Ever since its founding in 1922, Yacimientos Petroliferos Fiscales (YPF), Argentina's state-owned oil company has been the butt of jokes. It was known as the only oil company in the world that knew how to lose money.

Executives who knew nothing about oil were appointed on the basis of political loyalty. But union bosses made all the management decisions, anyway.

Then YPF was privatized between 1990 and 1993.

• Payrolls were cut from 50,000 employees to fewer than 10,000 and marginal fields were sold off along with money- losing side businesses -- such as hospitals and movie theaters -- that had nothing to do with oil.

• The new YPF invested in new fields, gas stations and pipelines in foreign countries -- including the U.S., Brazil, Ecuador, Russia and Indonesia.

• While the company needed an international price of $11 per barrel of oil to break even in 1995, it only needs $7 a barrel to break even now.

• YPF's largest refinery decreased the cost of processing a barrel of oil from $4.69 to $2.66 since 1995 -- largely by cutting its work force in half.

Argentineans don't laugh at YPF anymore.

Source: Clifford Krauss, "Argentina's Rising Oil Fortunes," New York Times, April 24, 1999.

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