Two weeks ago, when commenting [5]on the (first of many) nationalizations of energy companies (yes, the collateral shortage we have been discussing over the past year is particularly in effect when it comes to energy assets, although one does not need superficially complicated theories to explain it), in this case of Spanish YPF assets in Argentina we said "How soon until any and every government follows suit in a world in which excess liquidity sloshing around makes expropriation of vital energy producing assets a key prerogative? And how long until the resultant (accelerating) collapse in faith of the monetary system, leads government to declare "monetary self-sufficiency" and confiscate everything that is not nailed down. In exchange for worthless pieces of paper of course. Just to make it "fair"." The answer: two weeks. As of a few hours ago, Bolivia has followed in Argentina's footsteps and has just announced it is nationalizing yet another Spanish company's domestic assets, in this case Red Electrica.
From Bloomberg [6]:
Bolivia is seizing the local assets of Spain’s Red Electrica Corp. to give the government control of the Andean nation’s electricity grid.
President Evo Morales signed the nationalization decree today, Communications Minister Amanda Davila said in a telephone interview from La Paz. The Alcobendas, Spain-based company’s investment in its Bolivian unit was inadequate and the energy industry should be controlled by the government, Davila said.
As a reminder...
The takeover comes two weeks after Argentine President Cristina Fernandez de Kirchner announced the seizure of oil company YPF SA (YPFD) from its Madrid-based parent company, citing a lack of investment and the strategic importance of the industry. Since taking power in January 2006, Morales has seized gas fields, oil refineries, pension funds, telecommunications companies and a tin smelter in a bid to increase state control over Bolivia’s industry.
“Energy is a strategic sector that should subject to government control,” Davila said. “Red Electrica’s investments were excessively low.”
An independent auditor will set compensation to be paid to the Spanish company, Davila said.
Well, at least it's not a tribunal like in Argentina.
Finally, does Bolivia have no fear at all what the "forceful" EU and Hispanic response to this aggression will be? Guess not: it just may be that if the troubled country is scrambling to sue everyone else in the worldfor expropriating its assets it will achieve... nothing?
So let's see yesterday Aregentina, today Bolivia, tomorrow... the rest of the world that believes the energy industry should be controlled by the government?
Luckily, this news, like every other news, is purely bullish for stocks. Because the alternative, namely that currency wars are dead and buried, and at this point it is all about trade wars escalating into outright trade regime defection, is too preposterous to even contemplate.
Finally, we fully expect the same kinds of nationalization that have happened in the energy area to promptly spread to other commodities most certainly including precious metals, in the process crushing efficient supply.