By IHS Global Insight Latin America
Argentina's president, Cristina Fernández de Kirchner, yesterday (16 April) announced the expropriation of 51% of YPF, the Argentine energy company 57.43%-owned by Spain's Repsol. She announced that she had sent a decree and legislative proposal to the country's Congress giving the Argentine authorities a controlling interest in YPF at the expense of Repsol. According to the text of the bill, the 51% stake will be shared between the federal government and oil- and gas-producing provinces, with those provinces allocated 49% of the expropriated stake divided between them according to production levels and reserves - IHS Global Insight.
However, Fernández de Kirchner made it clear in her speech that none of the other existing shareholders would be affected, that is, the Argentine-owned Petersen Group (25.46%) or free float (17.09%). She made no direct comment on the compensation that Repsol might be entitled to, but the bill states that the price will be subject to article 10 of Law No. 21,499 (the "Expropriation Law"). This establishes that affected parties should be compensated taking into consideration the "objective value" of the company and any loss that is a direct and immediate consequence of the expropriation, with no regard to loss of earnings.
The bill, entitled "Hydrocarbon sovereignty in the Republic of Argentina", has as its primary objective "achieving self-sufficiency in hydrocarbons". It will make possible an expropriation justified as being in the national interest. The move comes after several weeks of intense pressure on YPF from the Argentine authorities, in response to growing government concerns over the country's ability to supply its energy needs and the consequent costs of energy imports to Argentina.
The Presidential Performance
During a national presidential address that included references to the many other oil-producing countries that maintain state control over energy-production, Fernández de Kirchner adopted presentational devices that have increasingly characterised her mandate. These included standing in front of an image of Eva Perón whilst speaking; an assertion that the expropriation was a "dream" that her dead husband and presidential predecessor Néstor Kirchner had long held; and regular outbursts of football-style chanting and clapping from the audience in the room. She played a further populist card in telling the audience that the government would if necessary import yerba mate?Argentina's popular warm beverage?to counteract the currently high prices.
Therefore, the announcement of the expropriation used a range of highly emotive nationalist populist symbols, and also featured advice to the business sector that expansion of production and of the internal market were crucial to maintaining the living standards of Argentines.
The political purpose of the announcement seems at least threefold. First, an assurance to Fernández de Kirchner's core supporters that her government will continue to look after their interests. Second, an attempt using a national interest rationale to convince the Argentine business sector that it, too, is part of the Kirchnerist project. That business sector is unlikely to have been convinced by the president's performance. Third, the focus on nationalistic discourse centred on Repsol in an attempt to maintain wider public support at high levels. In that respect, yesterday's performance is a continuation of recent rhetoric over the Falkland (Malvinas) Islands.
The government will send the bill first for approval by the Senate. Fernández de Kirchner said that the bill will need to be passed by a two-third majority, which in principle opens a possibility that the bill might not be passed into law. Although Fernández de Kirchner's Victory Front (FpV) enjoys a majority in both chambers of Congress, the YPF expropriation is an issue of such importance that it might, in theory, bring together a fractured political opposition. For example, the main opposition Radical Civic Union (UCR) has said it will reject the government's bill, as has the right-of-centre Propuesta Republicana (PRO) party.
However others, including members of the Broad Progressive Front (FAP), have already declared in principle their support for the bill. And it is likely, given the support for the bill voiced by labour union heavyweight Hugo Moyano yesterday, that wide sectors of non-Kirchnerist Peronism will also support Fernández de Kirchner's legislation nationalising YPF.