Argentine Finance Minister apologizes to Spanish CEOs, including some who pillaged Argentine firms.
Speaking at the New Economy Forum in Madrid, Argentine Finance Minister Alfonso Prat-Gay told a group of Spanish executives that he was “sorry for what Spanish capital suffered in the last several years.”
The unsolicited apology, made in reference to the numerous Spanish-controlled Argentine public services renationalized during the Néstor and Cristina Fernández de Kirchner administrations, prompted renewed questions over who has benefited the most out of the economic relationship between the two nations.
Spain, which was historically but a minor player in the Argentine economy, has since the 1990s been the second largest foreign investor in the country after the United States. They acquired that status when during the Carlos Menem administration Spanish firms bought many of the state concerns privatized at the time, including airlines, oil, electricity, and telecommunication firms.
The results, however, were at best mixed.
Some, like Telefónica (which bought 50% of ENTel) and Endesa (which controls the Edesur power company), could boast of having modernized and expanded services - albeit with some strain. Others like Repsol (which controlled the YPF energy firm), Aguas de Barcelona (which co-owned, with France's Suez, the OSN water works), and most notoriously Iberia Airlines and Marsans (which controlled Aerolíneas Argentinas), reaped outsized profits of 20% or more thanks to sharp rate hikes and generous government subsidies while saddling their Argentine companies with debts and with little to show in return.
YPF
Prat-Gay specifically mentioned Repsol yesterday, saying it was “welcome to invest in the country again.”
Repsol, headquarted in Spain but in reality controlled by Mexican interests through Caribbean offshore companies, became the largest single investor in Argentina when in 1999 it purchased a controlling stake in YPF (Argentina's largest energy firm). Founded in 1922 by the state, YPF was privatized in 1993 and sold to a mostly Argentine consortium. The privatization was initially a success; but after its private local owners sold YPF to Repsol, investment and exploration fell so rapidly that YPF lost two-third of its oil and gas reserves.
Repsol was accused of quietly disinvesting in Argentina, using its local profits and even more to finance its expansion elsewhere while re-investing little at home. Repsol-YPF’s own SEC reports show that new exploration wells fell from an average of 77 between 1993 and 1998 (before Repsol acquired the firm) to 26 between 1999 and 2004 and 13 between 2005 and 2010. Only in 2011, with the discovery of the Vaca Muerta shale deposits in Neuquén, did that figure recover to 24 wells per year.
When former President Fernández de Kirchner renationalized YPF in 2012, Repsol - and much of the business press - blamed “government policy which reduced financial incentives to invest” for the output declines; but between 1999 and 2011, YPF had profits of $16.4 billion - of which $13.2 billion were sent abroad.
Aerolíneas Argentinas
The national airline, Aerolíneas Argentinas, is still regarded as a poster child for botched privatizations both in Argentina and elsewhere.
Founded by the state in 1949, Aerolíneas was sold to Spain's state-owned airline, Iberia, in 1990. Acquired debt-free (at a cost to Argentina of $800 million) Iberia ran the firm nearly $1 billion into debt over the next decade while selling off assets and leaving it to lease its own former aircraft in order to operate. The proceeds were largely used to cover Iberia's own losses, making the Argentine state a direct source of subsidies to the Spanish state.
Iberia sold the insolvent airline to Spanish tourism conglomerate Marsans in 2001; but both the airline's fleet and finances continued to deteriorate despite massive Argentine subsidies. Gerardo Díaz Ferrán and Antonio Mata, top executives at Marsans, are today both serving prison terms in Spain for fraud and tax evasion.
Aerolíneas was ultimately renationalized by former President Fernández de Kirchner in 2008. Passenger traffic and revenues for the group nearly doubled by 2015, losses were pared from 78% of revenues to 12%, assets more than tripled, and the average age of aircraft was reduced from 20 years to seven.
“We can debate how Aerolíneas Argentinas is or was; but I never imagined I would see a government minister asking (Antonio) Mata and Marsans for forgiveness,” Mariano Recalde, who presided over the airline after its nationalization in 2008, said yesterday. Recalde posted pictures from 2008 of abandoned aircraft and protesting workers, saying “this is how Aerolíneas was left by the people to whom Alfonso Prat-Gay apologized in the name of the Argentine people.”
Premature celebration
Spain's right-wing prime minister, Mariano Rajoy, welcomed the election of Mauricio Macri as Argentine president last November primarily because of Macri's opposition to nationalizations and past promises that some renationalized Spanish firms would be sold off. Telefónica, which is now the largest Spanish investor in Argentina, learned however that their relationship with the new administration would also be at best a mixed one.
Macri, who was narrowly elected in large part thanks to a sustained smear campaign against his pro-Kirchner opponent by the country's largest media group, Clarín, created a new communications agency (ENACOM) which prevents Telefónica from entering the lucrative cable television market (Clarín's mainstay) until 2018 while allowing Clarín to enter the telecom sector (Telefónica's core business).
At: http://buenosairesherald.com/article/215361/pratgay-puts-spanish-firms-in-spotlight
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