Ignoring The World, Argentina Is Fast-Tracking The YPF Takeover

Argentina Cristina Kirchner

Photo: Casa Rosada

BUENOS AIRES, Argentina (AP) — The government showed no signs of backing down Thursday from expropriating a Spanish company’s controlling stake in Argentina’s formerly state-owned energy company, shrugging off international condemnation while finding overwhelming support for the plan in congress.Top officials also suggested that Argentina won’t pay anywhere near the $10.5 billion sought by Repsol-YPF SA for its stake, and that the company might not see any money at all before years of battles in international courts, if then. Repsol shares have tumbled 17 per cent this week, and Standard and Poor’s downgraded the company’s stock Thursday to one step above junk.

Argentina’s Senate is fast-tracking the expropriation measure, with only a handful of lawmakers opposed ahead of a floor vote next Wednesday. Some opposition members complained it seemed hastily prepared, but said they would vote for it anyway. Even Mauricio Macri, the Buenos Aires mayor who hopes to oust the government in 2015, said Thursday in a radio interview that he would keep YPF state-owned if elected, “now that the damage is done.”

Sen. Anibel Fernandez said authors of the bill initially did not realise that YPF Gas SA, the nation’s largest natural gas distributor, was separate from Repsol-YPF’s Argentine oil operations, so its expropriation was added to the legislation at the last minute.

The Spanish company had no immediate reaction to the addition of the gas company to the expropriation legislation. “We are not commenting,” a Repsol spokesman, Kristian Rix, said in Madrid.

The impact on Latin America’s energy sector remains unknown. While Repsol stocks plunged YPF shares closed nearly 10 per cent higher at $14.42 in New York trading Thursday after losing half their value this week, a network of other companies also have stakes in Repsol, and vice versa.

Mexico’s state-owned Petroleos Mexicanos, for example, has nearly 10 per cent of the company, while Repsol in turn owns sizeable stakes in other gas, fertiliser and chemical companies operating in Argentina.

The takeover prompted a flurry of meetings across Latin America as energy companies doing business in Argentina sought assurances. Executives of France’s Total Austral gas subsidiary met with Argentine Planning Minister Julio de Vido in YPF’s offices in Buenos Aires Thursday and promised to increase its natural gas production at sites co-owned by YPF by 2 million cubic meters a day — enough to grow Argentina’s overall gas supply by 2 per cent, de Vido announced.

Petrobras President Maria das Gracas Foster also planned to sit down with de Vido on Friday, likewise promising increased production and demanding the reinstatement of a lease revoked by the province of Neuquen, which accused the Brazilian company of failing to develop the site. The same argument was used to justify Repsol’s ouster.

Meanwhile, Spain’s Foreign Minister Jose Manuel Garcia Margallo said he asked U.S. Secretary of State Hillary Clinton for help in retaliating against Argentina, possibly at the World Bank, the International Monetary Fund, the G-20 nations and the Paris Club of financial officials from leading economies.

State Department spokesman Mark Toner said that “we’re very concerned” about the nationalization move and urged Argentina again Thursday to “normalize its relationship with the international financial and investment community.” But he didn’t advertise what if any actions the U.S. would take to support Spain.

Interior Minister Florencio Randazzo told reporters in Buenos Aires Thursday that the government “makes decisions thinking about the Argentines and not about what the U.S. or Spain may think.”

World Bank President Robert Zoellick called this attitude a mistake.

“I think it is a symptom that we have to watch out for,” he said, when countries under economic pressure “respond with populism, respond with protectionism. I think it is the wrong thing to do,” Zoellick said.

Argentine Economy Minister Hernan Lorenzino, appearing at the annual IMF and World Bank meetings that began Thursday in Washington, countered that both organisations have proven to be failures at rescuing economies.

“The only reality is that the people and internal markets suffer from austerity measures,” he said.

“It’s clear that this isn’t our vision for emerging from the crisis. We have experience,” he said, referring to Argentina’s world-record default and devaluation in 2002. Both populism and protectionism have been government standards since then.

“We have come through with growth, employment, an internal market and social inclusion,” he said. “This is what we’ve done since the most tremendous crisis in modern Argentine history in 2002.”


Associated Press writers Alan Clendenning in Madrid, Luis Alonso Lugo in Washington and Anne Gearan in Paris contributed to this report.

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