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When the State Takes Stock

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The Argentine government has seized control of Spanish oil giant Repsol's stake in what was, until its privatization in 1992, Argentina's national oil company. The takeover President Cristina Fernández de Kirchner signed into law on Friday is being celebrated in Argentina and roundly criticized elsewhere as a repudiation of the neoliberal reforms that opened up Argentina's crisis-plagued economy. In fact, that interpretation mischaracterizes what the Argentine government is doing. The move is not a rejection of foreign investment or a return to 20th-century protectionism. It's better understood as an extension the neoliberal economic policies that the US and Europe long have advocated for the Global South.

In 1922, Argentina founded YPF, the world's first vertically-integrated state-owned oil company outside of the Soviet Union. Amid a severe economic crisis, President Menem privatized YPF in 1992, and soon sold controlling stake in the company to Repsol. As an anthropologist who has examined the social consequences of YPF's privatization, I have seen how a change that was supposed to bring economic stability and prosperity has done quite the opposite.

Since the 1990s, Argentines have complained bitterly about the fallout from the privatization of state assets that were at the center of Menem's neoliberal reform. Repsol rocketed to the top of the list of oil giants, while the majority of Argentines found themselves and their country increasingly deep in poverty and debt. They have not forgotten the promises of future well-being that accompanied the bitter pill of neoliberal reform and have placed much well-deserved blame on foreign corporations for "robbing our grandmothers' jewels." While fuel shortages have become common in Argentina, Repsol reported that its profits had more than tripled between 2009 and 2010. Much of these profits come from its South American operations. President Fernández de Kirchner has effectively mobilized the widespread anger at these facts in support of her move to reclaim the country's oil resources, much to the consternation of foreign governments and companies.

Yet the renationalization of YPF is not the political and economic reversal that it seems. To the extent that neoliberal policy is both about encouraging foreign investment in the Global South and the belief that corporations manage markets better than states do, then the Argentine government's action this week is hardly a step away from it. The "re-nationalized" company will still be a joint-stock corporation, not a state entity. In fact, according to Argentine economist Diego Mansilla, the expropriation law does not give the Argentine government even as much control over YPF as the Brazilian government has over Petrobras. Nor does it reverse the widespread deregulation of the petroleum industry that has caused many of the national oil industry's current problems. The government will soon own 51% of the shares of stock of a company that represents a third of oil production in Argentina. No changes have been proposed for the two-thirds of production controlled by other private companies, both Argentine and foreign owned. This is hardly a recipe for a state managed economy and the repudiation of private business.

If YPF's renationalization provides a steady supply of oil at lower cost, as it is intended to do, the biggest beneficiaries might well be large corporations. Take, for instance, agricultural companies. Argentina is among the world's largest exporters of farm products and the recent growth of Argentina's GDP has depended especially heavily on these exports. The Argentine agricultural fields, in turn, are guzzling larger and larger quantities of the products from its oil fields, not only fuels but also fertilizers and pesticides, while requiring fewer and fewer workers. Oil production is notorious for offering few jobs once the roads are constructed and the wells are drilled. The law passed on Friday is not going to get Argentines where they want to be: in better paying jobs with benefits. It may be a small step toward keeping more of the returns of the Argentine oil industry on Argentine soil. More significantly, by reinvesting more money in renovating Argentina's aging oil industry, the expropriation of Repsol may make Argentina a better place for many other kinds of foreign investment.

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