Following the statements of the elected president, Javier Milei, about his intention to privatize YPF, The oil company’s shares on Wall Street jumped 41.3%, in a day of widespread increases in Argentine companies. Nevertheless, The privatization process does not look so simple for the brand new ruling party that the libertarian will lead starting next December 10.
Milei, in any case, promised that before privatizing the 51% of the share package in the hands of the National State and the producing provinces, would revalue its value for what “They can be sold in a very beneficial way for Argentines“. However, specialists emphasize that “it is an important operation” and that “in principle the expropriation law needs to be repealed” from 2012, when the oil company was controlled by the Spanish company Repsol.
So, Milei must obtain authorization from Congress to transfer shares to the private sector. “Perhaps I can do it through DNU (Decree of Necessity and Urgency). We should never rule out that instrument, but it depends on the political strength at each moment,” he explained to Clarion Gerardo Rabinovich, from the General Mosconi Institute. Either way, The DNU must also be subsequently approved by Parliamentwhich implies a risk for potential buyers.
The thing doesn’t end there. According to Rabinovich, “Then you have to define whether you are going to sell the entire package to a single buyer or sell the shares on the stock market.. It must be taken into account that according to the YPF statute, anyone who has more than 15% of the shares has to make an offer for the entire company and even has to agree with 49% of the private shareholders.”
This Monday, YPF had a stock market value of US$5,783 million. The 2012 expropriation, led by the then Minister of Economy Axel Kicillof, was expensive.
In 2014 Repsol was compensated for US$ 5,000 million to avoid a trial. But last September, New York Judge Loretta Preska sentenced Argentina to pay another US$ 16.1 billion, because it considered that when the Argentine State came to control YPF in 2012 it was obliged to launch a public offer to holders of retail shares. The ruling was appealed and the case remains open.
Milei has a few obstacles to advancing the privatization process. First has to gather majorities in both chambers to approve the repeal of the expropriation law, when the number of own seats that will count starting in December is still unknown, beyond the explicit support that it achieved in the face of the runoff from Mauricio Macri, Patricia Bullrich and the hard wing of the PRO.
“We finally have to see how many legislators from Together for Change and the UCR vote with Milei. Likewise, the key to the privatization of YPF is the very probable resistance of the oil provincessince it is a great source of income,” explains stock market analyst Sebastián Marill. The expert remembers that the two previous times that the issue went through Congress (to privatize and expropriate) “it was approved unanimously.”
Among Milei’s new allies is the former Secretary of Energy of Cambiemos, Javier Iguacel, who sounds like he will be the one to lead this new YPF privatization project. The precedent was the privatization of 1992, during the first government of Carlos Menem.. At that time, YPF (a state company) became a Public Limited Company with the approval of Congress and was granted privileges to increase its value.
In 1999, Repsol bought 85% of the shares of the Argentine oil company for almost US$ 13.5 billion and in 2007, with the backing of Kirchnerism, the Petersen group (from the Eskenazi family) took 14.9% of YPF with the mission of “Argentinizing” and commanding the company’s destinies to lead the exploration and exploitation of the country’s oil and gas resources.
The post first appeared on www.clarin.com