Business & Finance Economics

2012 Argentina - Economics, Trade, and Politics

It's very hard to have legitimate dialogue with foreign nations or engage in free-trade negotiations at a time when nations are busy seizing foreign assets and nationalizing oil wells, gas production, mines, and water filtration plants.
Such huge capital outlays and direct foreign investment exist so that companies can turn a profit, otherwise they wouldn't bother building up those industries abroad.
When those assets are stolen or taken over by another government, the diplomacy discussions take a turn for the worst.
Okay so, let's talk about South America, specifically Argentina in this quick case study.
The LA Times had another piece to this puzzle recently in an article published on April 18, 2012 titled; "Argentina Moves to Take Over Oil Firm - The Bid to Nationalize YFP Outrages Spain, Where the Main Shareholder is Based," by Chris Kraul and Andres D' Alessandro.
What many people don't understand is that the socialist government of Argentina as the inflation rate there at an estimated 9.
8% current, and well, any economist will tell you that such inflation is completely unsustainable.
Also because of the challenges Argentina had in 2000 coupled with this recent move, all but expected by global trade analysts foreign direct investment is down by 30%, yes, right "who would have thought," is what you are probably thinking here.
Still, Argentina even with all of its previous financial and economic challenges over the last 4-decades it seems to wish to follow Hugo Chavez, Evo Morales, and Rafael Correa into the same economic ditch by seizing foreign industrial assets.
You see, Venezuela, Bolivia, and Ecuador have all gotten this notion along with a few other ALBA nations that the ghost of Simon Bolivar is speaking to them and that the Western World is out to steal their resources.
The reality is that whenever a nation's government seizes foreign assets like this, immediately the production drops off so significantly that the enterprise stolen no longer makes money, but becomes a costly inefficient liability.
Again, "who would have thought" other than let's say Ayn Rand? The Wall Street Journal on April 17, 2012 put it rather bluntly in an article titled; "Argentina to Seize Control of Oil Firm," by Matt Moffett and Taos Turner.
Although it didn't mention that when Venezuela failed to renew the oil leases to the US companies after promising to do so, and after significant upgrades were made in anticipation of that promise, that the Venezuelan Government showed a 35% decrease in production.
This is much more typical of what happens and thus, is practically the rule, not the occasional anomaly where a government can actually run an oil enterprise efficiently enough to compete with free-enterprise - that rarely ever happens or even comes close.
What I find somewhat fascinating is that this happened or occurred during and right after the Obama Administration visited the Americas Summit Meeting in Columbia, and one might say that Socialism is on the march in South America, and also in other places here in North America - smile, I think you see what I am saying here.
Interestingly enough, on a side note there was a recent executive order which would allow the US Executive Branch to take over full control of natural gas production, at their discretion.

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