Following the announcement of his intention to privatize YPF, shares of the oil company on Wall Street jumped 41.3% in a day of widespread increases among Argentine companies. However, the privatization process may not be as straightforward for the new ruling party, which is led by libertarian Javier Milei and will take office on December 10th.

To privatize YPF’s 51% share package, Milei must first obtain authorization from Congress to transfer shares to the private sector. This could be done through DNU (Decree of Necessity and Urgency), but it would depend on the political strength at any given time. If DNU is used, it must also be subsequently approved by Parliament, which poses a risk for potential buyers.

Milei has promised to revalue the value of YPF shares before selling them, so that they can be sold in a way that benefits Argentines. However, specialists emphasize that this is an important operation and that in principle, the expropriation law needs to be repealed from 2012 when Repsol controlled YPF. This means that Milei must gather majorities in both chambers of Congress to approve the repeal of the expropriation law before he can proceed with privatization.

Once this hurdle is overcome, Milei will have to decide whether to sell YPF’s entire share package to a single buyer or sell it on the stock market. According to stock market analyst Sebasti├ín Marill, anyone who holds more than 15% of YPF shares has to make an offer for the entire company and even agree with 49% of private shareholders before they can sell their shares. This could complicate things for Milei since many parties may not be willing to agree on such terms.

The issue of privatizing YPF has been controversial in Argentina since its nationalization in 2012 under then-Minister Axel Kicillof and subsequent compensation paid by Repsol in 2014 and New York Judge Loretta Preska’s recent ruling against Argentina for failing to launch a public offer as required under Argentine law when it took control of YPF in 2012. The case remains open as Milei tries to navigate these obstacles and move forward with his plans for YPF’s privatization process.

By Editor

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