Argentina pushes on with YPF expropriation

BUENOS AIRES Wed Apr 18, 2012 8:39pm EDT

BUENOS AIRES (Reuters) - Argentine lawmakers took their first step toward nationalizing the country's No. 1 oil company on Wednesday when a Senate committee agreed on the outline of a bill to put YPF under state control.

President Cristina Fernandez unveiled plans on Monday to seize a 51 percent controlling stake in YPF from Spain's Repsol (REP.MC), sparking a chorus of condemnation from Madrid to Washington. Trade partners, already disgruntled by protectionist measures adopted by Buenos Aires, warned the move could hobble private investment in Latin America's No. 3 economy.

Far from backing down, the government said on Wednesday it will also expropriate another Repsol-controlled company called YPF Gas, which distributes butane and propane.

Fernandez, who has stepped up implementation of her state-centric policies since being reelected last year, is expected to win approval in Congress for the takeovers.

"The draft bill is signed," ruling party Senator Anibal Fernandez, who is not related to the president, told reporters. The full Senate is set to debate the takeover measures next week.

Shares of YPF (YPFD.BA) plummeted 28 percent in Buenos Aires to 77 pesos on Wednesday, extending weeks of heavy losses in the run-up to Fernandez's unveiling of the takeover plan.

Fernandez had long accused YPF of failing to invest enough in production while Argentina has been forced to spend more on energy imports, threatening to dry up its prized trade surplus.

Spain threatened economic and diplomatic "consequences" after the 59-year-old leader said she would solve her country's energy shortage by seizing control of YPF. But there may not be much Madrid can do to stop the expropriation.

The United States, Mexico and Britain have joined Spain in warning that the expropriations could deepen Argentina's economic isolation a decade after it staged the biggest sovereign debt default in history.

The YPF takeover, believed to be the biggest nationalization in the natural resources field since the seizure by Russia of the Yukos oil company a decade ago, is expected to be raised at this weekend's World Bank and International Monetary Fund meeting of finance chiefs.

Argentina's Economy Minister Hernan Lorenzino said he will be at the meeting in Washington to explain Argentina's position.

Argentina's credit risk increased sharply after the Senate signaled that it would approve the YPF nationalization.

The country's component of the JP Morgan Emerging Markets Bond Index Plus (EMBI+) widened on Wednesday by 51 basis points to 1,044 basis points, a huge move on a day when underlying benchmark U.S. Treasuries were little changed.

The increase shows that investors see Argentina as being roughly three times as risky as other emerging markets.

Fernandez stunned investors in 2008 when she nationalized private pension funds. She also renationalized the country's flagship airline, Aerolineas Argentinas.

Such measures are popular with ordinary Argentines, many of whom blame free-market policies for Argentina's economic crisis and debt default of 2001-2002. The country has been shut out of the international bond market since then.

(Additional reporting by Guido Nejamkis, Karina Grazina and Juliana Castilla; Editing by Toni Reinhold, Phil Berlowitz)

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