The privatization of YPF, the state-owned oil company in Argentina, has been a topic of discussion since the election of Javier Milei as president. Following his statements about his intention to privatize YPF, the stock prices jumped by 41.3% on a day when other Argentine companies also experienced increases. However, the process may not be as simple for Milei and his ruling party as it seems.
Milei promised to revalue the 51% of shares held by the National State and producing provinces before privatizing them. However, specialists emphasize that this is an important operation and that the expropriation law from 2012 needs to be repealed first. This means that Milei must obtain authorization from Congress to transfer shares to the private sector. While he mentioned using DNU (Decree of Necessity and Urgency) as an option, it still needs to be approved by Parliament which poses a risk for potential buyers.
After defining whether to sell the entire package to a single buyer or sell shares on the stock market, another obstacle arises – according to YPF’s statute, anyone who holds more than 15% of shares must make an offer for the entire company and agree with 49% of private shareholders. New York Judge Loretta Preska ruled last September that Argentina must pay US$ 16.1 billion because it was obligated to launch a public offer when it took control of YPF in 2012. The ruling was appealed and remains open.
The key players in this privatization process include Milei himself, his new ally Javier Iguacel (former Secretary of Energy), and stock market analyst Sebastián Marill who sounds optimistic about its success despite previous unanimous approval in Congress for similar projects during Carlos Menem’s government in 1992 when YPF became a Public Limited Company with privileges granted to increase its value. The resistance from oil-producing provinces could also pose challenges given their significant source of income from YPF’s operations.
Overall, while there are obstacles in place for privatizing YPF, Milei’s team remains determined to make this happen within their first year in power starting December 10th.