THE ARGENTINE EXPERIENCE IN THE PRIVATIZATION OF OIL AND GAS

• Jurisdiction: Derecho Internacional

Mining And Oil & Gas Development In Latin America
(2001)
CHAPTER 4C
THE ARGENTINE EXPERIENCE IN THE PRIVATIZATION OF OIL AND GAS
Hugo C. Martelli
Martelli Abogados
Buenos Aires, Argentina

[Page 4C-1]

In 1989, the Berlin wall fell down, the Cold War ended and a new era for Latin America began; such era was characterized by the end of military governments, and by a progressive political and economic integration of the continent to the republican and market economy model of North America (United States and Canada) and the European Community.

The Republic of Argentina leaded such process, leaving the Group of Non-Aligned Countries and deeply integrating with the United States of America, first, and the other countries of the European Community, then. Internally, in 1989 a deep, drastic antitrust, privatization and economic deregulation process commenced, which process had no precedents in the Republic of Argentina or in any other country of the Region.

This process was carried out by the Peronist party, which until then had sustained that the Federal State had to strictly control the economy. It is hard to imagine that a party other than the Peronist, such as the Radical party, or the moderate or conservative parties, could have carried out this process. The opposition that this parties would have had by the Federal Congress, the Provincial Governments and the citizens in general, would not have allowed them to carry out not even a small part of this political, but mainly economic, reform.

Thus, from 1989, the Republic of Argentine privatized telephone, drinking water and sewage services, hydroelectric and thermal generation and the transportation of electric power, air transportation and airports, sea and river ports, highways and roads, and the social security system; it also deregulated most of the economy providing for the free entrance and exit of capitals. However, the most paradigmatic sector regarding demonopolization, privatization and deregulation, was the oil and natural gas industry.

Until 1989, the oil and natural gas industry was mostly under the control of the Federal Government, without any actual private competition, and those parts of the activities open to the private companies were strongly regulated.

YPF produced itself approximately 80% of the oil and natural gas produced in the country, and was the monopolistic holder of 97% of the crude oil and of 100% of the national natural gas. The participation of private companies in the exploration and production of natural gas and oil was always marginal and...