Leftist economist behind Argentina's YPF takeover

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By MICHAEL WARREN, Associated Press

BUENOS AIRES, Argentina (AP) — Miguel Galuccio sat quietly with a nervous smile as Argentina's president suddenly thrust the youthful oil executive from obscurity into one of the nation's most high-pressure jobs: leading the newly state-controlled energy company.

As political leaders applauded, an even younger man sitting beside him, Axel Kicillof, draped his arm around Galuccio's shoulders, sending an unmistakable message that the president herself reinforced: Together, these men will manage the nation's top priority right now, YPF SA, the new symbol of Argentina's government-guided economy.

"The idea is essentially to create an YPF that is absolutely modern, competitive, with professional people, but with political leadership, intent on returning energy self-sufficiency to the Argentine Republic," President Cristina Fernandez said at Friday's ceremony.

Galuccio is the professional Fernandez hoped for when she decided to take back the company that had been in the hands of Spain's Repsol SA for 13 years.

While he is just 44, he has long experience in the extraction side of the energy business, building public-private teams to maximize production for state-owned oil companies. He quit YPF SA after Repsol took over in 1999, and then rose through the ranks of Houston, Texas-based oil services giant Schlumberger Inc., helping to turn failing projects into moneymakers in Mexico and Indonesia.

Kicillof, 41, is the political side of the equation. While he's just a deputy economy minister and officially her second-ranking representative in the YPF intervention, the expropriation was essentially his project from the start. He helped draft the law, which ignores a constitutional requirement to pay in advance for expropriations, and strongly argued that Spain's Repsol shouldn't get anywhere near the $10.5 billion it has demanded in compensation.

An economist who has published two books on the theories of John Maynard Keynes, Kicillof believes government must make sure private industry operates in concert with a country's priorities, taming markets and protecting consumers and workers. It's the essence of the model that Fernandez insists will keep Argentina growing strongly.

"We're sure about what we're doing, that we've chosen the responsible path, and that it will bring results completely different from what's happening in Europe and even in Spain," Kicillof said as he presented the takeover plan in the Senate. "We have tried the bitter taste of austerity measures, and we know that when there's a profound crisis, the worst you can do is think that the state is bad, that the government is the problem.

"Government is the solution, and we've seen this in Argentina."

Detractors consider Kicillof to arrogant and inexperienced. They accuse him of disrespecting the rule of law, which they predict will hasten the government's eventual collapse. YPF's stock soared 8.5 percent Friday after the appointment of the industry veteran Galuccio was reported, suggesting markets had a negative view of Kicillof's role running the company.

But his many admirers have enjoyed seeing such a charismatic figure emerge to defend the public interest.

And Fernandez, who must leave office in 2015, said after praising Galuccio and Kicillof Friday night that the time has come for "these people from the young generation" to become leaders.

"I think we're facing an historic opportunity, but we can't be nostalgic. We know we can't return to the old YPF that was criticized as inefficient and therefore needed to be privatized," she said.

Fernandez has sought out younger loyalists to counter the Peronist party veterans who might challenge her power since the death in October 2010 of her husband and confidant, former president Nestor Kirchner. Many have ties to "La Campora," a political movement organized by her son Maximo Kirchner whose members came of age during 2001 and 2002 and who blame the free-market principles in vogue then for Argentina's disastrous economic collapse.

Kicillof was part of this movement, but "always to the left of the left" of the rest, according to journalist Laura Di Marco, who recently published a book on La Campora.

A popular economics professor at the University of Buenos Aires, Kicillof always stood out for "his brilliance, the eloquence and simplicity with which he's capable of transmitting complex ideas, and his determination and honesty when it comes time to take action," said his friend Sebastian Rubin.

With penetrating blue eyes and Elvis Presley-style sideburns, he seems years younger than his age, and refuses to wear a suit or tie even in rooms full of dignitaries. But he's audacious enough to dictate terms to executives of the world's biggest oil companies. And he should be watched closely for clues about what Fernandez may do next, analysts say.

"The government of Cristina is so personalized that everyone is trying to figure out who this new confidant of hers is," said Mariel Fornoni, a consultant with the Management & Fit firm in Buenos Aires.

In his Senate testimony, Kicillof scoffed at the claim that investors might shun Argentina due to a lack of "legal security," calling them "horrible words" and saying that record investment has flowed into Argentina.

"What better rule of law, what better business climate, than a government committed to continued growth, to sustaining internal demand, to sustaining our extraordinary exports to the rest of the world?" he said.

When he finally handed over the microphone, it seemed as if there was no air left in the room.

Now his arguments are enshrined in a law that puts Argentina's entire energy industry under the threat of state intervention. It declares energy self-sufficiency to be a public good and a top national priority, and says any company working to develop, market, ship or sell oil or gas in Argentina must first ensure that the growing economy gets all the energy it needs at controlled prices before exporting oil or gas for much higher prices on the world market.

The same argument could apply to a range of other privatized state companies, from telephone providers to toll road operators, analysts say.

"I don't know how far Cristina thinks Kicillof ought to continue in politics, nor whether he wants to do it," consultant Ricardo Rouvier noted. "But he's a young guy with great potential."

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Associated Press Writer Almudena Calatrava contributed to this report.

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