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Resolving Conflict between Parties and Consequences for Foreign Direct Investment: The Repsol-YPF Case in Argentina

Raquel Fernández González (), María Elena Arce Fariña () and María Dolores Garza Gil ()
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Raquel Fernández González: ERENEA- ECOBAS, Department of Applied Economics, Faculty of Economics, Campus As Lagoas-Marcosende, University of Vigo, 36310 Vigo, Spain
María Elena Arce Fariña: Defense University Center, 36920 Marin, Spain
María Dolores Garza Gil: ERENEA- ECOBAS, Department of Applied Economics, Faculty of Economics, Campus As Lagoas-Marcosende, University of Vigo, 36310 Vigo, Spain

Sustainability, 2019, vol. 11, issue 21, 1-16

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.

Keywords: multinational enterprise; new institutional economics; agreement; foreign direct investment; YPF; Argentina (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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