Recently, Argentina's economic nationalism has caused consternation in both trade and investment circles, and there have been a number of trade and investment complaints brought in response to various Argentine government actions. The trade cases at the WTO are just getting underway; many investment arbitration awards have already been issued, but enforcement of these awards has been challenging.
In the area of foreign investment, one particular problem was the nationalization of YPF, an oil company owned by Spain's Repsol, and the failure of the Argentine goverment to provide compensation.
With all of these issues, you might think that foreign investment in Argentina would be drying up, especially in industries which have experienced these problems directly. But that doesn't seem to be the case. The Economist reports:
"on July 16th, after a year in which YPF’s oil and gas production continued to disappoint, the government announced that it had agreed on a big joint venture between YPF and a different foreign oil giant, Chevron.
...
Chevron has promised an initial investment of $1.24 billion in Vaca Muerta as part of its joint venture with YPF. The deal was announced after Ms Fernández issued a decree seemingly tailor-made for Chevron, which states that energy companies that invest over $1 billion will, after five years, be allowed to sell 20% of their production abroad without paying export taxes or being forced to repatriate profits."
Not only is foreign investment still flowing, it's flowing to the very same company that was already nationalized!
I'm not sure what to make of this. You might say that the existence of investment treaties has reassured investors that they can get their money back even if the government interferes. But the investment arbitration system hasn't really been effective so far in the Argentina cases, so that seems like a stretch.
Another possibility is that investment treaties don't really matter to the calculation, and foreign investors simply decide that the potential profit is worth the risk.
I would love to hear more about how Chevron decided to make this investment ...
