as Argentina’s case shows: The government who took over individual pensions and the Spanish company Repsol YPF’s assets is now trying to get out of paying Repsol by doing an Ecuadorian maneuver and try to assess “environmental penalties”, all in violation of the country’s constitution,
Kirchner’s Oil Expropriation Backfires
Many Argentines fear the checks and balances restraining presidential power are gone.
the YPF decision might make matters worse, even in the short run. That’s because the nationalization was done in violation of Article 17 of the Argentine constitution, which says that an expropriation has to be carried out according to the law and not before the company is compensated.
The fact that neither the courts nor Congress (including the opposition) tried to stop what was clearly illegal under Argentine law confirms what many Argentines have feared: The checks and balances on executive power that the founders once envisioned are gone. The logical conclusion is that if the executive wants to run a police state, she will have no quarrel from other institutions.
Not only won’t she have any quarrel, by filling all positions with her followers, she’ll be heartily cheered, as she was when she announced the takeover.
Perhaps if the YPF action were an isolated event, Mrs. Kirchner could hope to salvage some credibility for Argentina’s rule of law. It is not. From civil liberties—notably press freedom, which has been aggressively attacked by the executive—to economic freedom, Argentines and foreign investors have been losing their rights. The YPF expropriation has heightened their sense of foreboding.
The latest manifestation is the crackdown on the right to buy dollars. With accumulated inflation in 2010 and 2011 totaling almost 50% but the peso depreciating only about 15%, markets had been expecting that the government would be forced to let the exchange rate adjust more rapidly. Instead, Mrs. Kirchner’s economic team moved earlier this year to stop the peso from falling by putting strict controls on its sale. Importers who need to be able to buy dollars are now hard-pressed.
The government also began to demand that exporters turn dollar revenues over to the central bank within 15 days of making a shipment abroad. When exports dropped, the deadline was moved to 30 days, which is still an unreasonable burden. Travelers who need dollars must apply to the government, explaining where they are going and why.
It’s turned the country, as Mary O’Grady says, into “an accident waiting to happen and a good place for investors to avoid.”