Argentina’s proposal to nationalize the country’s biggest oil company sailed through the Argentine Senate by a 63-3 vote yesterday, underscoring broad domestic support for a move that has infuriated foreign investors.
The bill aimed at expropriating YPF, a unit of Spanish energy major Repsol, is expected to be approved by the lower house next week and become law.
Argentine President Cristina Fernandez, a popular second-term leader who controls both houses of the Argentine Congress, unveiled plans last week to seize a 51 percent stake in YPF from Repsol.
She says the parent company has under-invested and under-produced in Argentina, a charge that Repsol dismisses.
Most Argentines support the move to renationalize YPF, privatized in the 1990s after 70 years under full state control. Many blame the privatizations and free-market reforms of that decade for provoking Argentina’s 2001-2002 financial meltdown.
“The privatization of YPF was one of the worst mistakes of that era,” Senator Miguel Pichetto, a Fernandez ally, said just before the vote was called.
Latin America’s No. 3 economy has yet to return to global credit markets a decade after its crippling 2001-2002 sovereign debt default — the biggest in history.
With memories of this debacle still fresh, many voters have hailed Fernandez’s calls for “energy sovereignty.”
“The government’s bill doesn’t reflect a capricious or random decision,” ruling party senator Marcelo Fuentes said during the marathon debate. “It’s a logical result stemming from the need to reverse free-market thinking in energy policy.”
The early morning vote, in which four senators abstained, was held after a 15-hour debate.
Argentina’s trade surplus, a pillar of Fernandez’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.
Once the takeover becomes law, attention will turn to the compensation Argentina will pay Repsol for its stake. Officials have already said it will be far lower than the US$9.3 billion the company has sought.
Moody’s warned that other Argentine energy companies such as Pan American Energy, majority owned by BP PLC, and Petrobras Argentina now face a higher risk of government interference in the oil-and-gas sector.