Fitch: Argentina's YPF Nationalization Shows Policy Uncertainty
CHICAGO -- April 16, 2012
Fitch believes today's decision by Argentina's government to begin the process
of nationalizing YPF S.A., the country's largest energy producer, adds to
Argentina's policy uncertainty and could prove to be harmful for long-term
private investment. This action also underscores the unfavorable business
environment, as characterized by increased government intervention and
regulatory uncertainty in the country.
We note that a high level of policy unpredictability, typical for 'B'
category-rated sovereigns, has been incorporated to a large extent in the
current ratings of Argentina.
The government announced today its intention to submit a bill to Congress
authorizing the state to acquire 51% of the shares of YPF from Repsol, Spain's
largest energy company, owner until now of a 57% stake. At the same time, the
government decreed that it will immediately assume control over management of
YPF. The terms of the takeover are uncertain, but we will continue to monitor
how these would affect Argentina's public finances and financing flexibility.
Regulated energy tariffs and a domestic energy subsidy program have reduced
investment and production incentives in Argentina, contributing to a rise in
energy imports and reversal in the country's energy trade surplus. With the
YPF nationalization, the government aims to reverse the downward trend in oil
and gas production.
The proposed nationalization of YPF comes on the heels of other
interventionist policies the government has introduced over the past few
months. Authorities have imposed tougher controls on capital and current
account flows to preserve international reserves and control depreciating
pressures on the currency. All these measures highlight the relatively weak
overall policy framework of Argentina, which continues to heavily weigh on its
Fitch currently rates Argentina's foreign and local currency IDRs 'B' with
Stable Rating Outlooks.
Additional information is available on www.fitchratings.com
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