Real estate negotiations, Argentina style

January 25, 2013

There’s not too much one can do when a government minister marches into your office and essentially tells you to get lost. On April 16, 2012, the normal Monday morning routines unfolded with greater tension in the Buenos Aires offices of Spanish energy company Repsol’s YPF subsidiary. As top planning executive Carlos Jiminez and his colleagues were watching President Christina Fernandez unveil plans to seize control of YPF and nationalize Argentina’s leading energy producer, the unthinkable happened.

“About 30 minutes before she finished her speech, the undersecretary of planning and the state representative on the (YPF) board, Roberto Baratta, marched in and said the business relationship was ended,” Jiminez recalled after a luncheon in New York this week.

“All they said was ‘We need the office’, and that was that. We had 10 minutes to get our stuff and get out. Our e-mails and phones were cut off within 15 minutes of their arrival. It was a shock. Simply, that the relationship was finished. I never thought this would happen,” said Jiminez.

In February 2012, Argentine officials accused the oil company of denying them entry to a board meeting. It was the early days of the pressure  being applied to the company, and the local energy industry in general, by the Fernandez government to boost oil and natural gas output as fuel imports were soaring.

“We began to hear rumors last February that something like the expropriation might happen. We had 15,000 workers at YPF out of a total of 28,000 for Repsol overall,” said Arturo Gonzalo, corporate director of institutional relations and corporate responsibility. Gonzalo spoke during a luncheon sponsored by the Hudson Institute, a conservative think tank in New York.

In his remarks during the luncheon Gonzalo said the company was not engaged in any negotiations whatsoever with the Argentine government, although Repsol is willing to do so.

“Argentina is no longer a country where rule of law can be counted on ,” Gonzalo said, referring to the Fernandez administration. “They don’t talk and they don’t pay.”

Until February of last year, YPF had good relations with Fernandez, Gonzalo said. However, the leader of Latin America’s No. 3 economy and a member of the Group of 20 nations has taken on increasingly interventionist and off-beat policies, which infuriates her critics. She had praised the company when they found the equivalent of 22 billion barrels of oil in the form of massive shale oil and natural gas.

In 2008 she stunned investors when she nationalized private pension funds at the height of the global financial crisis. The International Monetary Fund is expected later this month to discuss Argentina’s progress in improving the quality of its economic data. Since 2007, Argentina has been accused of under-reporting inflation and exaggerating economic growth and industrial output figures, partly for political gain and also to reduce payments on its inflation-indexed debt that was created in the aftermath of its historic sovereign debt default in 2002.

But Fernandez has been strident with investors who refused to go along with her policies. Case in point is the fact that more than a decade after defaulting on its sovereign debt, the country refuses to submit to U.S. court rulings in favor of investors wanting full payment on their investment. The government’s steadfast refusal to pay has essentially cut it off from international financial markets and hindered its ability to sell debt.

Jiminez remarked that he had worked closely with Baratta over the eight years he was in Argentina. Baratta asked him to stay on an extra day to help the transition. “I felt physically and mentally unsafe in the country,” he said.

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see