You would never steal you friend’s wallet. Why? Even if you were self absorbed and morally reprehensible, the $50 in cash you stood to gain could never outweigh the loss of your relationship and all its benefits. Even more, the reputation for shady dealing you would collect among your social sphere would cost you dearly in the long run.
Well, Argentina just stole Spain’s wallet.
After spending two weeks discussing the option, Argentinian president Cristina Fernandez fulfilled her “life-long dream” of solving the country’s energy problem by nationalizing YPF, the oil company which owns the rights to Argentina’s reserves. There is no mistaking this as an uncompensated, hostile seizure of 57% of the company from Repsol, a Spanish energy company.
Repsol’s stake in the company is currently valued at around $10 billion. In the grand scheme of the international economy, $10 billion is nothing. (Well, it’s enough to save up to 7.6 million children’s lives, but never mind that for now).
The real affront is that Argentina so blatantly continues a tradition of disregarding respectable dealings within the international community. Two weeks ago I discussed how Argentinian nationalistic pride leads them to continue a claim over the Falklands, which they quite obviously do not own. Their economic record is no less disappointing.
First, in 2002, the country engaged in the largest sovereign debt default in history, and has been rightly banned from the international investment community ever since. Moreover, their government notoriously pursues protectionist trade measures. Even further, Argentina has refused to pay millions in compensation for breaching trade agreements as stipulated by international legal bodies.
The fact that Argentina so recklessly disregards its reputation and obligations makes Spain’s’ job difficult. Can they reason with the unreasonable? A 1991 bilateral international trade agreement between the two quarreling nations limits Spain’s ability to impose retaliatory tariffs against Argentina, who claims that the nationalization of YPF falls under a clause protecting actions taken “in the interest of the people” (couldn’t any actions be justified on these grounds?).
Regardless, the fine print of a trade agreement shouldn’t prevent some body from reprimanding Argentina. Yet this seems unlikely. International bodies such as the WTO and World Bank lack the authority and intelligence to go above the narrow definitions of protocol and exact justice, even when the infraction is as obvious as this. In a climate of international law that is largely driven by politics, not the consistent and dependable application of justice, even Repsol’s compensation of $10 billion for lost assets is up in the air.
This is the EU’s time to shine. One primary strength of the Union is to lend collective weight to the economic dealings of its members. In this case, EU-wide pressure on Argentina could certainly improve Repsol’s prospects. However, the EU is reluctant to take the measures necessary to defend Spain, as they have other, arguably more pressing matters on their hands than organizing 27 countries to sacrifice trade relations to benefit Spain alone. I think this is a shame and a waste of ability on the part of the EU to stand up for principles of free trade, solid law, and accountability that it applies within its own geographical and cultural block.
Luckily, we can rest assured that, even without immediate punishment, Argentina’s reputation for cheating foreign investors will eventually set in. When that day comes, the country will fall behind other business-friendly Latin American nations such as Brazil, Chile, and Peru. Maybe at that time Argentina will begin to take a closer look and amend its reputation.This post reflects the author’s personal opinions, not the opinions of Arizona Model United Nations.