By Paul Segal and Ingrid Bleynat, King’s College London
Argentina’s macro-economic policy has been accused of being incoherent, inconsistent, and out of control. Analysts blame ‘populist handouts’ for President Cristina Fernández de Kirchner’s popularity. Yet that cannot explain approval ratings around 50 per cent after nearly 8 years in power. There is a logic, and a history, behind Argentina’s policy that observers are overlooking.
Consider the challenge facing the government. They were elected to support domestic industry, and to redistribute income in favour of middle and lower class workers. What to do? Enter the economic theory of the second best, also known as (heavily) constrained optimisation. Read more
By Melissa Stark, Accenture
A lot has been written about the shale gas and oil boom in the US and why that model cannot be replicated in other countries with plentiful potential resources. In fact, this does not have to be the case.
We have done extensive analysis on the potential for shale development outside of the US, from Western to Eastern Europe, across Asia Pacific, Latin America and even South Africa. The biggest advantage that countries like Argentina, Saudi Arabia and China have over the others is a strong, government-backed national oil company (NOC). Read more
Argentina’s energy sector is a constant headache for the government – the fact that there are tankers charging hefty daily fees as they queue up offshore to unload liquefied natural gas because there is nowhere to store it is just the most recent example.
But YPF, Argentina’s biggest energy company, has been a beacon of light in the gloom, with the country’s energy deficit being the single biggest reason why it is running out of dollars.
YPF has notched up a string of achievements since the state took back a majority stake in 2012, most recently announcing on Wednesday a $170m deal with Ecuador’s Petroamazonas to optimise production in the mature Yuralpa oilfield. Read more
It’s hot in Buenos Aires. So hot, that there has been a wave of blackouts this week as melting porteños, as residents of Argentina’s capital are known, jam the electric grid by cranking their air-conditioners up to full blast.
This has become an annual occurrence during heat waves in the southern summer, as continuous underinvestment in the electricity system – since utility rates were frozen over a decade ago – takes its toll. But tempers as well as temperatures have been rising – both on the streets where sporadic protests are disrupting daily life, and in the government, which has decided that the fault lies with the private companies providing the electricity, Edesur and Edenor. Read more
We come in peace. That could have been the message from Axel Kicillof, Argentina’s deputy economy minister and head of a government commission in charge of approving investment plans, to oil executives gathered for the industry’s annual lunch in Buenos Aires. Read more
After a decade of virtually frozen tariffs that has pushed them to the brink of collapse, and a major power cut earlier this month, electricity and gas companies in Argentina have finally heard the magic words they have been longing for the government to say: higher tariffs.
Unfortunately for them, there’s a catch. They won’t get the money. A special government-administered fund will. Read more
Oh to be a fly on the wall of the rounds of meetings between Miguel Galuccio (pictured), chief executive of nationalised Argentine energy group YPF with US and UK investors starting in Los Angeles on Friday.
There’s no doubt that Galuccio is an experienced oilman and knows his subject. But it’s safe to imagine that investors will subject him to a barrage of questions that probably boil down to this: how much leverage will he have with the government of Cristina Fernández to guarantee investors the incentives needed to bring foreign cash flowing into YPF? Read more
Argentina’s nationalised energy company, YPF, faces its first hurdle in the eyes of domestic investors on Tuesday with the issue of three debt tranches designed to raise at least 1.35 billion pesos ($290m).
The paper has 9-, 18- and 36-month maturities but the bulk of the offer, 1.2bn pesos, is in three-year bonds with a variable interest rate. That offer can be increased to 1.5bn, depending on demand. Read more