After Argentina’s Move on Oil Company, Spanish Corporations Take a Wary View

MADRID — N2S, a Spanish supplier of software to the energy sector, has almost half of its 85 employees in Latin America, spread among Mexico, Brazil and Peru.

It was scheduled to open an office in Argentina this year, hiring 20 employees there. But N2S abandoned the plan on Wednesday, two days after the government announced it would seize majority control over the activities in Argentina of Repsol YPF, Spain’s largest oil company.

“Argentina really looked like a very attractive market for us, and we believed it was serious in its commitment to foreign investment — until Monday’s decision,” said Francisco de la Peña, managing director of N2S. “I’m sure that a lot of other Spanish companies are as disappointed and worried about what has just happened as we are.”

Another reason N2S was so eager to expand in Latin America, Mr. de la Peña said, was that “our largest multinational customers have been asking us to work alongside them in the region.”

In fact, since the start of the European sovereign debt crisis, several of Spain’s largest companies have been trying to reassure anxious investors that Latin America would help them stay afloat even as a surge in Spain’s borrowing costs has raised concerns that the country could be pushed into a Greek-style international bailout.

The message from some Spanish executives has been that booming Latin America would increasingly reduce their reliance on earnings from recession-hit Spain.

Spanish companies stepped into Latin America ahead of many of their current rivals there and before Jim O’Neill, now the chairman of Goldman Sachs Asset Management, coined the term BRIC, putting the spotlight on the world’s most promising emerging markets: Brazil, Russia, India and China.

While Brazil is linked by history and language to Portugal, Spanish companies saw the remainder of Latin America as an attractive market because the region’s Spanish-speaking countries have retained their cultural links to Spain.

Spanish companies now have combined annual revenue of about $39.3 billion in Argentina alone. Altogether, Spanish investments overseas were equivalent last year to 50.6 percent of Spain’s gross domestic product, compared with 3.6 percent 15 years earlier.

Repsol bought most of the Argentine oil company YPF in 1999 and held a 57 percent interest before Argentina’s decision. The telecommunications company Telefónica is the other Spanish heavyweight in Argentina, with 16 million wireless users and a market share of almost 30 percent.

Other significant Spanish investors in Argentina include Mapfre, an insurance company; Codere, a gambling company; and the utilities Endesa and Gas Natural.

Spain’s two-largest commercial banks, Santander and BBVA, also have sizable subsidiaries in Argentina, although they are only making single-digit contributions to the banks’ total earnings. BBVA and Santander have made much more significant forays into other parts of Latin America.

Last year, Santander earned more money in Brazil than it did at home, while BBVA’s profits in Mexico were more than its earnings in Spain. Over all, however, Santander and BBVA each reported a decline in profits of 35 percent in 2011, amid higher provisioning for bad loans in Spain, where banks financed the real estate sector’s boom and bust.

Like other Spanish companies with a large exposure to Argentina, and perhaps mindful of retaliatory measures the Spanish government has threatened to take against Argentina, Telefónica would not comment on its plans there.

Still, “Telefónica must be feeling fear right now and taking another look at its investment strategy,” said Xavier Trias, the mayor of Barcelona, Spain’s second-largest city after Madrid.

Some European politicians also expressed concern over whether the expropriation of Repsol’s stake in YPF would pave the way for similar actions by Cristina Fernández de Kirchner, the president of Argentina, against other foreign investors.

“I am alarmed to note that the president referred in her speech to investments in other sectors such as telecoms and banking,” said Catherine Ashton, the European Union’s high representative for foreign affairs.

Reuters reported Wednesday that Argentina plans to include the expropriation of a local natural gas company owned by Repsol in the bill to seize control of YPF, according to a ruling party senator.