Wednesday, May 2, 2012

Observing Argentina: Public v. Private Property

While spending the past two-months plus in Chile, I haven’t paid much attention to Argentina - especially since I spent most of 11 February days in Buenos Aires without leaving our apartment because of a severe bronchitis. It’s time to rectify that.

The YPF Fiasco
In the news recently for its pending nationalization, the Argentine energy company Yacimientos Petrolíferos Fiscales (YPF) was the world’s first state-run oil company when founded in 1922. In fact, its very name means “state oilfields,” and its first director was General Enrique Mosconi, an army officer whose Recoleta tomb appears above. State control intensified under governments like those of Juan Perón, but even the corrupt military dictatorship of 1976-83 considered it an essential state asset. Not until 1999, under the government of President Carlos Menem, did YPF pass into private hands.

In a sense, then, a renationalized YPF is merely returning to its origins. In ordering the nationalization, soon to be approved by Congress, President Cristina Fernández de Kirchner has argued that its Spanish majority owner Repsol’s failure to invest within the country has caused fuel imports (and prices) to rise.

Without indulging in detail beyond my expertise, I think it’s fair to say that the impetus behind the nationalization is political, rather than economic, and that it’s a diversion from some of Argentina’s real economic problems. The most notable is an inflation that most independent economists consider at least double the officially acknowledged rate of eight percent. In Argentina’s populist patronage politics, though, demagogic rallies takes precedence over genuine solutions to real-world problems.

Even with the best intentions, running an oil company requires technical expertise and incorruptible personnel. As Buenos Aires Herald columnist James Neilson noted sardonically, “When YPF was in the hands of its rightful owners, the people, it was widely regarded as the worst run enterprise in the entire world, the only sizable oil company that managed to lose money while all the others were raking it in.” Given the juridical insecurity – government compensation appears unlikely to approach YPF’s market value – Argentina may find it hard to attract replacement investors.
Given that Aerolíneas Argentinas – the flagship airline renationalized in 2008 after nearly two decades of private ownership – is a money pit that’s averaging US$2 million daily in losses, any optimism over YPF’s nationalization is more than likely misplaced. It wouldn’t be surprising to see fuel shortages more acute than those that occurred under YPF.

Occupy Buenos Aires? Sidewalk Sanctions in the Capital
One of the great pleasures of Buenos Aires is the number of sidewalk restaurants, cafes and bars that give certain neighborhoods, such as the Palermo district of Las Cañitas (pictured below), a vigorous street life.  That could change, at least in degree, as the city daily Clarín reports that municipal authorities have begun to crack down on unauthorized usage that affects pedestrian access to city sidewalks.
In the last three months, the city has issued more than 800 citations in Palermo alone to businesses that have, apparently, occupied more than their due. In addition to leaving at least 1.5 meters for pedestrian right of way, which many of them do not, businesses taking advantage of sidewalk seating are obliged to pay 427 pesos (nearly US$100) every six months for every table they place there. If they have to do so, the rising cost of sidewalk dining could exceed even the unofficial inflation rate.

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