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The Globe and Mail

YPF nationalization: poor Repsol, poor Argentina

Demonstrators in Buenos Aires on Monday hold up a banner that reads in Spanish 'We are going for all YPF,' in support of a bill proposed by Argentina's President Cristina Fernandez to expropriate 51 per cent of the shares of YPF oil company that is controlled by Spain's Repsol.

Natacha Pisarenko/Natacha Pisarenko/Associated Press

Readers can decide for themselves whether Argentina is run by a populist lunatic seemingly determined that her people do not participate in an economic golden age for Latin America.

What is certain is that the nationalization of YPF by the government of President Cristina Fernandez will guarantee that it is not only the share prices of YPF and 57 per cent-owner Repsol which are heading south. Argentina simply cannot afford the $25-billion a year needed to develop new fields containing up to 22 billion barrels of shale oil and gas. Which oil company will now lend its expertise?

It is already embarrassing that long-suffering but energy-rich Argentina has to spend 7 per cent of its annual budget on energy imports. It is wrong, however, for Ms. Fernandez to blame Repsol. Last year, YPF accounted for a quarter of the Spanish company's operating income but a third of its total investment. On the face of it, therefore, the 20 per cent fall in Repsol's share price since the start of the year looks about right. But it will fall more on Tuesday because YPF was expected to double its production over the next decade. Repsol can kiss that goodbye. And Argentina can kiss goodbye being treated seriously again by investors for another generation.

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