Ypf Research Paper

Submitted By ashearer1
Words: 5229
Pages: 21

The Past, Present, and Future of YPF
A century long battle over the sovereignty of Argentina

(Above: An actual screenshot of YPF’s current website)

Alex Shearer
Regional Economies– 3677
Professor Ricciardi

The objective of this paper is to understand: the history of the YPF (Yacimientos
Petrolíferos Fiscales or Treasury Petroleum Fields) as an organization, the back and forth transfer of YPF from national to private back to national domain of ownership over the course of the past century, the significance of the scope of the expropriation of YPF carried out by the Argentinian government, and what this successful expropriation means for other countries within South America and around the world. Much detail be see in the analysis of the transfer of wealth between the government of Argentina with the Spanish multinational company, Repsol, which had acquired full control of YPF in 1999. Due to
YPF’s significant size as a national company in the second largest industry in the country, most of Argentina’s major industrial related issues as a country can in some way shape or form be traced back to issues with YPF since its formation. Both the government and private industry have been at fault for issues caused by YPF to the Argentinian economy over the course of the company’s history. Requirements placed upon YPF by the government became its ultimate undoing. By being forced to pay royalty fees to the government for oil extracted as well as having to keep prices below international market prices, the Argentinian government did not exactly setup YPF to be able to succeed as a nationalized company. Essentially, by demanding so much from the company without investing in its long-term development with new projects, the government of Argentina setup YPF to succeed and then fail. Operating as a private company (1993-2012), the company found much success up until the government increased the royalties that it required YPF to pay. Much like as a nationalized company, as a private company this along with the price floor set on locally produced oil and natural gas led to undercapitalization and reduced investment in YPF’s long-term production capability.

Then shortly after discovering a massive reserve of shale oil, the government expropriated YPF.
There are so many different viewpoints to look at YPF from. Yet the main issue here is not simply one of free-market versus state-market controlled economy of oil so much as sovereignty of a government. YPF has been a part of almost every major domestic political issue since its creation. It has been the one organization in Argentina that various political or business agents have held hostage time and time again in attempt to take wealth in the short term without investing back into the long-term production. As of this year though, thanks to the expropriation of YPF by the Argentinian government,
YPF currently holds interest in 52 exploration permits and has “proved reserves of approximately 628 million barrels of oil (mmbbl) and 2,558 billion cubic feet of gas, as well as a distribution network of 1,542 retail service stations” (Exhibit E). Finally, YPF is positioned to succeed in the long run and to benefit the people of Argentina in the process, just as President Yrigoyen set out to do almost a century ago.
YPF has been a focal point of Argentine economics and politics since its formation as an entity by President Hipolito Yrigoyen in 1922 (Patiño). President
Yrigoyen was a leader who sought to do everything in his power, including introducing a minimum wage to reduce the effects of inflation on the people, to improve the standard of living of Argentine citizens. The proof of his success as a leader for the people seems obvious as, "by 1920 Argentine consumption of petroleum products exceeded that of
France, and the republic was becoming, in the words of oil expert J.A. Brady, 'One of the greatest consumers of petroleum products in the