Argentina's Nationalization

Questions: Is Argentina’s nationalization of  Yacimientos Petrolíferos Fiscales  a response to an inefficiently run energy firm? 

Or is it a response to the lack of international support in its claim to the ‘Malvinas’?

The sovereignty of the ‘Malvinas’, known to most of the world as the Falklands, have been a subject of heated debate since 1982, when the United Kingdom and Argentina went to war over them.  In an attempt to distract the public’s attention from the unpopular military regime, the Argentine military invaded the Falkland Islands on April 2nd of 1982, under the premises that the Argentina had the sovereignty over the islands. The United Kingdom responded by sending the Royal Navy to defeat the Argentinean military, and take back the Falklands. Thirty years later, the issue began to heat up again, when the United Kingdom began drilling for oil off the territorial waters off the Falkland Islands 

To me, it seems as if Argentina has known that there was oil around the Falkland Islands for almost a decade.  In 2009, Argentina submitted more than a decade’s worth of records and documentation that laid claim to over 1.7 million square kilometers of ocean, including parts of Antarctica and, of course, the Falkland Islands.  According to these reports, if these claims are proven legitimate by the United Nations Convention of the Sea, Argentina’s sovereignty would extend from its current mainland claim 200 miles off the coast, to 350 miles 

These claims have obviously, not garnered any support from the international community.  Ever since the UK has revealed its plans to expand its oil exploration off the Falkland’s coast, Argentina has done everything it can to make its sovereignty “grievances” heard, including submitting the 2009 research documents to the UN threatening the United Kingdom with legal action  and even President Cristina Kirchner walking out of the Americas summit. 

The UK, in response to Argentina’s continuing accusations of the stealing sovereign resources, has accused Argentina of bullying the people of the Falkland Islands. In the BBC article titled ‘Argentina threatens legal action over Falklands oil’, the United Kingdom’s Foreign Office accused Argentina of damaging “the livelihoods of the Falkland Islands people...harrassing Falklands shipping...threatening the islanders’ air links with Chile,” and calls these actions “illegal, unbecoming and wholly counter-productive,”. So in response to these bullying tactics by the Argentine government, the Royal Navy deployed one of its most modern warships, the ‘HMS Dauntless’ in February 

Since the deployment of the HMS Dauntless, Argentina has accused the United Kingdom of warmongering. President Cristina Kirchner has said that the United Kingdom should “give an opportunity for peace and dialogue.” In an attempt to rally Argentina’s Latin American allies, President Cristina Kirchner said that “The question of the Malvinas has stopped being just an Argentinean cause. It has become a Latin American cause,” .

But in April  it became obvious that no one else in the Latin American region, except for Bolivia and Venezuela, really was willing to bring up the sovereignty of the Malvinas. On April 15th, President Kirchner stormed out of the Americas Summit in response to the islands not being brought up. 

Only a day after this incident it was announced that Argentina had nationalized Yacimientos Petrolíferos Fiscales (YPF), a private Spanish, energy company, owned by Respol.  The move was effective immediately after President Kirchner sent a bill to Congress, buy out a 51% stake in YPF, and replacing CEO Sebastian Eskenazi with Juilo De Vido. YPF has been accused of not investing enough into the extraction of energy. In the past year, Argentina doubled its imported oil to $9.2 billion.  The Argentine government accused YPF of being inefficient and Respol of failing to fulfill the promise of making Argentina self-sufficient in energy.  YPF’s stocks fell immediately after, and faced condemnation from many nations, especially Spain.

I don’t think that Kirchner’s decision to nationalize YPF was a coincidence. I believe that the international community ignoring the Falkland Islands debate, along with the UK exploring the disputed coasts for energy, emboldened Argentina to make its voice heard louder than ever before. In doing this, Argentina accomplished two short-term goals.

First, it has strived to become less dependent on foreign energy and oil. YPF has indeed failed to yield the energy dependency that Argentina has sought since the privatization of its oil industry in 1999.  Perhaps gaining control of these companies will benefit the people and strengthen domestic economic development. 

Second, Argentina has taken this step to counter, what Argentina and maybe some of its Latin American allies have seen as, the spread of European and Spanish influence in Latin America. It also shows that Argentina can make a bold move like this, without facing any real economic consequences up to this point.

At the same time, Argentina has isolated itself a bit in doing this. The Falkland Island issue has not been a popular one globally, and this move will not help it with this issue. Whether or not this move will benefit Argentina, will be known in the coming years, or months.

References

Argentina continental shelf presentation includes Falklands — MercoPress. (2009, April 22)

Argentina grasps again for Falklands. (2012).The Washington Post. 

Argentina Seizes Oil Producer YPF, as Repsol Gets Ousted. (2012, April 16).Bloomberg News

Argentina storms out of Americas summit. (2012a April 15).Al Jazeera English. 

Argentina threatens legal action over Falklands oil. (2012a April 15).BBC News.

 Argentina’s move to nationalize oil firm YPF highlights Spain’s decline CSMonitor.com.

Swaine, J., & Sanchez, R. (2012a Feb 08). Argentina to complain to UN over “militarisation” of Falklands - Telegraph. The Telegraph.

American Entrepreneurs

How does running a business differ around the world? 

This was a question asked in What drives US entrepreneurship?  It was interesting finding out the perspective of three US business people interviewed by BBC News exploring what drives American entrepreneurship.

Tom Ryan (founder of restaurant chain Smashburger) was one of the three interviewed and found it hilarious how he was described.  He’s described as you’re typical, easy going American entrepreneur and the last part is he wants to take over the world. And who doesn’t? When you own your business and are proud of it you feel like introducing your special product to the unknowing masses.

The other interviewee was a Californian named Eric Ries from Silicon Valley. Ries said that some of his technological start-ups have been both failures and successes. With his past history, Eric Ries feels that the US willing to support and tolerate business failures compared to Europe or other parts of the world. He goes on saying that in Europe when you fail in business it’s very difficult to borrow money again for other business ventures.

I see both benefits and risks with that concept. You could end up making money the second time around or just become increasingly more in debt. But as they say in American business the bigger the risk, the bigger the reward.

The third US entrepreneur was Julie Meyer and she works as well as lives in London. She agreed that Americans are willing to take more of a chance on their business. She felt that is it’s a “cultural thing.” Meyer felt that the UK had wonderful entrepreneurs, but financing is sometimes not available to them.

A lot of the issues that the three mainly focused on were that fact that in the US you had more of an opportunity to getting the fund to work for yourself. If it wasn’t for our risk taking culture companies like Google or Facebook might not have occurred. These start-ups were started in a garage/dorm room. They also stressed how you don’t have to be born with the abilities to be an entrepreneur they can easily be acquired.

Micro-financing in other countries

Other countries could easily achieve this if their government provided its’ people with more support. I fully believe this is true. For example, I have read cases where in India women were given small loans to start up their business and not only were they able to pay it off, but turned it into a profit. India even has a school that teaches women how to borrow money, network, and they provide resources. Micro-financing could successfully impact women groups in India and take them out of poverty.



Studies found that women in Kenya were helped with practical needs in the short-term and long-term promoting strategic change. Micro-finance may actually help women gain respect and achieve more socially defined roles.

Theme Parks in France

Machines de L'lle

I was going through the news stories on BBC NEWS and the article “Nantes' theme park economics at Machines de L'lle ” caught my eyes. France used funds from the regional government and the European Union to build a theme park in the city of Nantes.  The amount invested in the French theme was over $13 million.

I think the concept of this park is pretty unique. For example, the theme of the park is based around just giant mechanical animals. Both the partners in the project were convinced that this theme could be an appealing success to all. It also seems that they are trying to take a different route when it comes to theme park.  One of the partners in the project, Pierre Orefice said, "In the Disney and Asterix parks, the parents are spectators, they don't have the same emotion as their kids” and "We were sure there should not be separation from the world of children and adults. It was very important that a parent could enjoy the experience as much as the children."

It seems that the attraction is paying off by attracting many customers, but despite it’s popularity the park can’t cover its costs. It’s no surprise because according to BBC News one of its mechanical elephants requires 2,000 liters of oil to operate smoothly. The cost for that much oil in that elephant runs up to over $200,000 a year!

I was more surprised to find out that local officials are more than happy to keep investing in the park. The argument is that the park has created highly skilled workers in the workshop and in the gallery. Also, they claim that the tourist revenue compensates for losses endured by the park.

Even though, this park is operating at a loss I oddly hope it remains in business for years to come. I would like to personally go and take a trip to Machines de L'lle in France. Apparently, this summer they are set to unveil their latest creation. The name of the attraction will be The Carousel of Marine World. This attraction will have three levels of elaborate mechanical sea life.

Disneyland Paris

The article triggered my memory to a case that I remembered reading in one of my international business courses. The case was on how Disney wasn’t able to be as successful as they had hoped when they decided to build a park in France.

After finding success outside of the U.S., like Tokyo, Japan, Disney decided to start searching for a place in Europe to build a theme park. The heads of Disney's theme park division finally came up with a list of 1,200 possible places. In 1985, the list was lowered down to two countries either France or Spain.

Both places had a sub tropical climate and were located near the Mediterranean Sea. Disney’s final decision was on a site in the rural town of Marne-la-Vallee in France.  The location was chosen because it was in the central location of Western Europe and had a close proximity to Paris. Disney had estimated it was a four-hour drive to for over 60 million people and a two-hour flight for over 300 million.

Construction began in 1988 after the French government had given the Disney Company clearance to start building.  The construction budget of the Disney theme park was $2.3 billion.

The park opened up its doors to the public in 1992 under the name Euro Disneyland.  But opening day turned out to be a disappointing one. The parking lot was half full and attendance was below 20,000.

People tried to defend the loss by blaming external factors that were occurring in France. The country was experiencing a recession and unemployment. You would think having a Disney theme park would decrease unemployment, but it didn’t.  The Hollywood Reporter reported that almost 3,000 people had resigned their positions at Euro Disneyland.

So why would people quit their jobs at the theme park when there is an unemployment crisis? I believe that Disney didn’t do their homework well when they decided to go into France.

Many employees claimed they left because of unacceptable working conditions. Disney tried to impose the same codes it requires here in the U.S. As reported by USA Today "Rules governing fingernails (neutral polish, no more than one-quarter inch beyond the fingertips for women or tip of the finger for men), eyewear (conservative color and style) and body alteration (no "visible tattoos, brands, body piercing other than traditional ear piercing for women, tongue piercing or splitting, tooth filing, earlobe expansion and disfiguring skin implants". Recently, Disney let men have beards or goatees. The French citizens didn’t like the idea of being told to keep up with a dress code appearance. The French labor unions protested saying that it was an attack on individual liberty. There was also controversy around the staff being told they needed to speak English in meetings. Others were also concerned that Euro Disneyland would influence the French public with unhealthy American consumerism.

Disney shouldn’t try to impose their “Disney culture” to everyone. Here in the U.S. workers at the Disney theme parks don’t agree too much with the codes, but they still follow them. In the past years Disney has tried to turn around Euro Disneyland.  For example, they found that the name Euro Disneyland didn’t sit well with the locals.  Mike Eisner, the CEO at the time, noted, “As Americans, the word ‘Euro’ is believed to mean glamorous or exciting. For Europeans it turned out to be a term they associated with business, currency, and commerce. Renaming the park ‘Disneyland Paris’ was a way of identifying it with one of the most romantic and exciting cities in the world.”

Disneyland Paris celebrated its 20^th anniversary this year, but it’s still not “out of the woods”. There are still controversies concerning the park like the ones reported on The Independent and last year they reported a financial loss. The Guardian reported Disneyland Paris lost €55.6million which is over $73 million in U.S. dollars.

 Not sure really what to think about this because both parks are operating at a loss. At first I blamed it on the fact that Disney was an American company not willing too fully comply with French culture. But Disneyland Paris gets an overwhelming amount of tourist visiting the park each year. I can only assume that it's pretty difficult to keep a park in France operating efficiently. 


As much as I loved Disneyland growing up as a little girl, I hope that Machines de L'lle is able to operate for a long time in France. The concept is a unique one unlike Disneyland, which usually has the same outputs in their locations around the world.