AbovetheNOISE: Argentina's sudden oil nationalisation grotesque

The world and certainly the Spanish oil company Repsol YPF and the Spanish government woke up this morning to devastating news. Argentina has seized 51 percent control over YPF, a wholly-owned subsidiary of Repsol.

This Hugo Chavez-style move - the Venezuelan dictator nationalized foreign-owned assets in several industries - will further alienate Argentina from the global economic community. It also sends a clear signal to global companies about the dangers of investing in Latin America. The move is really grotesque and the consequences for Argentina will be grave. It will mean further isolation, more poverty, more central planning and less markets. 

Greece must never end as Argentina

As we wrote some time ago, Argentina's growth is overstated and their default on foreign debt in 2011 has pushed the country on a path to destruction of private capital. I believe Argentina's development since 2001 shows how fragile governments and institutions are when a country defaults.

Linking it to the crisis in Europe, I personally believe the solution with debt restructuring going hand in hand with market reforms in countries such as Greece is a much better solution. Argentina cannot be a role model for countries that have lived above their means.

Should companies accept nationalisations?

As I wrote in my article Who rules the world - companies or governments? the ten largest oil companies could easily, with only 5% of their EBITDA allocated to the purpose, have the 13 largest military budget in the world. The interesting question is whether companies, but also countries built on private property rights, should just accept nationalisations of assets without a legal fight and international pressure on countries nationalising assets. What do you think?