been dedicating most of its profits to re-buying its own stock because of ECB/FED zero-interest rate policies combined with expansion of the financial sector has made investing less profitable than re-capitalising and/or investing or expanding operations.

You can't really say for sure, but this seems to be the logic most companies are following right now, draw your own conclusions. But to get back to my point: Argentine importation of energy is a drag on its economy, and the nationalisation of YPF was a good step toward alleviating it, regardless of the reason why Repsol was not fulfilling its contractual obligations.

 

[Bajo_cero2]

Why didn't YPF/Repsol invest more than they did?

Because it was more profitable to import gas and nafta. Why to spend money in developing new gas and oil resources in Argentina when Repsol has enough in other countries.
Plus they developed a new market...

 

[John.St]

Because it was more profitable to import gas and nafta. Why to spend money in developing new gas and oil resources in Argentina when Repsol has enough in other countries. Plus they developed a new market...

Partly right, but for the wrong reasons.

I wasn't going to respond, because this thread has taken more U-turns than the kirchner government, but since you asked:

Various reasons, and you'd have to ask the Board of Repsol to get a definitive answer, but the most probable explanation is that it is doing what most major international companies have been doing since 2008: sitting on cash because it's more profitable than investing now. Over the last 5 years Repsol (like many other corps) has been dedicating most of its profits to re-buying its own stock because of ECB/FED zero-interest rate policies combined with expansion of the financial sector has made investing less profitable than re-capitalising and/or investing or expanding operations.

You can't really say for sure, but this seems to be the logic most companies are following right now, draw your own conclusions. But to get back to my point: Argentine importation of energy is a drag on its economy, and the nationalisation of YPF was a good step toward alleviating it, regardless of the reason why Repsol was not fulfilling its contractual obligations.

Try this:

Market analysts and Repsol blamed the decline in exploration and production on government controls on exports and prospecting leases, and price controls on domestic oil and gas.

Rather than raise fuel prices that are now about five times lower than in Brazil and Uruguay, Fernandez de Kirchner's expropriation measure insists that oil companies must serve Argentines first, even if it means selling the energy they produce at a loss.

"With oil capped at $55 a barrel in Argentina while trading above $100 on the world market, they followed the money, Eduardo Fernandez said. "So there's no interest in making investments in Argentina when in other countries they're paying in full. So Repsol went to Brazil, Trinidad and Tobago, Bolivia. All of this provoked the disinvestment," [1]

A barrel of crude:

World market price more than US$ 100
The Argentine government forced Repsol/YPf to sell in Argentina at US$ 55
Are you willing to do business at a similar loss?

[1] http://www.huffingto..._n_1444144.html

 

[EdRooney]

This is exactly the point why such resources, which belong to all of us, should be nationalised. Repsol was living up to its corporate purpose of seeking profit. Nothing wrong with that; it's the nature of the beast. Yet since it belongs to all of us it should be managed for our collective interests, not for those of a limited group of shareholders. (Whether the K's will manage it for Argentina's interest is quite debatable, but the principle remains the same, since they will soon be gone.)

 

[Bajo_cero2]

A barrel of crude:

World market price more than US$ 100
The Argentine government forced Repsol/YPf to sell in Argentina at US$ 55
Are you willing to do business at a similar loss?

[1] http://www.huffingto..._n_1444144.html

When a country produce something, it gives a competitive advantage: lower prices. It makes no sense to pay everything like we live in japan where they have to import almost everything.

To sell the oil cheaper in Argentina was the price for exporting and getting the international price in the international market.

Remember that they didn t own the oil according to the argentine law, only the facilities for extracting and refine it.