Javier Milei, the newly elected president of Argentina, has announced his intention to privatize YPF, the state-owned oil company. This news has led to a significant increase in YPF’s shares on Wall Street, with a 41.3% jump in value in just one day. However, the process of privatization is not expected to be easy for Milei and his new ruling party.
Milei has promised to revalue the 51% of YPF’s share package that is currently owned by the National State and producing provinces before selling it to the private sector. However, experts emphasize that this is an important operation and that the expropriation law from 2012 must be repealed first. This will require obtaining authorization from Congress to transfer shares to the private sector.
The use of DNU (Decree of Necessity and Urgency) is one option that Milei may consider, but it must be approved by Parliament as well. This could pose a risk for potential buyers since any decision made under this decree can be reversed later.
Additionally, Milei must define whether he will sell the entire package to a single buyer or sell shares on the stock market. According to YPF’s statute, anyone who owns more than 15% of its shares must make an offer for the entire company and agree with 49% of its private shareholders before making any sale.
The privatization process is further complicated by ongoing legal disputes related to YPF’s expropriation in 2012 led by former Minister of Economy Axel Kicillof. In September 2021, New York Judge Loretta Preska ruled that Argentina was obligated to pay US$ 16.1 billion in damages because it failed to launch a public offer when it took control of YPF in 2012 as required by international law. The ruling was appealed and remains open today.
In order to advance the privatization process successfully, Milei will need support from both chambers of Congress and cooperation from oil-producing provinces who rely heavily on YPF as a source of income