The Argentine Petro-Provinces & The Incoming Fernández Administration
In terms of determining who will be the next president of Argentina, the October 27 elections are now a mere formality, and on December 10 it is a virtual certainty Macri will hand over the reins of power to Alberto Fernández and Cristina Fernández de Kirchner. And, as a result, a relatively unified Peronism, which in one form or another governed Argentina for all but two years between 1989 and 2015, will return to power later this year.
Under the Fernández-Fernández administration the balance of power between the governments of the six principal petro-provinces (Neuquén, Chubut, Santa Cruz, Mendoza, Tierra del Fuego, Río Negro) and the national government in the area of energy policy will shift towards the national government, with the national government playing a more dominant role in energy policy and the provincial governments playing a more submissive role than has been the case during Macri’s tenure (2015-19). That said the nature and tenor of the provincial-federal relationship will differ notably among the six provinces depending on who holds the office of governor between 2019 and 2023. These six provinces account for 95% of Argentine petroleum production and 85% of Argentine natural gas production, with offshore production in federal waters and in other provinces respectively representing 1% and 4% of petroleum production and 10% and 5% of natural gas production.
Five of the six petro-province governors who will serve from 2019 to 2023 have already been elected earlier this year, with Mendoza to hold its gubernatorial election on September 29. These governors will differ at least initially in terms of their relationship (both in general and in particular in the area of energy policy) with the Fernández-Fernández government, ranging from positive and relatively pacific to negative and relatively hostile.
In two provinces (Santa Cruz and Tierra del Fuego), federal-provincial relations are expected to be very tranquil and positive. In Santa Cruz, Cristina Fernández de Kirchner’s sister-in-law, Governor Alicia Kirchner (2015-19), was re-elected, and due to her familial and political affinity will be on good terms with the incoming administration. In Tierra del Fuego, the diehard Cristina Fernández de Kirchner supporter Gustavo Melella was elected as governor with more than 50% of the vote, and is expected to also have cordial relations with the federal government.
Two other provinces (Chubut and Neuquén) can expect to have generally positive relations with the federal government, but at the same time there exists a significant possibility these relations could at times become strained, both because the provincial governor is not considered to be a true supporter of Cristina Fernández de Kirchner, and because within the province there exists a significant group of Peronists who are not aligned with the governor, or at least recognize his status as the province’s political leader, and continue to compete with him for political power and influence.
In Chubut, Governor Mariano Arcioni was a latecomer to the Fernández de Kirchner bandwagon and will have to rely on assistance from his political mentor and ally Sergio Massa (likely the next Speaker of the Argentine Chamber of Deputies) and his personal ties with Alberto Fernández to maintain positive and cordial relations with the federal government. This is especially the case since in Chubut Peronism is divided into three main factions, that of Arcioni and his allies, that of oil workers union leader Jorge “Loma” Ávila and his allies, and that of 2019 gubernatorial candidate Carlos Linares and his allies, with this latter faction for instance having deeper and longer standing ties with Cristina Fernández de Kirchner and her inner circle.
In Neuquén, home of the Vaca Muerta, Governor Omar Gutiérrez continued the Neuquén Peoples Movement’s (MPN) streak of what is now ten straight consecutive gubernatorial victories since the return to democracy in 1983. A provincial party competing only in Neuquén, the MPN has demonstrated a considerable ability (with a few exceptions) over the past 36 years to work productively with the federal government, regardless of who is in control. There is no reason to believe Gutiérrez should not be able to establish and maintain a good working relationship with the Fernández-Fernández administration over the next four years, with the caveat that there will always exist more tension and friction between Gutiérrez and the Fernández-Fernández government than between a provincial government run by an unconditional administration supporter like Alicia Kirchner in Santa Cruz or Gustavo Melella in Tierra del Fuego.
A principal method employed by the MPN to obtain benefits from the federal government in the area of energy policy has been to trade the votes of its senators and deputies in the Argentine Congress on issues of importance to the president in exchange for concessions on energy related matters. However, unless the MPN dramatically improves its electoral fortunes between now and October 27, it is likely to possess only one deputy and zero senators in Congress come December 10, which would far and away represent its most diminutive presence in Congress since its founding more than 50 years ago, leaving Gutiérrez with more limited bargaining power.
The rockiest relationship (among these five provinces) between a provincial government and the Fernández-Fernández administration is likely exist in the case of Río Negro. In Río Negro, Governor Arabela Carerras, the hand-picked candidate of term-limited governor Alberto Weretilneck (2012-19), faces strong opposition from a vibrant Peronist opposition led by Martín Soria and his sister, María Emilia Soria. Carreras, and her mentor Weretilneck, are seen by the incoming Fernández-Fernández administration as being located somewhere between the status of a neutral third party and of an enemy.
Where Mendoza will fall on this dimension will depend on which of the two viable gubernatorial candidates is victorious on September 29. If Anabel Fernández Sagasti is the victor, then Mendoza would fall into the first category along with Santa Cruz and Tierra del Fuego given Fernández Sagasti’s status as a Cristina Fernández de Kirchner acolyte. On the other hand, if Rodolfo Suárez is victorious, then that would position Mendoza as the one petro-province controlled by a governor who is an unabashed opponent of the Fernández-Fernández administration, setting up Mendoza to potentially have the most conflict-ridden relationship of all of the petro-provinces with the federal government during the 2019-23 period.
At the present time, it is impossible to know with any certainty the model of government and energy sector related policies that will be adopted and pursued by the Fernández-Fernández government in 2020, let alone in 2021, 2022 and 2023. That said, it would be naïve to not expect conditions for international energy companies in Argentina to worsen somewhat over the next four years, with the billion dollar question being the extent to which conditions worsen. Today it is not possible to accurately answer that question, but as the smoke clears over the next few months, it will begin to be possible to make some more informed predictions about the future direction of energy policy in Argentina.