Javier Milei, the newly elected president of Argentina, has sparked controversy with his plans to privatize YPF, the state-owned oil company. The mere mention of this potential move led to a 41.3% increase in YPF’s shares on Wall Street as part of a broader surge in Argentine companies. However, privatizing YPF is not expected to be an easy task for Milei and his ruling party.
Milei has promised to revalue the 51% share package held by the National State and the producing provinces before privatizing them. This move is aimed at ensuring that the sale benefits all Argentines. However, experts emphasize that this operation is complex and requires repealing expropriation laws from 2012 when Repsol controlled YPF.
To transfer shares to the private sector, Milei will need authorization from Congress. He has suggested that this could be done through a Decree of Necessity and Urgency (DNU), but any DNU issued must also be approved by Parliament, which presents a potential risk for potential buyers.
Furthermore, additional decisions must be made regarding whether the entire package will be sold to a single buyer or if shares will be sold on the stock market. Additionally, resistance from oil provinces who rely on YPF as a source of income adds another obstacle to the privatization process.
Milei’s plans for privatization align with Carlos Menem’s precedent during his first government when YPF was privatized in 1992 through Congress approval and granting privileges to increase value. If Milei can gather majorities in both chambers to repeal expropriation laws, then privatization may proceed; however, support in Congress is uncertain due to past controversies surrounding YPF ownership and legal issues surrounding its future ownership.
In conclusion, Milei faces numerous challenges in pursuing his goal of privatizing YPF including opposition from oil provinces and uncertainty over gathering support in Congress. Furthermore, there are complex legal and financial implications involved in revaluing shares held by national entities before transferring them to private sector ownership.