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Argentina: Oil nationalization and currency controls divide a nation

Months after Argentine President Cristina Fernández de Kirchner’s nationalization of the YPF energy company and controversial economic policies, where does Argentina stand?

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But restrictions have given rise to a flourishing black market for greenbacks and Marina Dal Poggetto, an economist at Estudio Bein & Asociados, a Buenos Aires consultancy, says the policies are “short-termist.” In the longrun, high inflation cannot be maintained, she insists. What is keeping the economy afloat today could potentially spin Argentina into yet another economic crisis in the future.

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‘Not a soccer team’

Growth and inflation data are other points of contention in Argentina. The government reported growth of 3.4 percent this year and 4.4 percent next year, impressive numbers given the global crisis and reduced trade with Brazil, Argentina's biggest export market. 

“The engines of economic growth next year will be a boost in domestic consumption and in investment,” Economy Minister Hernán Lorenzino said when he presented the 2013 budget last month. “Argentina’s economy continues growing in an international economic context in which some important regions in the world are in recession.”

However, the IMF has called the government out on what it says are inaccurate statistics.

Christine Lagarde, head of the fund, threatened Argentina with a “red card” should it not improve the reliability of its statistics by mid-December.

“My country is not a soccer team,” Kirchner retorted at the United Nations last week, continuing the sports analogy. “We won’t be subject to threats.”

Argentina’s national statistics agency, INDEC, puts the annual rate of inflation at around 10 percent, compared with the 24 percent reported by independent economists, who say they have been discouraged from reporting these higher rates through legal action and fines by the government: Twelve consultancies have so far been reproached.

Speaking in the United States last week, Kirchner said they had “no scientific base” for their figures.

Ms. Dal Poggetto, whose firm was fined $130,000 for relesasing statistics that conflicted with INDEC, says underestimation of inflation and overestimation of growth is typical of a “populist regime.”

Oil company nationalization

In perhaps her most controversial move of the year, this April Kirchner nationalized YPF, Argentina’s biggest oil company, by emergency decree from Spanish energy firm Repsol.

This wasn’t the country’s first nationalization: During her first term, from 2007 to 2011, Kirchner expropriated a $24 billion private pension fund and an airline.

The government said YPF was seized because of Repsol’s lack in investment in oil company, and in an effort to boost control over the country’s natural resources.

The government’s policies have led to a lack in confidence on the part of investors, some analysts say. While Chevron signed an agreement to explore the vast Vaca Muerta shale field and an alliance has also been struck with Venezuela’s state oil company, Miguel Galuccio, YPF’s chief executive, has had to tour the US and Britain to woo investors in attempt to raise $37 billion over the next four years.

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