Argentina says YPF takeover needed to fuel economy
BUENOS AIRES |
BUENOS AIRES (Reuters) - Argentina must seize control of top energy company YPF from Spain's Repsol to boost production of the oil and natural gas needed to fuel economic growth, Economy Minister Hernan Lorenzino said on Thursday.
President Cristina Fernandez unveiled plans to expropriate a 51 percent stake in YPF (YPFD.BA)(REP.MC) last week, sparking a swift reprisal by Spain on biodiesel imports and threats of trade retaliation by the European Union.
While the takeover bid has provoked outrage in some countries, polls show most Argentines support it. The Senate passed the bill 63 to 3 on Thursday and the lower house looks set to give the bill final approval next week.
"This decision is about energy self-sufficiency, which is very important for our country," said Lorenzino, a former finance secretary who took office in December after Fernandez's landslide re-election.
Lorenzino, 40, said the expropriation push also responded to Repsol's "failure to fulfil its obligation to increase ... reserves and production in a way that keeps up with growth and sustains Argentina's economic activity."
Latin America's No. 3 economy has been slowing from growth rates that rivalled China's, prompting the government to take increasingly unorthodox and protectionist measures. The country's trade surplus -- a pillar of economic policy since 2003 -- shrank last year after fuel imports roughly doubled to some $9.4 billion (5.8 billion pounds).
YPF was privatized in the 1990s after 70 years under full state control. Many Argentines blame the privatizations and other free-market reforms of that decade for causing a deep 2001-02 economic and political crisis.
YPF came under intense government pressure to boost investment and production earlier this year. Repsol denies it has breached its contractual commitments and says it has been singled out unfairly since it cut oil and gas output less than some other energy players.
It warned it could take legal action against companies that invest in YPF after Argentina took administrative control of it last week.
Lorenzino, asked if YPF's government administrators will pay interest on the company's 2028 global bond next week, said: "(They) will keep managing each of the aspects of the company's day-to-day operations, and this includes not only production but also its financial administration. Each of these aspects will continue to be tended to."
Once the expropriation becomes law, the new management of the state-controlled company will determine the next steps to take on YPF's debt, which - according to the government - doubled between 2007 and 2011 to $8.9 billion.
"Today we're concentrating on the company's operational aspects and the debate in Congress. The time for defining a concrete corporate strategy will come soon enough," Lorenzino said.
Madrid has vowed to curtail multimillion-dollar imports of biodiesel from Argentina in retaliation for the YPF takeover. Spain is the biggest market for Argentina's biodiesel exports.
Argentina's president downplayed the move, saying the biofuel can be used in the domestic market and Lorenzino said Spain's decision "will not have an impact" on Argentina.
"We think the sales that will no longer go to Spain will be absorbed by Argentina's economic activity, which is very vigorous, unlike that of other countries," Lorenzino said. "Our domestic market hasn't stopped growing in recent years."
"Spain must know why it's doing this and whether it's advantageous for the Spanish people or if this will mean they pay more for what they used to buy from Argentina," he said.
The minister said possible reprisals from the EU were hypothetical, when asked whether reactions from trade partners upset over YPF or over Argentina's import curbs could undermine the goal of maintaining a robust trade surplus.
EU Trade Commissioner Karel De Gucht said on Thursday the move to expropriate a controlling stake in YPF was "a very unfortunate step from the perspective of the Argentine people, whose government is endangering their future prosperity."
But Lorenzino said the government - which spends heavily to stoke economic growth, job creation and domestic demand, at the cost of high inflation - was putting Argentine interests first: "The debate in Congress has won broad support not only from the people but also from the entire political opposition."
(Additional reporting by Sebastian Moffett in Brussels)
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