The election of Javier Milei as President of Argentina has sparked a renewed debate about the privatization of YPF, the state-owned oil company. After Milei’s announcement that he plans to privatize 51% of YPF’s share package, the company’s shares on Wall Street jumped by 41.3% in a day of widespread increases in Argentine companies. However, the privatization process may not be as straightforward as Milei and his ruling party, Libertad Avanza, imagine.
One of the main challenges that Milei will face is obtaining authorization from Congress to transfer shares to the private sector. While he has indicated that he may use the Decree of Necessity and Urgency (DNU) to do so, this instrument carries political risks and must be approved by Parliament after being submitted for review.
If Congress approves the DNU, Milei will need to decide whether to sell the entire package to a single buyer or sell shares on the stock market. According to stock market analyst Sebastián Marill, anyone who owns more than 15% of YPF’s shares must make an offer for the entire company and agree with 49% of private shareholders under Argentine law. This could complicate negotiations with potential buyers if there are multiple parties interested in acquiring control of YPF.
Milei’s decision to revalue YPF before privatizing it also poses challenges. While he has promised to do so in order to sell them at a higher price and benefit Argentines, experts warn that this could lead to legal disputes if it involves expropriating land or resources from indigenous communities or violating environmental regulations.
Furthermore, Milei must repeal the expropriation law from 2012 when Repsol controlled YPF in order for any privatization process to proceed smoothly. However, gaining majorities in both chambers is uncertain given that the number of own seats that will count starting December is still unknown beyond explicit support from Mauricio Macri, Patricia Bullrich and hard wing PRO supporters during campaigning period. This means that Milei must work closely with other members of Congress and build alliances with key stakeholders if he wants his vision for YPF’s future comes into fruition.
In conclusion, while privatizing YPF may seem like an attractive option for some sectors in Argentina’s economy and society alike, it presents significant political challenges for Javier Milei and his ruling party Libertad Avanza starting next December 10th