Thursday, April 26, 2012

Senate passes YPF expropriation bill

The Upper House passed Repsol-YPF’s expropriation bill late last night after debating for more than 15 hours. With 63 votes in favour, 3 against and 4 abstained from voting, Senators passed the bill sent to Congress by President Cristina Fernández de Kirchner that calls for the expropriation of 51 percent stake in YPF oil and gas giant, which are currently held by Spain-based energy company Repsol. Now the bill will be sent to the Lower House for final approval next week.

With a total of 72 members at the Upper House, there were only two absents, while 70 senators could vote for the expropriation, clearing the way for final approval next week in the Lower House, which is set to debate and pass the bill into law on May 3.

Prior to the debate itself, the foreseen result was already clear, as the national government, with the additional support of the Radical Civic Union (UCR) and the Broad Progressive Front (FAP) had already secured 80 percent of the vote.

Most Argentines support the move to renationalize YPF, which was privatized in the 1990s after 70 years under full state control. Many blame the privatizations and other free-market reforms of that decade for provoking Argentina's 2001/02 financial meltdown.

A survey published last weekend by local polling company Poliarquía showed 62 percent of respondents agreed with the expropriation, with 23 percent against it.

"The government's bill doesn't reflect a capricious or random decision," ruling party senator Marcelo Fuentes said during the long-standing debate. "It's a logical result stemming from the need to reverse free-market thinking in energy policy."

In an advertisement in Argentine newspapers yesterday, Repsol said it had been singled out unfairly since it has cut oil and gas production less than some other energy companies.

But Economy Minister Hernán Lorenzino said that was “an insult to people’s intelligence.”

Argentina's trade surplus, a pillar of Fernández de Kirchner's economic policy, shrank last year as fuel imports more than doubled - sending the issue of flagging oil and natural gas production to the top of the president's list of priorities.

"Moments like this define whose side you are on," said Kirchnerite Senator Daniel Filmus, who added: "Are you on the side of the national interest or are you are fighting the side of those who pray on our natural resources."

Once the takeover becomes law, attention will turn to the compensation Argentina will pay Repsol for its majority stake in YPF. Officials have already said it will be far lower than the 9.3 billion dollars the company has requested.

The nationalization has investors and trade partners worried about increasingly antagonistic policies such as import curbs.

Madrid has vowed to halt multimillion-dollar imports of biodiesel from Argentina in retaliation while ratings agencies Moody's and S&P said the YPF seizure could heighten Argentina's economic isolation at a time of slowing growth.