With the country’s net fuel exporter status under threat, on 16 April 2012 the government unveiled measures to seize control of Argentina’s largest crude producer, YPF SA, two decades after its privatisation in 1992. A bill that would allow the government to expropriate 51% of YPF shares has been approved by the Senate and sent to the government-controlled Lower House which is likely to adopt it readily. The level of compensation for Repsol is expected to be very limited as the World Bank’s Institute for Settlement of Investment Dispute (ICSID) channel has proven ineffective in the past. In fact, any ruling of the ISCID has to be ratified by a domestic court before it becomes effective.

Impact on country risk

Since her re-election in November 2011, President Cristina Fernandez has increased capital controls, interventionism and protectionism with the introduction of discriminatory measures such as the use of non-automatic licenses for a growing number of items and the  imposition of  new procedures. Additional protectionist measures and tighter foreign exchange controls are likely to be adopted. A detailed analysis on Argentina can be found on ONDD’s website.

Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com