The recent statements of the newly elected president, Javier Milei, regarding the potential privatization of YPF, led to a 41.3% increase in the oil company’s shares on Wall Street. This increase was part of a widespread surge in Argentine companies. However, the privatization process is not expected to be straightforward for the ruling party that Milei will lead.
Milei has promised to revalue the 51% share package held by the National State and the producing provinces before privatizing them, in order to ensure that they are sold in a beneficial way for Argentines. However, experts emphasize that this is a complex operation and that the expropriation law from 2012, when the oil company was controlled by the Spanish company Repsol, needs to be repealed.
In order to transfer shares to the private sector, Milei will need authorization from Congress, and he has suggested that this could potentially be done through a Decree of Necessity and Urgency (DNU). However, any DNU issued must also be subsequently approved by Parliament, presenting a potential risk for potential buyers.
Furthermore, there are additional decisions to be made, such as whether the entire package will be sold to a single buyer or if the shares will be sold on the stock market. Additionally, the resistance of the oil provinces, which rely on YPF as a source of income, presents another obstacle to the privatization process.
Milei’s plans for privatization align with the precedent set by the privatization of YPF in 1992, during the first government of Carlos Menem. This process involved the approval of Congress and the granting of privileges to increase the company’s value. If Milei is able to gather majorities in both chambers to approve the repeal of the expropriation law, then the privatization of YPF may proceed. However, the support he will have in Congress is still uncertain.
Overall, Milei faces several obstacles in his pursuit of privatizing YPF, including the potential resistance of the oil provinces and the need to gather support in Congress. Additionally, the history of the company’s privatization and subsequent developments in its ownership present complex legal and financial considerations.