Wednesday, October 26, 2011

Argentina Orders Oil, Mining Exporters to Repatriate Funds to Stem Flight

Argentina ordered oil, gas and mining exporters to repatriate all export revenue as the government struggles to stem accelerating capital flight from South America’s second-biggest economy.

President Cristina Fernandez de Kirchner, in her first move since winning re-election on Oct. 23, changed a 2002 decree requiring companies such as Repsol YPF SA and Pan American Energy LLC to keep at least 30 percent of their export revenue in the country. Today’s decree, published in the official gazette, applies to future sales.

The decision by Fernandez, who nationalized the $24 billion pension fund industry and called for a limit on purchases of farmland by foreigners, is part of an effort to slow capital flight estimated at $3 billion per month that is draining central banks reserves. The policy may make it harder to attract foreign direct investment to Argentina that the United Nations estimates fell 30 percent in the first half of the year.

“These types of controls only discourage investment and thus hurt exports,” said Juan Pablo Fuentes, a Latin America economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The oil sector is already hampered by controls and regulations. This will only add to those problems.” more