Milei: “YPF must first be put back together” | Milei assured that he will seek to privatize the company, but not in the short term

“Everything that can be in the hands of the private sector is going to be in the hands of the private sector,” said president-elect Javier Milei this Monday. The economist made this statement when asked about what he will do with public media and state companies. Regarding public television, he left no doubt when he stated that “I do not support having a covert propaganda ministry. It has to be privatized.” He maintained the same regarding Radio Nacional and the Telam agency. When asked about YPF, he maintained that the sale is the objective, but not in the short term.

“YPF must first be recomposed,” remarked Milei, who questioned the nationalization carried out in 2012 that led to a lawsuit against the State and also the daily management of the company. “The deterioration that has been done to the company in terms of results, so that it is worth much less than the moment in which it was expropriated, requires that it must first be recomposed,” she added. This Monday the company’s share price in the New York market (it was not listed in Buenos Aires due to the holiday) rose up to 40 percent in response to Milei’s triumph. The increase was even above the rest of the ADRs of Argentine companies listed in the United States.

Milei maintained that “in the transition that we are thinking about for the energy issue, both Enarsa and YPF have a role to play while these structures are rationalized and put to create value so that in this way they can be sold at a very beneficial price for the Argentines. In short, the objective is to sell both companies, but not now. Milei also did not clarify when.

In mid-September, Eduardo Rodríguez Chirillo, Javier Milei’s energy reference and possible Energy Secretary of his next government, gave a talk at the Petroleum Club, a select space that brings together the main businessmen in the hydrocarbon sector. There he was consulted about the future of YPF and left some key definitions in line with what Milei now stated. “We want to organize YPF’s business units. There is YPF Luz, YPF Agro, there are many business units,” Chirillo said and then added: “YPF must be reorganized before designing its form of privatization. “Identical measures also with Enarsa.” This means that profound changes will be introduced within the company, covering not only the positions of president and CEO but also within the management line. For now the libertarian leader did not anticipate names.

Chirillo stressed that time that “it is important in the short term to refrain from using YPF as a tool of intervention in the price formation policy.” This point marks a turnaround with respect to what the company has been doing in recent years, when despite the increase in costs, it stopped increases due to government directives. This brake also served to discipline the rest of the market because YPF has a market share that exceeds 50 percent and if it freezes its prices the rest of the companies are forced to follow the same path, because if it sells well above the leading company its market share can be reduced rapidly.

Pricing policy

When asked what he is going to do with the price of fuel, Milei said that “in tariff matters, what we consider necessary to do is to recompose the economic and financial equation of the contracts, but that these adjustments be paid by the State in terms of tax reductions or tax redesign mechanisms so that they benefit the company’s cash flow and the impact on prices is minimized.”

The strategy aimed at trying to minimize the impact on prices at the expense of taxes has also been implemented by this government over the last three years. In fact, the current law provides for a quarterly update of taxes in line with inflation and the government systematically postponed that adjustment, giving up more than 3.4 billion dollars in collection in three years.

Milei also clarified in statements to radio Miter that prices “would only be adjusted there, as long as the income of Argentines is restored. Note that all our measures are aimed at restoring the economic balance of the company, but without causing harm to Argentines and always having a special line for the most vulnerable segments.”

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