Following the announcement of President-elect Javier Miley’s intention to privatize IPF, the oil company’s shares jumped 41.3% on Wall Street in a day of broad gains for Argentine companies. However, the privatization process seems to be more complex than expected for the newly elected ruling party and its libertarian leader.

President-elect Miley promised that before privatizing the 51% of the stock package in the hands of the National State and producing provinces, he would revalue its value for what “can be sold in a very beneficial way for Argentines”. However, experts emphasize that it is an important operation and that “in principle, the law on expropriation” from 2012, when Repsol controlled IPF, should be abolished.

In order to transfer the shares to private sector, President-elect Miley must obtain authorization from Congress to do so through DNU (Decree of Necessity and Urgency). The DNU must also be subsequently approved by parliament, which implies a risk for potential buyers. Gerard Rabinovitch of General Mosconi Institute explained that there are two options: either sell entire package to one buyer or sell shares on stock exchange. According to Rabinović, anyone who has more than 15% of shares must make an offer for entire company and agree with 49% of private shareholders.

The matter does not end there as President-elect Miley faces several obstacles in improving privatization process. He needs to gather majority in both houses to approve repeal of expropriation law when number of his own seats will still unknown despite explicit support he received from Mauricio Macri and Patricia Bullrich. Also key is resistance from oil provinces as they see it as a large source of income. The precedent was successful privatization in 1992 during Carlos Menem’s government when IPF became public limited company with Congress approval and privileges to increase value. In recent years Repsol bought 85% shares for almost $13 billion dollars while Kirchnerism supported Petersen group taking 14.9% ownership with mission “Argentinizing” commanding oil resources exploration and exploitation.

By Editor

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