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backLATINtalk May, 2012

Latin America must open up

The opening of the World Economic Forum on Latin America is overshadowed by a row over Argentinian plans to nationalize a Spanish-owned oil company. Spain has reacted with anger.

Spanish Prime Minister Mariano Rajoy's visit to Mexico began on an unexpected note. As he arrived in the resort town of Puerto Vallarta for the opening of the World Economic Forum for Latin America, there was only one issue on the agenda - Buenos Aires' plans to nationalize YPF, Argentina's biggest oil company which is controlled by Spanish energy giant Repsol.

Dozens of camera teams lay in wait, hoping for a statement from the Spanish delegation. But Rajoy was in no mood for a press conference.

On Monday, Argentine President Cristina Kirchner asked her country's Congress to put 51 percent of YPF- Argentinina's biggest oil company - in state hands, ousting flagship Spanish energy firm Repsol as the majority shareholder.

The decision likely took the Spanish delegation at the WEF unawares, and counter-measures were hurriedly discussed on the long flight from Madrid to Mexico. Prime Minister Rajoy however did use strong words as he took the stage at the WEF.

"This decision by Argentina will cause lasting damage to the economic relations between the two countries," Rajoy said at the opening, which was originally meant to focus on the state of the global economy. "If laws are simply changed, when rules are not upheld any more - that will have consequences for investments by Spanish companies in Argentina."

Rajoy's blunt message wasn't just directed at Argentina. The Spanish leader insisted that the good economic ties between Spain and Latin America so far could only work if there was free, uninterrupted trade and if companies weren't scared away by fear of forced nationalization.

Latin America is not Argentina

Mexican President Felipe Calderon was quick to support his Spanish counterpart. Calderon said the region continued to rely on capital flows from abroad and that foreign companies would be able to continue to operate freely. Calderon's words were meant to distance his country from Argentina and portray the nationalization of YPF as an isolated case.

Calderon sees himself as a champion of free trade in Latin America. In his opening speech at the WEF, he quoted statistics underlining Mexico's economic success. Calderon pointed out that Mexico had massively liberalized its economy and cut red tape by getting rid of over 16,000 regulations and directives.

The result, he said, is a growing economy that's creating jobs and has the lowest inflation rate - 3 percent - in Latin America.

Growing wage gap

Calderon said the recipe of free markets is one he recommends for all of Latin America. But is it really a mantra for success? Not every participant at the WEF subscribes to that view.

Small discussion groups on the sideline of the summit constantly pointed to the growing wage differences in the region. One common complaint was that access to education in Latin America still often depends on the economic background of the family.

Calderon himself warned that economic growth needs to be inclusive with all classes of society partaking of the success. How that can be made possible is certain to be discussed by the around 900 participants at the WEF.

Source: Deutsche Welle - GAI

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