Decoding Milei’s Strategy: A Comprehensive Explainer

The newly elected president, Javier Milei, has announced his intention to privatize the state-owned oil company YPF. This news led to a 41.3% increase in YPF’s shares on Wall Street. However, the privatization process may not be so simple for Milei and his ruling party, as they must obtain authorization from Congress to transfer shares to the private sector and repeal the expropriation law from 2012.

Milei has promised to revalue the value of the 51% of YPF’s share package that is owned by the National State and producing provinces before selling it in a beneficial way for Argentines. However, experts emphasize that this is an important operation that requires repealing the expropriation law.

Milei must also define whether he will sell the entire package to a single buyer or sell shares on the stock market. According to YPF’s statute, anyone who owns more than 15% of the shares must make an offer for the entire company and agree with 49% of private shareholders.

The privatization process may face challenges as Milei must gather majorities in both chambers to approve the repeal of the expropriation law and overcome potential resistance from oil provinces, which rely heavily on YPF’s income. The precedent for this issue going through Congress was during Carlos Menem’s first government when YPF was privatized with Congress approval and granted privileges to increase its value. Repsol then bought 85% of YPF for almost US$ 13.5 billion in 1999, with Kirchnerism backing them in taking control of another 14.9% in 2007 with a mission “to Argentinize” and command its destiny.

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