Abstract
In 2012, the Argentine government expropriated 51% of the shares of Yacimientos Petrolíferos Fiscales S.A. (YPF) from the Spanish company Repsol S.A. The YPF was nationalized without prior compensation, violating Argentina’s own laws and, consequently, the institutional framework in force in the country. As a consequence, the country’s reputation deteriorated and, although there were several contacts with multinational enterprises to become YPF’s new partner, the investment climate was affected, making it really difficult to attract Foreign Direct Investment (FDI). In order to attract these investments after the expropriation, the Argentine government understands that it is necessary to settle the legal proceedings with Repsol. In order to avoid an imperfect judicial procedure of long duration and with high transaction costs, both parties reached a settlement agreement. This paper presents an institutional economic analysis of expropriation, contextualizing it within the Argentine institutional framework and studying the trajectory of the nationalization of YPF. In this way, it seeks to contextualize institutionally the Argentine government’s decision and the impact it has had on both the FDI and the credibility of the country’s institutional framework. It also analyzes how the resolution of the conflict occurs through an agreement between the parties that avoids the judicial process, given its high transaction costs.
Highlights
In April 2012, the Argentine State nationalized the Yacimientos Petrolíferos Fiscales S.A
Faced with a state that does not respect property rights and behaves in a predatory manner, as in this case study, North, Summerhill, and Weingast [6] established that the costs of judicial proceedings can be high—which underscores the advantage of a voluntary agreement between parties
Both parties would prefer a private agreement between the parties: Repsol because it understood the maxim that a "bad agreement is better than a good lawsuit" and the Argentine government because it understands that in order to achieve new investors and stable agreements with other companies, it is better to resolve the conflict with the company which had owned Yacimientos Petrolíferos Fiscales S.A. (YPF) and had resorted to the courts
Summary
In April 2012, the Argentine State nationalized the Yacimientos Petrolíferos Fiscales S.A. Faced with a state that does not respect property rights and behaves in a predatory manner, as in this case study, North, Summerhill, and Weingast [6] established that the costs of judicial proceedings can be high—which underscores the advantage of a voluntary agreement between parties For this reason, both parties would prefer a private agreement between the parties: Repsol because it understood the maxim that a "bad agreement is better than a good lawsuit" and the Argentine government because it understands that in order to achieve new investors and stable agreements with other companies, it is better to resolve the conflict with the company which had owned YPF and had resorted to the courts.
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