President Mauricio Macri met today with Spanish Business leaders to work on what is perhaps the most time-sensitive goal of his three-day state visit to Spain: getting investments for the country, or at least work towards getting them in the near future.
Macri focused on the latter, more achievable, goal in the breakfast that he shared with representatives of the Spanish companies that comprise the Ibex 35, the Spanish stock exchange market. Altogether, these companies hold 70 percent of the countries’ GDP. And apparently they liked what they heard.
According to press reports, the business leaders particularly praised the economic policies his administration has made since taking office and highlighted the favorable climate to do business they generated. On the other side of the table, the present government representatives focused on two things: making it clear that their administration would grant them legal certainty to those willing to invest. And tout the benefits the so called Public, Private Partnerships (PPP) law, approved by Congress last year and which will come into effect shortly.
The first one is aimed at patching up the relationship between the Argentine state and Spanish business leaders, practically broken since the Cristina Kirchner administration expropriated the majority stake of oil company YPF from Spanish private company Repsol in 2012. Last year, Macri said the expropriation represented “an abuse” that was a “violation of the Argentine National Constitution.”
However, it’s fair to clarify that almost no one in Argentine politics agreed with what Macri, along with the rest of his party, thought of the decision. The partial nationalization of the company was one of the few measures in recent political history that was carried out with almost unanimous consensus. Practically all of the political parties in Congress, except for Macri’s PRO, agreed on the need to retake control of the Argentine oil company that was first privatized in 1992 and Repsol acquired in 1999.
To justify the expropriation of a majority stake in the company, the government noted that after 13 years under Repsol, YPF’s oil reserves in the country fell by 54 percent, while gas reserves plunged by 97 percent. That decline in production was in part responsible for Argentina turning from an energy exporting company to an importer.
At the time, Macri’s stance was strikingly similar to that of Spanish President Mariano Rajoy, who said the decision “broke the good understanding both countries had” and encouraged Repsol to take legal action against the nationalization. However, two years after the law came into effect, Repsol gave up any sort of legal claim when, in February 2014, accepted a juicy US$5 billion compensation, partly in cash and partly in sovereign debt.
However, the episode marked a breaking point between Spanish companies that could have potentially invested in Argentina and the Kirchner administration. Neither was particularly interested in doing business with the other. However, Macri has a completely different stance, and it looks like business leaders, at least to his face, are with him on this.
As for the Public-Private Partnerships, press reports indicate that the business leaders were particularly interested in this form of investment where a private company undertakes a large, long-term infrastructure project and commits to provide its related services — like building and manage a train line, for example — and the state deals with the cost in payments over time and the profits they earn from people using the service.
At the end of the meeting, Production Minister Francisco Cabrera said “the most relevant [talking point] was the level of assistance from business leaders from all industries.”
Macri then continued his jam-packed schedule by meeting with Spanish President Mariano Rajoy. They signed a series of bilateral agreements and then held a joint press conference.