LatAm nationalizations: Spain says Bolivia isn’t Argentina

Bolivia has joined Argentina in announcing new plans to take back an energy company owned by a Spanish firm. However, there’s no connection between the moves.

At least, that’s what the reeling Spanish government is telling itself, The Associated Press reports.

But Spanish Economy Minister Luis de Guindos did criticize both nationalization moves, saying, "They are mainly negative for the countries that make them, for the governments that make them."

On April 14, Argentine President Cristina Fernandez de Kirchner announced the country would renationalize YPF, its main oil company, seizing 51 percent of controlling shares from Spanish energy company Repsol.

Then, on May 1 — May Day or Labor Day or International Workers Day, depending on what flag you fly — Bolivian President Evo Morales announced plans to take control of its largest electricity grid known as TDE, mostly owned by Spain’s Red Electrica.

If anybody needed ganging up on, it was not recession-hit Spain.

The Spanish government may claim not to see a link between nationalizations in Argentina and Bolivia, but Madrid business leaders sure seem peeved by the 1-2 punch.

"It is just not right that Mrs. Kirchner did what she did and now in Bolivia they toy with the Spanish people like this," Arturo Fernandez, vice president of Spain’s leading business federation, told Spanish state television, according to AP.

“I do not see this happening with the French or the Germans. It seems we have been singled out. We have invested a lot of work and money and we have resolved too many economic problems in those countries to be treated like this now,” Fernandez reportedly said.

Spanish business newspaper Cinco Dias reports that Spain expects at least $90 million in compensation from Bolivia. "The 'gift' that the government of Evo Morales gave to the Bolivians on Labor Day … could cost the Andean country more than $90 million — higher than the amount of [Bolivia's] debt that Spain forgave some years ago," Cinco Dias writes.

Lutgardo Alvarez, Bolviia's deputy minister of electricity, said TDE has generated $100 million since the Spanish firm became its majority owner, reports America Economia.

Of course, Latin America has a history of nationalizing and liberalizing key industries, sometimes only to nationalize them again. So, unlike in the rich north, there's less consensus in emerging markets that privatization is the only way forward.

Argentina in 2008 took over Aerolineas Argentinas — a company that was in trouble under prior Spanish ownership, reports BBC Mundo, the British broadcaster’s Spanish-language service.

Many recall Hugo Chavez nationalization wave in Venezuela.

But neither is Bolivia’s Evo Morales a stranger to state takeovers. He has a habit of a announcing them on May Day, seen as a way to appease disgruntled labor unions.

Bolivia’s TDE takeover should not be seen as “a harbinger of a new wave of Bolivian nationalization” but rather “as the tail end of a cycle of nationalizations,” according to Joao Augusto de Castro Neves, Latin America analyst at political risk consultancy Eurasia Group.

In an emailed report sent out Wednesday, De Castro Neves writes:

“This strategy … seems to be winding down significantly since the end of 2010. Despite sinking approval ratings and growing unrest between Morales and his social base throughout most of 2011, no nationalizations were actually implemented during that year.”

The Argentine oil grab is a more bitter pill for Spain to swallow. Spain privatized Repsol between 1989 and 1997. When the firm bought Argentina’s YPF in 1999 it became Repsol's most important international asset, writes the historian Richard Drayton in The Guardian.

In April, Morales reacted to Argentina's oil grab by distancing himself, saying “it’s an issue between Argentina and Spain” and “we have a very trusting relationship with Repsol,” according to Agence France-Presse news wire.

Drayton underscores further strong points. Latin America’s nationalization efforts come at a time when Europe is pushing privatization on its weakest countries, including Spain. It’s as though the pendulums in the Old World and New World are swinging in reverse motion. Can pendulums collide?

The Guardian commentary also stresses an interesting parallel between the Bolivian and Argentine news: “In both cases Spanish multinationals had prioritized the repatriation of dividends over investment.”

Both Morales and Fernandez de Kirchner cited poor investment and subsequently low production as cause for a takeover by the state.

Drayton argues:

“In nationalizing, Argentina showed that a democratic government can stop predatory financiers. And it has not scared away new investors: already Talisman, ConocoPhillips, Chevron, and Chinese companies are seeking access to Argentina’s shale oil reserves, the third largest in the world.”