Argentina’s newly elected president, Libertarian Javier Milei, has been forced to make concessions in his radical market reform package, shelving plans to privatize state-run oil company YPF SA, Bloomberg reports.
On Monday, the omnibus bill currently before Congress did not include YPF privatization plans, with negotiations having led to certain concessions in Milei’s radical market liberalization plans.
Milei had proposed the privatization of 41 state-owned companies, including YPF, the country’s nuclear energy company and energy infrastructure entity, Energia Argentina.
YPF was nationalized in 2012 after Spanish Repsol was accused by the government of Argentina of neglect.
Accounting for around 760,000 barrels of oil per day, YPF was to lead the charge in terms of shale development in Argentina. However, its growth in this respect has been consistently diminished by soaring inflation and government intervention in fuel prices, according to Bloomberg, which notes that the company has seen its shares dive some 30% since 2012.
Observers had overwhelmingly predicted that a YPF privatization deal would not make it through Congress.
Bloomberg quoted Paula La Greca, an analyst at TPCG in Buenos Aires, as saying that it was not feasible for YPF to be privatized due to its role as a guarantor of the country’s energy trade balance.
“YPF was conceived as a company to ensure energy independence was a part of national security,” La Greca said, according to Bloomberg.
Additionally, Milei is seeking to free up crude oil exports and allow domestic fuel prices to be determined by the market, replacing rules from the 1960s that authorize the government to intervene in crude oil and gasoline prices and give refiners the right to first refusal on export cargoes.
Such policies are believed to have hobbled growth and development in Argentina’s vast Vaca Muerta shale patch.
Milei's radical reform package, overall, is intended to shock the economy by lifting import controls, making sharp spending cuts.
By Charles Kennedy for Oilprice.com
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