Privatization of State-Owned Companies and Corporations. Applicable Regime

This declaration has been framed under the terms outlined in Chapters II and III of the State Reform Law 23696. This law, enacted in 1989, governed the last significant privatization process of state-owned companies in Argentina during the 1990s. The State Reform Law was also amended by the Bases Law.

1. Companies Subject to Privatization

In Annex I, the Bases Law lists the following companies and corporations totally or majority owned by the Federal Government as “subject to privatization”:

Subject to privatization:

• Energía Argentina SA

 

• Intercargo SAU

Subject to privatization/concession:

• Aguas y Saneamientos Argentinos SA

 

• Belgrano Cargas y Logística SA

 

• Sociedad Operadora Ferroviaria SE

 

• Corredores Viales SA

The Bases Law also declares that Nucleoléctrica Argentina SA and the Complejo Carbonífero, Ferroviario, Portuario y Energético [Carbon, Railroad, Port, and Energy Complex], managed by Yacimientos Carboníferos Río Turbio, are subject to privatization. These companies may only:

1. organize an employee stock ownership program and place a class of stock for that purpose,
2. incorporate private capital participation, with the Federal Government retaining the control or majority participation in the capital stock.

In the case of Nucleoléctrica Argentina SA, the Bases Law establishes that certain corporate decisions will require the affirmative vote of the Federal Government.

2. Privatization Process

The Bases Law appoints the Executive the responsibility of carrying out the authorized privatizations. The process must adhere to the principles of transparency, competition, maximum competitiveness, open government, efficiency, effectiveness, publicity, and dissemination. Implementing regulations will provide the specific terms and modalities to ensure compliance with these principles.

Among the amendments to the privatization regime provided in the State Reform Law, the Bases Law provides that, in addition to the sale of shares, capital stock quotas or productive operating facilities, these instruments may also be "placed" in the market.

Regarding procurement procedures, the State Reform Law provides for the following methods:

1. public bidding, with or without base,
2. public tenders, with or without base,
3. public auction, with or without base,
4. sale of shares in domestic stock exchanges and markets. The Law includes the sale of shares in foreign stock exchanges and markets and eliminates the possibility of direct awarding.

Under these amendments, the Executive may grant preferential rights for acquiring companies "subject to privatization," under specific conditions, to the owners of part of the capital stock and to the employees of the entity to be privatized.

To facilitate the privatization of companies declared "subject to privatization," the transfer of existing contracts to the Provinces may be considered. The Bases Law also includes the procedure applicable to the liquidation of companies in which the Federal Government holds the total capital stock.

3. Employee Stock Ownership Program

Only employees of the entity to be privatized—of all hierarchical levels and with an employment relationship—may become acquiring parties. This excludes temporary personnel, hired personnel, and officials and advisors appointed in representation of the Government or its dependencies.

4. Control of the Privatization Process 

The Bases Law provides the intervention of the Bicameral Commission for the Monitoring of Privatizations. This Commission must be informed about the modality and procurement procedure chosen, the preferences given to potential acquirers and the measures adopted to guarantee compliance with the applicable principles.

The Internal Auditing Office (SIGEN) and the External Auditing Office (AGN) of the Federal Public Sector will permanently collaborate with this Commission. The AGN must examine the privatization process and submit its findings to the Commission.

Before formalizing the relevant contracts, SIGEN must prepare and publish a comprehensive report about the company. This report will include economic, patrimonial, financial, and operational information, along with corresponding suggestions and observations. The Executive must expressly consider this report and submit it to the Bicameral Commission for the Monitoring of Privatizations.

5. Next Steps 

To further understand the details and specifics on how each privatization process will be conducted, it will be necessary to the examine the regulations the Federal Executive Branch will issue. This will include the regulations for implementing the Bases Law, the relevant bidding terms, and other administrative decisions and regulations.