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Argentina strikes a deal with energy firm Repsol: will investment follow?

President Kirchner’s unpredictable policy decisions, and the uncertainty about her successor, mean investors find the Argentine market opaque and risky.

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Sergio Perez/Reuters
The logo of Spanish oil company Repsol is seen in a petrol station in Madrid May 14, 2013.

Argentina’s government says that its recent $5 billion settlement with Spanish oil major Repsol SA will clear the way for new energy investment.

Our correspondent says otherwise, based on speaking with top economic analysts and former government financial officials in Buenos Aires. Rather, multinational companies are still playing a game of wait-and-see with Argentina, even as local stock market investors are making bets that the nation will see the upside once multinationals do regain confidence in the protectionist South American nation.

“The agreement with Repsol is not enough to attract foreign investment,” says our correspondent in the Argentine capital. “Caution will continue to rule.”

That caution is based in large part by Argentina’s 2012 expropriation of Repsol’s controlling stake in Argentinian oil company YPF SA. The government approved a settlement with Repsol on April 24 for half the company’s initial request for $10.5 billion in compensation.

Cabinet Chief Jorge Capitanich said the settlement would “open the door for increased energy investment,” as reported by Bloomberg News. Mr. Capitanich also said the government will need a total of about $149 billion of investment for infrastructure projects over the next decade.

But rare is the multinational firm that has dared to invest in Argentina since the expropriation, and none have stepped forward since the settlement. Chevon Corp last year made a $1.24 billion pilot investment to develop shale deposits of Vaca Muerta in western Argentina with YPF. Chevron followed up last month with another $1.6 billion investment in the project. YPF also attracted a modest $188 million in September 2013 from Dow Chemical to jointly develop Vaca Muerta.

“That’s peanuts,” says our correspondent... For the rest of the story, continue reading at our new business publication Monitor Global Outlook.

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