The controversy involving Repsol and the Argentine government came to a climax in mid-April, when president Cristina Fernández de Kirchner announced the expropriation of 51% of Repsol’s YPF shares. The government argued that Repsol was not making the investments necessary to boost production of oil and gas to the levels that Argentina’s fast growing economy requires.

Two weeks later, Bolivian president Evo Morales nationalised Transportadora de Electricidad, TDE, an electricity transmission company that belonged to Spain's Red Eléctrica de España. Once again, the argument for the action was a lack of investment.

The two measures have fuelled growing concerns that Latin American governments are adopting protectionist policies in order to counter the effects of the wider economic crisis on their own economies.

European risk managers with experience of dealing with Latin American markets point out that high profile expropriations, like those at YPF and TDE, are just the tip of the iceberg.

They say that companies are often subjected to strong pressure from government officials who want them to direct investments to specific regions and carry out activities that contribute to socio-economic policies or political goals.

This kind of stealth protectionist action is particularly troubling because it leaves little room for the recovery of losses from the insurance market, or by other means such as international mediation, the experts say.

Repsol is likely to be compensated for the expropriation of its shares in YPF, although the Argentinian government is not expected to get even close to the €9bn that the company believes the stake was worth. Negotiations are ongoing and the case could be taken to an international court.

Mr De Gucht has promised that the EC will react to measures that affect companies based in the EU, starting with the expropriation of YPF. Many Spanish firms derive a significant share of their revenues from Latin American countries and are particularly exposed to protectionism in the region.

But finding insurance coverage for political risks is still possible, according to Donnie DiCarlo, a vice-president at Marsh in New York. He said that there is more capacity in the market for those risks than one year ago. He also notes that prices, so far, have remained stable.

The situation is more complicated for companies that want to purchase standalone coverage for operations in Argentina or Bolivia. Therefore Marsh suggests that clients look at region-wide policies to cover all their businesses in Latin America.

However, buyers from the energy sector may face some challenges, Mr DiCarlo pointed out.

“For some time people became a little complacent with Latin America,” he said. “But, although companies still see the region as a source of opportunities, we have received many questions about political risk in Latin America lately.”

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