Argentina vowed Friday to pay $16.1 billion in damages for the expropriation of energy company YPF following an order by a US court. Exactly how it will foot such a huge bill is still under analysis, a government official said.
“Argentina will comply with its commitments and will always respect its contracts, and will always respect the decision of justice in all orders and under all circumstances,” presidential spokesman Manuel Adorni said in a televised press conference. The government is analyzing the alternatives for making the payment, he added.
He spoke a day after US District Judge Loretta Preska, who is hearing the case, turned down Argentina’s request for more time to pay the damages for the 2012 expropriation of YPF.
The judgement is in favor of Burford Capital, a London-based finance and asset management firm that funded the lawsuit for Argentine conglomerate Petersen and US-based investment firm Eton Park. The court in Manhattan previously ruled that Petersen and Eton must be fairly compensated for the expropriation of their stakes in YPF, which were 25% and 4%, respectively, at the time of the nationalization.
The decision on how exactly to comply with the ruling ultimately falls to Argentina’s President Javier Milei, a right-wing economist who took office this month. His left-leaning predecessor, Alberto Fernández, appealed the court’s decision earlier this year, saying it would be impossible to make a payment equivalent to 20% of the country’s 2023 budget so quickly. The country is suffering one of its worst financial crises on record, with the central bank basically bankrupt, the economy in recession and runaway inflation.
‘COLOSSAL AMOUNT’
Adorni lashed out at the left-leaning Peronist Party for orchestrating the expropriation of 51% of YPF and leaving such a large lawsuit for the new libertarian administration to contend with. Nevertheless, he said the new government will find a way.
He said the lawsuit stems from “the mismanagement” of YPF. “We are seeing the consequences of this colossal amount that all Argentines will have to take responsibility for.”
If Argentina doesn’t make the payment by January 10, the beneficiaries of the judgement can start enforcement proceedings, such as by embargoing assets held abroad.
One concern for the government is that as long as the damages from the lawsuit remain unpaid, it could complicate the sovereign’s eventual return to international bond markets, if investors fear the country’s repayment capacity could be hampered. Argentina has been sidelined from the global financial markets since 2018 as it struggles to overcome a financial crisis, leading it to default on bonds in 2019 and 2020. That debt has since been restructured.
The International Monetary Fund has estimated that Argentina faces a “legal exposure” of $25 billion, equivalent to 6% of its GDP and nearly all of its $27 billion in international reserves.