The American Interest
Analysis by Walter Russell Mead & Staff
Wave of Nationalizations Spreading Across South America

For the second time in two weeks, a Spanish company operating in Latin America has been nationalized by a populist government looking to score political points. Last week, Argentinian President Cristina Fernandez, following the advice of her Marxist adviser, nationalized YPF-Repsol, a Spanish energy company. Now the FT reports that the leftist Bolivian President Evo Morales has nationalized Red Eléctrica, another Spanish energy company active in his country. As in Argentina, the rhetoric justifying the move comes straight out of the 1970s:

“Today, as we pay homage to the workers and Bolivians that have fought for the recovery of natural resources and basic services, we are nationalising the electricity transmission provider,” Mr Morales said, according to Spain’s state news agency.

Nationalization fever is hitting South America. Venezuela has been leading the charge towards nationalization for the past 13 years, and Argentina and particularly Bolivia have begun to follow suit. One executive told the FT that nationalization has become “an annual [Mayday] tradition” for the Morales government.

And this is just the tip of the iceberg. Nearby Ecuador has been making moves toward nationalization as well, and as these nationalizations continue, other leaders may decide to follow their lead when approval ratings begin to dip.

Foreign investors (especially Spanish ones) are already beginning to get nervous after the events of the past two weeks, and if nationalizations continue, this is likely to get worse. With the global recovery still shaky, the last thing the region needs is the perception that it is a risky place to invest. Unfortunately, populist leaders are doing everything they can to reinforce this perception. Soon they will begin to pay the price, and the results will not be pretty.

Published on May 2, 2012 12:00 pm
  • BigFire

    Well, the bill for non-investment due to aversion to their asset being nationalized won’t be felt for another 5 years. And in 5 more years, these tin-pot dictators are betting on the very short memories of their subjects.

  • Jbird

    And despite all our faults and blemishes that investment capital will come rushing back to the United States. Because we are safe. . . er. . . .for now.

  • Steve W from Ford

    “Unfortunately, populist leaders are doing everything they can to reinforce this perception. Soon they will begin to pay the price,”

    The truly unfortunate aspect is that the pain will NOT be felt by these “leaders” but by the people caught in their web of deceit.
    “Leaders” make sure they are insulated from the very pain they inflict.

  • Jacksonian Libertarian

    “Unfortunately, populist leaders are doing everything they can to reinforce this perception. Soon they will begin to pay the price, and the results will not be pretty.”

    You can say that again.

  • http://facingzionwards.blogspot.com/ Luke Lea

    Haven’t we seen Latin America cycle back and forth between left and right like this before? Do you suppose democracy will be next to go? How about Mexico?

  • Lyle Smith

    God help these countries.

  • JEM

    Yes, they’re destined to end up milch cows of the Gaucho Marx kleptocracies; that said, if it’s true that the Repsol operation was being sold to Sinopec I’m not going to sweat that one.

    Maybe the Chinese would have been more effective operators than whatever Kirchner crony ends up in the managing director’s office, but state capitalism is state capitalism.

  • MarkJ

    What’s that old saying about Latin American governments? Oh yeah: “They remember everything…and learn nothing.”

  • willis

    I suppose “nationalise” is newspeak for “steal.” Thank goodness our government here in the US would never do something like that, particularly to our fine medical industry. It could turn us into a latin america look-alike overnight. Devastating, but maybe fairer.

  • Jdetal

    The US government as well as most countries insure and guarantee investments and debt to the outlaw nations so taxpayers pay, business continues.

  • Evil Otto

    Hey, I don’t see the problem here. Once they nationalize d’Ancona Copper, they’ll be set. Prosperity is just around the corner!

  • Evil Otto

    Grr, d’Anconia. Ah, the joys of typing on an iPad.

  • http://thepencilofnature.net Lorenz Gude

    Populist is a bit too euphemistic in my view. These are socially destructive leaders who pursue delusional policies to a lesser degree than the worst of their kind: Mugabe or Kim il sung come to mind. . It is well to remember that capitalism has a self destructive streak too – witness the Wall St. Elect.

  • The Other Jim

    This is the real reason that the Democrats oppose oil drilling. They want as much oil as possible left in the ground for the day they nationalize the industry.

  • Robert Hanson

    “we are safe. . . er. . . .for now”.

    Four words: General Motors bond holders…

  • dave

    and we thought Ayn Rand wrote fiction.

  • AD-RtR/OS!

    Kirchner, continuing in the fine Fascist tradition of the Perons.

    It will be interesting, but not probably informative (at least to the intelligentsia), to see which countries in Latin America become – once again – complete economic basket cases as their rulers attempt to appropriate the assets of the 1%, to “distribute” to the 99% (and how much of that asset base ends up in numbered accounts in the various banking-havens around the world).

  • richard40

    If the foreign investors had beem smart they would have pulled a D’Anconia and burned all their businesses to the ground right before the first government tried to have them stolen, er nationalized. It would have served as a great deterrent to the other socialist/marxist theives.

  • Mak

    This paints with a very broad brush, and ignores the fact that the largest economy in South America — Brazil — is in the process of a massive privatization and economic liberalization kick (even with a center left government). They are now in the process of privatizing all of the large airports, and have already privatized through private concessions many roads, bridges, railways, etc. — things which lovers of liberty and economic freedom in the United States can only dream about. What happens in Brazil is much more important for South America, and the world generally, than what happens in backwater Bolivia, or long time lost cause Argentina, and in Brazil there is a clear and definite trend towards economic liberalization.

  • jkl

    Steel mills? GM?