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Fernandez Avoids YPF Takeover in Speech to Argentina’s Congress

Argentina's President Kirchner
Cristina Fernandez de Kirchner, president of Argentina. Photographer: Diego Giudice/Bloomberg

Argentine President Cristina Fernandez de Kirchner defused speculation she would announce a takeover of the country’s biggest energy company today during an annual speech to Congress. Shares of YPF SA soared.

Fernandez vowed to guarantee the country’s fuel supply without calling for new measures against YPF, the local unit of Madrid-based Repsol YPF SA. She criticized the company for cutting production since 1999 and said higher fuel imports were hurting the country’s trade balance, which fell to $10.3 billion last year from $11.6 billion a year earlier.

“The curve of oil output has fallen since 1999 and fallen drastically,” Fernandez, 59, said in a three-hour speech to lawmakers in Buenos Aires. “If we hadn’t had the increase in imports, we would have posted a trade surplus of $15 billion.”

YPF rose 14 percent to $29.91 in New York trading at 2:55 p.m. after Fernandez didn’t announce direct measures against the company. The stock fell 14.3 percent yesterday after newspaper Ambito Financiero reported the possibility of a takeover. YPF is under pressure to boost investment and cut dividends after Fernandez said fuel imports doubled in 2011.

Since her landslide re-election in October, Fernandez’s government has tightened controls on the foreign exchange market, raised restrictions on imports and ordered energy and mining companies to bring all their export revenue to the country after capital outflows accelerated to a record high in the third quarter and the trade surplus narrowed.

Business Climate

“The business climate has deteriorated with the import restrictions, exchange controls and pressures on YPF,” said Daniel Kerner, a Buenos Aires-based analyst at the Eurasia Group. “She speaks at a time when the economic slowdown is starting to be noticed.”

A YPF spokesman, who can’t be identified because he isn’t authorized to speak publicly, declined to comment.

Repsol Chairman Antonio Brufau is visiting the Argentine capital this week for the third time this year, Investor Relations Director Maria Victoria Zingoni said during the company’s earnings conference call yesterday, without disclosing the purpose of the visits.

YPF last week barred three politicians from entering a meeting in Buenos Aires, prompting the government’s representative on its board, Roberto Baratta, to walk out in protest. Baratta, who voted against YPF’s dividends last year, left the board meeting after being told Energy Secretary Daniel Cameron, Deputy Economy Minister Axel Kicillof and other officials accompanying him weren’t allowed to attend.

‘Blaming YPF’

“Argentina has passed from being a fuel exporter to a country that will import about $10 billion this year,” opposition Senator Maria Eugenia Estenssoro told reporters after the speech. “Blaming YPF for that is not acknowledging that there has been a failure in energy policies.”

Spain and Argentina formed a working group to resolve their “differences” over YPF, Spanish Industry Minister Jose Manuel Soria said today.

South America’s second-biggest economy is facing a slowdown after expanding 9.2 percent in 2011, according to Fernandez’s estimates. The government forecasts that the economy will grow 5.1 percent in 2012. An inflation rate that private economists estimate at more than 20 percent and the elimination of some subsidies led consumer confidence to fall 8.2 percent in February, the biggest decline since October 2008, according to a poll released by Torcuato Di Tella University.

Confidence in the government declined 7 percent last month, the most since August, according to the Buenos Aires-based university.

Central Bank Charter

Fernandez also asked Congress to change the central bank’s charter to be more closely tied to the “real economy” in order to sustain growth and employment. She said the government will eliminate the so-called convertibility law, which limits the use of central bank reserves to savings that exceed the monetary base. Fernandez plans to tap $5.7 billion of the bank’s $46.7 billion savings to pay debt this year.

Argentina will also seek to renegotiate a 1998 accord with the U.K. that allows two monthly flights by Santiago-based Lan Airlines SA to the Falkland Islands. Fernandez says she wants three direct flights from Buenos Aires to the Falklands by the country’s flagship airline, Aerolineas Argentinas SA.

On Feb. 28, the government asked companies to cut their imports of goods made in the U.K. as a protest over control of the islands. Fernandez said the U.K. has “militarized” the Malvinas, as the Falklands are known in Latin America.

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