April 19, 2012 / 4:00 PM / 7 years ago

UPDATE 2-World Bank says Argentine move on YPF 'a mistake'

* World Bank’s Zoellick says takeover “wrong thing to do”

* Europe, Washington have criticized Argentine takeover bid

* Zoellick says decision will hurt investment in Argentina

By Lesley Wroughton

WASHINGTON, April 19 (Reuters) - World Bank President Robert Zoellick on Thursday called Argentina’s move to seize control of the country’s biggest energy company from Spain’s Repsol “a mistake,” joining a chorus of international criticism.

President Cristina Fernandez unveiled plans on Monday to seize a 51 percent controlling stake in YPF by expropriating almost all of Repsol’s shares in the firm.

“It’s a mistake,” Zoellick, the outgoing president of the World Bank, told a news conference at the opening of World Bank and International Monetary Fund meetings of finance chiefs in Washington.

“I think it is a symptom we have to watch out for under economic pressure whether countries will move, ... respond more to populism, respond more to protectionism,” he said. “I think it was the wrong thing to do.”

Argentina’s aggressive move has already drawn condemnation from Madrid to Washington and warnings that investors could shun Latin America’s No. 3 economy.

Argentine Economy Minister Hernan Lorenzino will attend the weekend meetings in Washington to explain Argentina’s position, which has been supported by some of the country’s left-leaning allies including Venezuelan President Hugo Chavez.

Spain has threatened to retaliate and has asked the European Union to intervene on behalf of Madrid.

Zoellick said the decision would have a lasting impact on Argentina’s economy and its ability to attract new investments.

“I think it was a bad policy. I think it’s a mistake, and I think it will hurt Argentina over the long run,” he told CNN.

“It may have some short-term political benefit to the government, but this is not the time to be playing with fire, and ultimately, it will leave Argentina behind in the international economy, and that hurts the people of Argentina, and that is who I am concerned about,” he added.

YPF has been under pressure from Fernandez’s government to boost production, and its share price has plunged over months of speculation about a state takeover.

Until recently, YPF had a harmonious relationship with Fernandez. However, a surge in the country’s fuel import bill has pushed a widening energy shortfall to the top of her agenda at a time of worsening state finances.

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