April 17, 2012 / 4:06 PM / 8 years ago

RPT-Latin America reconquest of Spain assets unlikely

* Argentina has debt problems, neighbours don’t

* Venezuela, Peru also resource nationalists

* LatAm giants Brazil, Mexico investor-friendly

* Argentina remains a small trading partner

By Martin Roberts

MADRID, April 17 (Reuters) - Spanish investments in Argentina may be at risk after the South American country expropriated oil firm YPF from its Spanish controlling shareholder Repsol, but Spain’s relatively small exposure in the region means the impact will be limited.

As of the 1990s, newly privatised Spanish businesses scooped up Latin American banks, telephone companies and utilities, much as their armour-clad “conquistador” ancestors had conquered the region 500 years earlier.

Banks like Santander and BBVA, and telecoms giant Telefonica are now global players, but historical and linguistic links made Latin America attractive and Spain has invested 142 billion euros ($185 billion) in the region since 1993.

Repsol followed the trend and in 1999 bought Argentina’s YPF, which accounts for about 20 percent of the Spanish oil major’s net profits.

After months of pressure on Repsol to boost production in Argentina to offset a widening energy shortfall, President Cristina Fernandez unveiled plans on Monday to take back control of YPF.

In addition to resource nationalism, economists say the Argentine government may have been motivated by its need to repay debts, which it has not been able to do by issuing bonds since defaulting on $100 billion in debt in 2002.

“It must not be forgotten that to meet debt maturities Argentina is having to draw from reserves and they cannot go to the primary markets,” said Estefania Ponte, research director at the Cortal Consors brokerage in Madrid, adding other countries in the region did not have such liquidity issues.

“We don’t rule out further moves in this direction by Argentina, but don’t see risk of contagion,” she said.

Analysts believe Venezuela or Peru might need watching, but they ruled out expropriations by Brazil, Chile and Mexico, whose President Felipe Calderon condemned Argentina’s YPF plan.


The impact of the YPF expropriation could also be limited because Latin America is a less important global trading partner for Spain than booming Asia or even impoverished Africa.

It takes just 5 percent of Spain’s exports, which compares to a whopping 66 percent for the European Union.

Economist Santiago Sanchez of Madrid’s Carlos III University said that in a volatile global economy, Spain needed anyway to diversify between trading and investment partners, especially in its current crisis.

And apart from Repsol, the exposure to Argentina for Spanish companies is small. Although Spanish investments account for more than three-quarters of all foreign spending in the South American nation, Argentina ranked only 39 in the list of countries in which Spain invests most.

Argentina generates no more than 5 percent of Telefonica’s sales and profits. The pattern is similar for Spain’s two main banks, Santander and BBVA, while it drops to less than 2 percent for insurance company Mapfre or builder ACSv.

While Repsol shares dived 7.5 percent on the Madrid bourse, investors gave a vote of confidence in other Spanish companies that trade in Latin America.

Telefonica was up 1.47 percent, unaffected by the news and marginally outperforming a gain of 0.53 percent by Madrid’s benchmark share index.

Spain’s biggest power utility Iberdrola meanwhile rose 2.5 percent. Latin America - mainly Brazil and Mexico - accounts for 13 percent of its revenues, but it has no operations in Argentina.

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