The privatisation of state-run oil company YPF SA is no longer included in the sweeping reforms President Javier Milei is trying to get approved by Congress, according to a summary of the legislation circulated by the government Monday.
The so-called omnibus bill, currently up for debate in the lower house Chamber of Deputies, was changed after negotiations with lawmakers. It’s the clearest sign yet that libertarian hard-liner Milei, whose party has only a minority in Congress, is willing to make concessions in order to push through a radical reform package that would shred the fabric of Argentina’s interventionist economy to build a free-market haven.
YPF is Argentina’s biggest oil driller and refiner. It was nationalised in 2012 to spearhead development of shale riches in Patagonia after Spanish owners were accused of neglecting production. And while YPF has found some success there — shale oil now makes up nearly half of the country’s crude output of 760,000 barrels a day — it has been hobbled by government meddling in fuel prices to contain runaway inflation.
Its New York-listed shares have fallen almost 30 percent since the nationalization. But some investors had recently been buying up YPF securities in the hope Milei would see through a re-privatisation that could, in theory, make the company more efficient and profitable.
Paula La Greca, an analyst at TPCG in Buenos Aires, said privatisation was always unlikely to happen. That’s because by keeping YPF under state control the government has a guaranteed tool for improving Argentina’s energy trade balance, which in turn helps budget and monetary goals.
“YPF was conceived as a company to ensure energy independence was a part of national security,” La Greca said.
YPF’s US depositary receipts were up by about one percent at midday in New York after falling sharply before the start of regular trading.
To be sure, Milei — who’d originally said he wanted to get YPF in good order before pursuing a sale midway through his term — could still revive the plans. However, it would be a challenge to secure the required two-thirds approval in Congress.
Complicating matters is a US court ruling earlier this year ordering Argentina to pay some US$16 billion after it botched technical steps during the nationalisation. Since the government failed earlier this month to pledge equity in YPF as a guarantee to investors during an ongoing appeals process, a Manhattan judge has given those investors the green light to collect the judgment by going after Argentina’s assets.
Milei will still seek to privatise tens of other state companies as he moves to shrink a bloated government. But the revised version of the omnibus legislation also pares back plans for the state-run nuclear operator, a satellite company and Banco Nación.
The president also made concessions on how pensions should be calculated. Resistance to his reforms out of Congress includes a general strike planned this week by powerful trade unions.
YPF over the past decade has channelled its nationalistic role to successfully spearhead development of Argentina’s Patagonian shale riches, and it is leading plans for pipeline build-outs and liquefied natural gas exports.
-TIMES/BLOOMBERG
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by Jonathan Gilbert, Manuela Tobias & Kevin Simauchi, Bloomberg
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