Following the announcement by new President Javier Milei of his intention to privatize YPF, shares in the oil company jumped by 41.3% on Wall Street. However, the privatization process may not be as simple for the ruling party as it seems, with obstacles such as obtaining authorization from Congress and repealing an expropriation law from 2012.
According to Milei, before privatizing the 51% of YPF held by the National State and producing provinces, he will revalue its value in order to sell it at a “very beneficial way” for Argentines. However, experts emphasize that this is an important operation and that in principle the expropriation law needs to be repealed from 2012 when YPF was controlled by Spanish company Repsol.
Milei will need to obtain authorization from Congress to transfer shares to the private sector. He explained that he might do this through DNU (Decree of Necessity and Urgency), but it depends on political strength at any given time. The DNU must also be subsequently approved by Parliament which implies a risk for potential buyers.
Furthermore, Milei must decide whether he will sell the entire package to a single buyer or sell shares on the stock market. According to stock market analyst Sebastián Marill, if he decides on selling shares on the stock market, anyone who holds more than 15% of shares has to make an offer for the entire company and agree with 49% of private shareholders. This presents another challenge for Milei’s team.
The privatization process may also face legal challenges due to ongoing court cases related to previous expropriations of YPF in 2012 and 2014. New York Judge Loretta Preska ruled in September that Argentina should pay US$ 16.1 billion because it was obliged to launch a public offer for retail shareholders when it came into control of YPF in 2012. The ruling was appealed and remains open.
In order for Milei’s plan to succeed, he will need support from both chambers of Congress and buy-in from majorities among Legislators from Together for Change and UCR parties. It will also be important for him to gain support from oil provinces since they rely heavily on income generated by YPF.
Overall, while Milei’s plan may seem promising on paper, there are many obstacles that must be overcome before it can become a reality – including legal challenges, political hurdles