BUENOS AIRES (Reuters) - Argentine senators on Wednesday were set to approve the nationalization of the country’s biggest oil company, underscoring broad domestic support for a move that sparked outrage among foreign investors and trade partners.
Most Argentines support the move to renationalize YPF, which was privatized in the 1990s after 70 years under full state control. They blame the free-market policies of that era for precipitating an economic meltdown in 2001/02.
More than 60 legislators in the 72-member Senate -- including many from the opposition -- could vote for the expropriation, clearing the way for final approval next week in the lower house, which is expected to debate it on May 3.
“The government’s bill doesn’t reflect a capricious or random decision,” ruling party senator Marcelo Fuentes said during the debate. “It’s a logical result stemming from the need to reverse free-market thinking in energy policy.”
Once the takeover becomes law, attention will turn to the compensation Argentina will pay Repsol for its majority stake in YPF. Officials have already said it will be a far cry from the $9.3 billion the company has requested.
In an advertisement in Argentine newspapers on Wednesday, Repsol said it had been singled out unfairly since it has cut oil and gas production less than some other energy companies.
But Economy Minister Hernan Lorenzino said that was “an insult to people’s intelligence.”
Lorenzino told local radio: “This policy of sending home profits, taking on debt and not producing clearly has a negative impact on the economy.”
Despite widespread support at home, Fernandez’s move has foreign investors and governments worried about increasingly antagonistic policies such as import curbs.
Repsol has denied her accusations that it failed to invest to boost production, a major justification for the takeover. Madrid has vowed to halt multimillion-dollar imports of biodiesel from Argentina in retaliation.
Ratings agencies Moody’s and S&P this week said the YPF seizure could heighten Argentina’s economic isolation.
London-based Capital Economics said it could have “a significant impact on investment flows into the wider economy, making the current ‘model’ increasingly reliant on maintaining a dwindling trade surplus.”
The trade surplus, a pillar of Fernandez’s economic policy, shrank last year as fuel imports more than doubled - sending the issue of flagging oil and natural gas production to the top of the president’s list of priorities.
Latin America’s No. 3 economy has yet to return to global credit markets a decade after its crippling 2001/02 financial crisis and sovereign debt default -- the biggest in history.
With memories of this debacle still fresh, many voters have hailed Fernandez’s calls for “energy sovereignty.”
A survey published last weekend by local polling company Poliarquia showed 62 percent of respondents agreed with the expropriation, with 23 percent against it.
Fernandez’s critics, however, say she could have done it through negotiations, without provoking Madrid and risking foreign investment.
“When we make the sovereign decision to expropriate, let’s be smart, let’s do it properly,” Senator Gerardo Morales from the opposition Radical party said.
Fernandez was re-elected in October with 54 percent of the vote on pledges to deepen the unorthodox policy mix began on the ashes of the crisis by Nestor Kirchner, her late husband and predecessor as president.
Fernandez, a fiery public speaker sometimes compared to Argentina’s famous first lady Evita Peron, has worn only black since Kirchner’s sudden death in 2010 and she has dedicated YPF’s takeover to his memory.
In a speech on Tuesday, Fernandez acknowledged she was nervous when she announced the YPF takeover plan: ”They weren’t nerves caused by doubts or insecurities. On the contrary; I‘m absolutely certain that this is the only way.
“What upset me was that (Kirchner) couldn’t be there to see such a historic moment.”
Additional reporting by Helen Popper, Hilary Burke and Guido Nejamkis; Writing by Helen Popper