Home' Trinidad and Tobago Guardian : December 5th 2013 Contents BG26 | INTERNATIONAL
BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 2013 • WEEK ONE
Having been an exporter of hydrocarbons not
long ago, Argentina now imports natural gas
from Bolivia and oil from Venezuela -- even
though it is sitting on what is probably one of
the world s biggest shale oil-and-gas fields,
Vaca Muerta in Patagonia.
Last year, when President Cristina Fernandez ordered the
expropriation of Repsol s controlling stake in YPF, the country s
main oil company, she saw the move as a way of ensuring
that Vaca Muerta would be developed by Argentines, not by
Spaniards. However, the nationalisation placed YPF at the
centre of an international legal dispute.
This left Miguel Galuccio, YPF s new chief executive officer,
running a company with little chance of raising the capital
it needs if it is to develop its slice of more than a third of Vaca
Muerta s acreage. It is only one of several problems making
it hard for Argentina to cut an energy deficit that, according
to economist Miguel Kiguel, is heading for US$7 billion this
year. That deficit is a big reason behind a plunge in the Central
Bank s reserves to a seven-year low.
All this explains why this week the government offered
Repsol compensation, reportedly of US$5 billion, payable in
government bonds. That is hardly generous: Repsol wanted
US$10.5 billion in cash. Nevertheless Repsol s board gave the
offer a cautious welcome. The alternative is years of international
For Argentina to meet its goal of being self-sufficient again
in energy by 2030 will require investment of around US$200
billion, reckons Jorge Ferioli of the local branch of the World
Energy Council, a pressure group, of which US$140 billion is
in shale and about US$60 billion in conventional oil and gas.
A deal with Repsol improves Galuccio s chances of getting
other investors to follow Chevron, which in July agreed to
invest a modest US$1.24 billion during the next five years in
a pilot scheme in Vaca Muerta.
Only a bit, however. Under Galuccio, an experienced oilman,
YPF s investment spending has doubled this year, but only to
about US$5 billion. A big obstacle to going faster is that Argenti-
na s dispute with holders of defaulted sovereign bonds limits
YPF s ability to tap international financing on reasonable terms.
The government has taken some steps to attract investment.
It has raised the wellhead price it pays for newly developed
gas, approved a new hydrocarbons law and issued a decree
allowing companies to repatriate profits after investing at least
US$1 billion over five years. Drawing in more investment,
however, means allowing multinationals to import equipment,
export production and repatriate profits freely, according to
a senior industry source in Buenos Aires.
It doesn t help that the official exchange rate is 60 per cent
overvalued, which makes it unattractive to bring in dollars.
"To get money," the source says, "you need to be trusted."
Grudging though the deal looks, compensating Repsol is at
least a first step toward restoring investors confidence in
Argentina. It is only one of many that are needed.
@2013 Economist Newspaper Ltd. (Distributed by the New York
When Juan Orlando Hernandez, the winner
of Honduras presidential election of November
24, was involved in a minor helicopter crash
eight days before the election, he clambered
out, fell to his knees and thanked God for sav-
ing his life. Since then the 45-year-old right-
winger, who grew up in a rural family of 17
children, has done his best to show that he
is the chosen one.
"The voice of the people is God s voice," he
proclaimed, defending a victory that his main
Hernandez, who is reputed to be an adept
political operator, badly needs a deus ex machi-
na to help him when he is formally declared
president-elect of a country that last year had
the world s highest murder rate: About 20
Hondurans are killed each day.
The election marked the fragmentation of
what had been a stable two-party system, in
which Hernandez s conservative National Party
alternated in power with the slightly less con-
servative Liberals. That cozy arrangement
began to crack in 2009 when Manuel Zelaya,
a Liberal who had embraced Venezuela s Pres-
ident Hugo Chavez, was overthrown in a coup.
With 80 per cent of the count complete,
Hernandez had won only 36 per cent of the
vote, well short of the clear majorities achieved
by past presidents. Though the electoral tri-
bunal declared him the winner, Zelaya s wife,
Xiomara Castro, won 29 per cent under the
banner of a new left-wing party and was
refusing to recognize Hernandez s victory. The
couple called on her supporters to take to the
streets to protest "fraud," but as yet they have
come out only in dribs and drabs.
The Liberals were pushed into third, with
about 20 per cent. It is not clear which, if any,
of the opposition forces might join a pact that
Hernandez hopes to forge to overcome his
party s minority in the 128-seat Congress.
Despite these impending difficulties in what
is one of Latin America s poorest countries,
some outsiders put a positive spin on the elec-
tion. An American official said that a higher
turnout -- about 60 per cent -- showed Hon-
durans faith in democracy, which was "a beau-
tiful thing." Feared post-electoral unrest, which
prompted some panic buying in supermarkets
before the election, did not materialize. Despite
the claims of fraud, observers from the Euro-
pean Union said that the result tallied closely
with exit polls.
"I m basically optimistic that, with the new
government, there s a new start," the American
Hernandez has pledged to make that start
straight away. He hopes to renew a standby
facility with the International Monetary Fund
within six months. International finance offi-
cials say that to do so he will need to cut a
budget deficit that is expected to reach seven
per cent this year by raising electricity tariffs
and eliminating hundreds of value-added-tax
exemptions. Since the new legislature will be
splintered, the National Party may try to ram
these unpopular measures through the outgoing
Congress, in which it has a majority.
Damming the flood of red ink is vital if the
next government is to find the money for what
most Hondurans think should be its top pri-
ority: tackling violent crime. At polling stations
voter after voter complained of the collapse
in law and order, especially what Juan Roberto
Antunez, a young engineer, called a "war tax"
-- the charging of protection money by gang
members who kill those who don t pay.
Analysts say that one of the reasons Her-
nandez eventually overcame Castro s early
lead in the opinion polls was his promise to
do "whatever it takes" to improve law and
order. The creation this year of a 2,000-strong
military police, which he says he will increase
to 5,000, appears to have gone down well with
voters, though the shape and scope of that
force is still unclear. Castro was the only can-
didate to favour civilian policing.
Oscar Alvarez, Hernandez s campaign man-
ager, hints that he may lead a new super-min-
istry in charge of both the police and the army.
Alvarez says that the mano dura ("iron fist")
approach will be leavened with crime-pre-
vention measures aimed at discouraging youths
from joining gangs, with money from the Unit-
ed States and know-how from Colombia. Her-
nandez insists that only drug traffickers need
fear the military police, though this claim rang
hollow when dozens of them were deployed
to deter Castro s supporters the day after the
In the past four years mano dura from the
National Party has failed to rein in organized
crime and drug trafficking. According to the
EU observers, the party vastly outspent its
rivals in the campaign, and it is not clear where
the extra money came from.
As well as calming a divided country, Her-
nandez will have to ensure that his own house
is clean, too.
Mano Dura wins the day
Backpedalling in Argentina
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