After President-elect Javier Milei said he intended to privatize YPF, the oil company's shares on Wall Street jumped 41.3%, in a day of widespread gains in Argentine companies. However, the privatization process does not look so simple for the new ruling party that will lead the libertarian party as of December 10.
Milei, however, promised that before privatizing the 51% of the shares in the hands of the National State and the producing provinces, he would revalue their value so that "they can be sold in a very beneficial way for Argentines." However, specialists stress that "it is an important operation" and that "in principle it is necessary to repeal the expropriation law" of 2012, when the oil company was controlled by the Spanish company Repsol.
Milei must then obtain congressional authorization to transfer the shares to the private sector. "Maybe I can do it by DNU (Decree of Necessity and Urgency). That instrument should never be discarded, but it depends on the political strength at any given time," Gerardo Rabinovich, of the General Mosconi Institute, told Clarín. In any case, DNUs must also be subsequently approved by Parliament, which implies a risk for potential buyers.
It doesn't end there. According to Rabinovich, "then you have to decide whether you are going to sell the whole package to a single buyer or sell the shares on the stock exchange. It should be noted that according to YPF's bylaws, anyone who holds 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."
On Monday, YPF had a market value of US$ 5.783 billion. The 2012 expropriation, led by then-Economy Minister Axel Kicillof, proved costly.
In 2014, Repsol was compensated $5 billion to avoid a lawsuit. But last September, New York Judge Loretta Preska sentenced Argentina to pay another $000.16 billion, because she considered that when the Argentine state took control of YPF in 100 it was obliged to launch a public offering to holders of retail shares. The ruling was appealed and the case remains open.
Milei has a few obstacles to moving forward with the privatization process. First, he has to gather majorities in both chambers to approve the repeal of the expropriation law, when the number of seats of his own as of December is still unknown, beyond the explicit support he achieved in the runoff from Mauricio Macri, Patricia Bullrich and the hard wing of the PRO.
"Finally, we have to see how many legislators from Juntos por el Cambio and the UCR vote with Milei. Likewise, the key to the privatization of YPF is the very likely resistance of the oil-producing provinces, since it is a great source of income," explains stock market analyst Sebastián Marill. The expert recalls that the two previous times the issue passed through Congress (to privatize and expropriate) "it was approved unanimously."
Among Milei's new allies is the former energy secretary of Cambiemos, Javier Iguacel, who sounds like he will be the one to head this new privatization project of YPF. The precedent was the privatization of 1992, during the first government of Carlos Menem. At that time, YPF (a state-owned company) became a corporation with the approval of Congress and was granted privileges to increase its value.
In 1999, Repsol bought 85% of the shares of the Argentine oil company for almost US$ 13,500 million and in 2007, with the backing of Kirchnerism, the Petersen group (of the Eskenazi family) took over 14.9% of YPF with the mission of "Argentinizing" and commanding the company's destiny to lead the exploration and exploitation of the country's oil and gas resources.