When Nationalization Works

McKinsey’s interview with YPF CEO provokes interesting questions about the ability of state owned companies to function in a challenging global industry and the significance of nationalization in the relationship between multinational companies and governments of their home countries.

YPF is a large Argentine oil and gas company that was acquired by Repsol in 1999 and nationalized by the government shortly thereafter. Shortly after the nationalization, President Cristina Fernandez de Kirchner tapped Miguel Galuccio to run the company. In hiring Galuccio, President Kirchner went for management capability rather than political allegiance. Galuccio worked for Schlumberger and (then independent) YPF.

In the interview, Galuccio describes how he and his team created a “company DNA” which includes professionalism and integrity, a sense of national purpose, and value for the shareholders.

That McKinsey describes this as a success story and an example of strong corporate leadership suggests that nationalization does not have to mean management by political cronies, and that the public and private sectors can work together to create value for both the nation and investors.

That does not mean the company is immune to the recent drop in oil prices or that they will succeed in developing Argentina’s shale assets. However YPF’s performance stands in contrast to the apparent debacle at PDVSA in Venezuela.

Stakeholders in the new oil industries in Africa should take note.

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One thought on “When Nationalization Works

  1. advansa says:

    For more on YPF click here for an article from the Emerging Markets Investors Association:
    http://en.mercopress.com/2014/12/26/exceptional-year-2014-for-argentina-s-ypf

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