Following the announcement of the expropriation of YPF Repsol, Spain's government threatens retaliation
President Cristina Fernandez seeking energy self-sufficiency
Conference at which the president of Argentina, Cristina Fernandez de Kirchner, announced it will send to Congress a bill to expropriate most of YPF, company that responsible for the decline in oil production Ap Photo
Newspaper La Jornada
Tuesday April 17, 2012, p. 2
Tuesday April 17, 2012, p. 2
Buenos Aires, April 16. Argentina YPF oil company stepped in and look for expropriate 51 percent of the company, controlled by the Spanish Repsol, a decision that emphasizes the state presence in the economy and triggered a conflict with Madrid, which threatened to retaliate.
Argentina's President Cristina Fernandez announced to applause that will send to Congress a bill to expropriate most of YPF, the largest company, which blamed a fall in the production of hydrocarbons requires to import and erodes the trade surplus.
YPF is all I want you to have clear, Fernandez said in a speech on national TV. As legislators and governors, Congress quickly approve the proposal, Fernandez said the country aims to give freedom to decide its energy policy and recover a lost self-sufficiency.
Hostile gesture: Madrid
The president explained that the actions that seek to expropriate are solely those having Repsol-YPF and not those of other private partners.
Following that announcement, the executive of Spain said that interprets the move as
a hostile gesture.
The government absolutely condemns the arbitrary power of decision to expropriate Argentina Repsol YPF shares, said Spanish Foreign Minister, Jose Manuel Garcia Margallo after an emergency meeting with President Mariano Rajoy.
There will be consequences, he added.
Fernandez previously said he did not answer what he called threats made from Spain. "This president is not going to answer any threat, will not answer any outburst is not going to echo disrespect or insolent phrases, because I represent the Argentines, I am a head of state, not a patotera (bully ), "he said.
Repsol-YPF has 57.4 percent of YPF, while the Petersen Group, the largest local shareholder, owned by the Eskenazi family, owns 25.4.
The Spanish company said it believes
unlawfulFernandez's decision and the legal fight, which would indicate that the conflict could end up in another lawsuit against Argentina at the International Centre for Settlement of Investment Disputes, the World Bank.
The European Union (EU), second largest export market for Argentina, also reacted quickly.
A forced takeover by the Argentine government will be a very negative signal to domestic and international investors and could seriously damage the business environment in Argentina, the spokesman said EU trade, John Clancy.
Carlos Bastos, an expert on the local energy sector, said the measure will drive away the millions and much needed investments to develop the Argentine megayacimiento Vaca Muerta, with huge non-conventional hydrocarbon resources.
do not think there is no risk investment that is willing to invest in the country, he said.
The bill will begin to be discussed Tuesday at the Argentine Congress, the lawmakers agreed Aníbal Fernández and Agustín Rossi.
In Buenos Aires the titles of YPF fell 2.43 percent before being canceled their operations.
The sum of all evil is consummated by nationalization and this change strongly the trend of the action, said Marcelo Paccione, an analyst at Capital Brokerage Consult .
The current total capitalization of YPF is about 46 thousand 765 million pesos, or 10 thousand 640 million dollars at official exchange rate, according to the Stock Exchange of Buenos Aires.
The firm has lost more than 4 billion dollars of market value so far this year.The law of expropriation in Argentina provides the first instance, an agreement between the parties on the amount payable.
Without an agreement, you advance to a court where a judge asks a court to set the price of the transaction. Goldman Sachs said in a report that it is unclear how the government will pay 51 percent of YPF and if the rest of its shareholders would be willing to continue as a minority.
The bonds of Argentina's sovereign debt accelerated their decline after the announcement.
The news (YPF) sensitized the entire market and it showed very clearly in bonds with heavy casualties, as reflected by the country risk, synthesized an operator of private banking.
Faced with the barrage of ads, the Argentine country risk measured by the JPMorgan rose to its highest level since late November.
Founded in 1922, YPF was partially privatized in 1992, after years of reporting losses because they usually had to finance the Treasury.
During most of its history as a state company, YPF was conducted with strong political interference. Fernandez said the state's future conduct will be fully professional YPF. In Fitch's opinion, which on Monday downgraded the oil in local currency,
the control by the government lead to greater inefficiencies and less useful, since SOEs tend to incorporate strategies social entrepreneurs.
A regional example is PDVSA, the Venezuelan state oil company, to be financed social programs constantly President Hugo Chavez. Brazil's Petrobras has a better image among investors for greater transparency of their finances to go public, but is also criticized by strong government intervention in their strategy.
Argentina's energy needs have been a time bomb for years, but the government recently became priority because the rising cost of fuel imports is eroding the precious trade surplus.
Argentina, even without access to international credit markets after a default in 2001, its trade surplus has one of the few sources of foreign exchange.
Crude oil production fell 5.9 percent and 3.4 natural gas last year, when energy demand grew 5.1 percent, according to the Argentine Institute of Oil and Gas. The import of more expensive alternatives such as liquefied natural gas (LNG) and diesel, has more than doubled in 2011, about 9 thousand 300 million dollars.
EU and GB Reviews
Meanwhile, Daniel Volberg, an economist at Morgan Stanley, said in a report to clients that
the oil conflict is just one aspectof what he called the possible
radicalization of the politicsof the Argentine government has nationalized companies such as Aerolineas Argentinas, the funds private pension and most local water distribution, among other companies.
According to the consultancy Capital Economics, based in London, Argentina's decision highlights the
narrowness of their modeleconomic growth characterized by high consumption-driven, subsidies and price controls.
These policies have already forced the country to impose restrictions on the foreign exchange market and imports to guard the trade surplus, he said.
We see this (the proposed expropriation) as a negative perspective (and poor) for long-term investment and we believe it could spread a partial withdrawal of foreign investors in other sectors.