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Excel, AK47s and Argentine Oil

January 22nd, 2013 | Categoría: Economics

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Axel Kicillof, Argentina’s deputy economy minister, is said to wield considerable sway over President Cristina Kirchner, influencing her thoughts on everything from gasoline prices to trade and housing policy.

But the 41-year-old Keynesian economist is deeply unpopular in Argentina’s oil industry, which he oversees.

Kicillof requires oil and gas companies to submit excruciatingly detailed Microsoft Excel spreadsheets divulging information about sales, costs, investment plans and pricing strategies. Oil executives refer to him privately as “Excel” instead of Axel.

Given the industry assumption that he’s a Marxist – something his colleagues deny – executives also mock his initials and call him as “AK47″ – “because this kid is a lethal weapon; he destroys everything that gets near him,” says one executive.

Industry insiders say Kicillof has lost sway in the government and that Kirchner’s recent, market-friendly decision to more than triple natural gas prices confirms this. Whatever the case, oil executives applauded the move to raise prices, saying it was necessary to spur investment.

Kicillof says any talk of political infighting within the cabinet is nonsense and that he and other government officials work well together and are on the same page. He also says he wants energy companies to make a reasonable profit. So do the energy companies, of course.

The question is: What is a reasonable profit? Making money isn’t easily compatible with the government’s goal of keeping energy cheap. The government wants to keep oil, gas and electricity prices low to help bolster economic growth. Kirchner has decided not to depreciate the peso, which is appreciating in real terms, to make Argentine exports competitive abroad.

As inflation and rising labor costs make doing business here ever more expensive, the government sees low energy prices as one way to help keep some costs down.

Since the government raised the price of newly discovered natural gas late last year, more foreign investors have begun looking at investing in the energy industry. But at this point, most foreign companies are asking for more than Argentina can deliver.

Foreign investors want to be able to charge free-market prices, export oil abroad, send dividends overseas, sign contracts based on foreign legislation and get guarantees of greater government control over labor unions. Some companies would even like congressional legislation protecting them from potential government intervention and expropriation.

Such things are unpopular in the Kirchner administration and it seems unlikely the government will budge a great deal on these requests, making it less likely that investment will pour in soon.

Still, officials realize the country needs to cut its reliance on costly imported fuel and gas and that doing so requires foreign investment. To that degree, it seems likely the government will do more to attract investment.

For that to happen, Excel, as he is known, will have to do more to woo executives.

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1 Comment

MilesNo Gravatar says:

Good article, not many people making sense of Argentine politics at the moment!

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