Compulsory purchase in Argentina


Argentina’s President Cristina Fernández de Kirchner presented this week a new legislative proposal, which aims to hold the majority of the shares of Argentine’s biggest oil company YPF. Since congress is controlled by Fernández de Kirchner, it is most likely that the parliament will agree to this proposal. The state will hold 51 percent of the shares under the new legislation. Of this new stake, the central government would get 51 percent and the country’s provinces 49 percent.

In 1992, the former president Carlos Saúl Menem decided to privatise YPF and reduced the state-own share to 5%. A few years later, the Spanish Repsol group became the main shareholder. As a result of the big economic crises in Argentina in 1999, the government sold the remaining 5% to generate money and to decrease the state indebtedness. The take over lead Repsol YPF to get one of the ten biggest petrol companies worldwide as well as the country’s biggest tax payer.

According to Fernández de Kirchner, the reason for this compulsory purchase is because of the decreasing oil production as well as fewer investments from Repsol YPF in Argentina. Due to these actions, the costs for oil imports increased from US $ 4.3 billion to US $ 9.3 billion over the last two years. Apart from the above mentioned reasons for this development, it has to be considered that other companies in this sector also diminished their production because of unattractive economy politic with high taxes and fixed prices.

Fernández de Kirchner has already ranged a forced administration of YPF, even though congress has not yet decided on the legislative proposal. Twenty members of the directional board had fifteen minutes to leave their workstations and were replaced by governmental employees. Exemplifying that the company is now already operated by the state.

The Spanish government sharply criticises the actions of Argentina. The Spanish foreign minister, José Manuel García Gargallo said that Argentina’s move “broke the climate of cordiality and friendship that presided over relations between Spain and Argentina.” Spain wants to call the European Union to lodge a complaint with the World Trade Organization. Furthermore, Spain and the EU threaten Argentina with economic boycotts because of this compulsory acquisition. Argentina’s actions can, according to them, be compared to Venezuela’s where several private companies became state-owned since Hugo Chávez became president in 1998.

Observers worry that this action could have a negative influence on the economy as investments could decrease because of the uncertainy of further nationalisations of other private companies. After a downward spurt of its shares, the American rating agency Fitch downgraded YPF’s degree of creditworthiness from B+ to B.

It is highly questionable if Fernández de Kircher’s interference in the economy will help Argentina in the long turn as foreign investors could avoid the country and its external trade could be affected negatively.

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