1. What are the costs and benefits of FDI inflows for a host country such as Argentina?
2. Will foreign firms such as Repsol make decisions in the best interest of Argentina?
3. As a Spanish manager at YPF, how would you cooperate with the Argentine government to expropriate YPF? If you were an Argentine manager at YPF, would your action be different?
4. If you were a member of Argentina’s Congress, would you vote to support Fernandez’s renationalization bill for YPF?
5. If you were a member of the arbitration panel assembled by ICSID (which would require you to come from a neutral country—neither from Argentina nor Spain), how much compensation would you think Argentina’s government should pay YPF?
Argentina’s relationship with foreign investors in its energy industry has historically been rocky. The government in 1955 canceled international oil contracts signed by a previous president, Perón, in 1952. The next president signed new contracts in 1958, which were nullified in 1963 by a different president. Foreign oil companies were then invited to return in 1966, expelled in 1973, and again encouraged to enter after 1976. Not surprisingly, many foreign investors shied away from this country.
Since the 1990s, the pro-market reform policies that were centered on trade liberalization, than $10 billion of cash outflows. The government argued that the largest producer, YPF, which contributed 45% of the country’s energy production, was responsible for this mess. In Fernández’s own words in her announcement: If YPF’s policy continues—draining fields dry, no exploration, and practically no investment—the country will end up having no viable future, not because of a lack of resources but because of business policies. . . . Our goal is for YPF to be aligned with the interests of the country. When corporate interests are not aligned with national interests, when companies are concerned only with profits, that’s when economies fail, which is what happened globally in 2008 and what happened to Argentina in 2002.