BUENOS AIRES (Reuters) - The nationalization of Argentina's biggest oil company was headed toward final congressional approval on Thursday, reflecting broad domestic support for a measure that has rattled private investors.
President Cristina Fernandez, a combative career politician who has tightened state control of the economy, unveiled the plan to seize a majority stake in YPF (YPFD.BA) from Spain's Repsol (REP.MC) six months after her landslide re-election.
The 59-year-old leader, who controls both houses of Congress, easily secured Senate backing for the expropriation last week when it approved the bill 63-3. The lower house looked set to give it similar support in a vote later on Thursday.
Fernandez has justified the renationalization of YPF, which was privatized in the 1990s, on the grounds of slack investment to boost oil and natural gas production that has failed to keep up with growth in Latin America's No. 3 economy.
Repsol denies under-investing, but her message has struck a chord with Argentines, many of whom are suspicious of foreign companies and blame the free-market policies of the 1990s for setting the country up for its 2001/02 sovereign debt default.
The Argentine economy, relieved of much of its debt burden, has fared better than many other economies in weathering fallout from the world crises prompted by the U.S. sub-prime mortgage meltdown in 2008.
"The goal is a YPF aligned with the interests of the country," Fernandez said in a speech on Thursday.
"When corporate interests are not aligned with national interests, when companies are concerned only with profits, that's when economies fail, which is what happened globally in 2008 and what happened to Argentina in 2001," she said.
In the fine print of the YPF takeover bill, Argentina's whole oil sector is declared to be in the public interest.
Speculation about a possible YPF takeover mounted in recent months after Fernandez lambasted the company for spiraling energy imports that are squeezing Argentina's prized trade surplus. The import bill doubled last year.
Fernandez's move on YPF drew a swift reprisal from Spain, which curtailed Argentine biodiesel shipments. Wall Street warned that Argentina risks scaring off investment needed to bolster growth, which is slowing due to the sluggish world economy.
This week, Bolivian President Evo Morales nationalized the local unit of Spain's Red Electrica Espanola (REE.MC), adding to the former colonial power's concerns about investments in the region.
Argentina has yet to return to global credit markets a decade since staging the biggest default in history and foreign direct investment is lagging much of the rest of the region.
While most of Fernandez's critics agree that YPF should be in state hands, some say her confrontational approach could harm the country's already tarnished reputation abroad.
"It's a good move for the country because if the government does not control strategic resources such as oil, it loses power," said financial analyst Leonardo Rodriguez, 32, as he sipped a latté coffee in the well-heeled Buenos Aires neighborhood of Puerto Madero.
"But the approach used in taking over the company, without negotiating, was too jarring and authoritarian," Rodriguez said. "There could be serious consequences. I mean, who wants to invest in a country where the government expropriates private property from one day to the next?"
Once she signs the YPF bill into law, attention will turn to how much compensation Argentina will pay Repsol. Officials say it will be less than the $9.3 billion the Spanish company wants.
Analysts will also look for signs of how the government plans to manage YPF. Leading daily La Nacion on Thursday named an oil industry executive as a possible contender for the chief executive's job.
A gifted public speaker who never appears in public without her trademark mascara and high heels, Fernandez has billed the YPF renationalization as central to her election pledges to deepen the interventionist policies began by her late husband and predecessor as president, Nestor Kirchner.
"The real custodians of his legacy are you," she told supporters at a rally last week in Kirchner's honor. "You will never permit a step backward."
Editing by David Gregorio