Three Questions: Is resource nationalism and nationalization back in Latin America? Will this cause a trade war? What will foreign investors do in light of these developments?
Here are some recent trade and investment items:
…. Argentina expropriated the Argentine subsidiary YPF of Spain’s Repsol.
…. Bolivia expropriated the Spanish owners of TDE (electricity transmission).
…. The EU warns Argentina that the foreign investment of European companies is fully backed by the EU and warns of a trade war over nationalization.
…. This same warning is intended implicitly to go to Bolivia also, obviously.
…. Yet, Brazil is welcoming Sovereign Wealth Fund investment from Abu Dhabi (Mubadala Development Company) into its leading commodity and shipping conglomerate (EBX).
What are the lesson here? Very easy …………..
…. Nationalization is coming back into style in some Latin American countries where economic development has lagged.
…. This may lead to serious global trade disputes.
…. These disputes may eventually be heard by the WTO and the World Bank (ICSID).
…. This is the obviously linkage between financial investments and the trade system.
…. Unfortunately, the WTO does not have juridical competence over international financial disputes.
…. But still foreign investors persist in a market that is dynamic and growing.
…. Brazil is growing. Bolivia and Argentina are basket cases.
…. Bad economies make for bad investment environments.
…. This general situation in Latin America needs to be closely monitored as the global economy increasingly struggles. Hopefully, this will not be the start of a global trend.