Argentine opposition leaders warned that President Cristina Fernandez de Kirchner’s takeover of YPF SA (YPFD) would damage South America’s second-biggest economy as the Senate began debate on the company’s nationalization.
Buenos Aires Mayor Mauricio Macri, a Fernandez adversary, asked his supporters in Congress to oppose the move authorizing the government to take control of 51 percent of YPF’s shares. La Nacion, one of the country’s biggest newspapers and a critic of Fernandez, said the surprise takeover announcement yesterday was an “admission of failure,” while former Energy Secretary Emilio Apud said it would worsen the country’s energy crisis.
“The YPF takeover goes against the interests of the Argentine people,” Macri told reporters in Buenos Aires. “I call on all lawmakers to think once more about what they are doing and to think about the nation and the people.”
Blocked from international credit markets and facing quickening inflation and a slowing economy, Fernandez turned to the same tool she used while confronting a similar situation in 2008, when she nationalized the $24 billion pension fund industry. Spain today vowed to retaliate and Repsol YPF SA (REP) demanded $10.5 billion compensation for the seizure.
“What happened yesterday to a Spanish company, somebody might think could happen tomorrow to any other investment,” Prime Minister Mariano Rajoy said during the World Economic Forum on Latin America in Puerto Vallarta, Mexico.
Fernandez is reversing the position of her late husband and predecessor, Nestor Kirchner, who as governor of Santa Cruz province in 1992 supported legislation for the government to sell most of YPF, at the time a state-owned company.
“We have a governing party that every 10 years changes direction,” said Jorge Giacobbe, who heads pollster Jorge Giacobbe & Asociados SA. “In other countries, the party that privatizes is from the right and those that nationalize are from left. This is the only country where the same party does both. These are the same people who voted for the privatization.”
Kirchner, Fernandez said yesterday, actually dreamed of retaking YPF before his death from a heart attack in October 2010.
Fernandez sent Planning Minister Julio De Vido and Deputy Economy Minister Axel Kicillof, who were named to run YPF yesterday, to address Senate committees today to help ensure passage of the bill. Fernandez’s Peronist party, named for founder Juan Domingo Peron, and its allies control both houses of Congress. The bill will be debated by the Senate next week.
“It’s one thing to think that oil is a good that should be extracted and sold and it’s another thing to think of it as a strategic resource,” Kicillof said in his opening statements.
YPF tumbled as much as 11 percent to 103 pesos after trading, which was halted yesterday, resumed in Buenos Aires today. Shares were down 6.9 percent to 108 pesos at 1:25 p.m. local time. The company’s American depositary receipts have not resumed trading in New York.
Argentina’s economic growth, among the fastest in Latin America for the past decade, will slow to 3 percent from 8.9 percent in 2011, according to the median estimate of seven economists surveyed by Bloomberg. Annual inflation, estimated by economists at 23 percent in March, is the fastest among G-20 nations and lags behind Venezuela’s 24 percent as the quickest in South America.
Mexican President Felipe Calderon said yesterday Fernandez’s decision was “regrettable.”
“No one in their right mind would invest in a country that expropriates investments,” Calderon said in Nuevo Vallarta. “This is absolutely a not very responsible measure.”
In the first half of 2011, foreign direct investment in Argentina dropped 30 percent from a year earlier, the biggest decline among the region’s major economies, according to the United Nations’ Economic Commission for Latin America and the Caribbean.
Through June 2011, Argentina received $2.4 billion in foreign investment, compared with Brazil’s $44.1 billion, Mexico’s $10.6 billion and Colombia’s $7 billion.
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