Archivo de Autor

FONTEVECCHIA equivocado

1 febrero, 2014

http://www.perfil.com/columnistas/El-problema-no-es–ideologico-es-cultural-20140131-0048.html

Un brillante periodista como  J. Fontevecchia puede equivocarse en materia económica. La economía argentina fue planificada como LIBERAL en nuestra Constitución Nacional desde 1853/60 , pero a partir 1930 y aún mas, de la primer presidencia de Perón, se modificaron las reglas para irnos convirtiendo en el pais estatista inflacionista que hoy tenemos.  Nuestro problema es el estatismo corrupto, que garantiza impunidad a los presidentes ladrones, en forma sucesiva. La ley de la Omertá (silencio mafioso) funciona, los presidentes no investigan a sus antecesores para evitar ser investigados al dejar el cargo. Y lo consiguen,  ahora. Igual sucede en los paraísos bolivarianos amigos de Cristina. En otros paises seguramente igual se roba – caso Pinochet – pero de otra forma, sin  inflación ni  populismo. Invertir en Chile y Uruguay es mas seguro que en la argentina peronista, aunque los amigos del oficialismo se enriquecen siendo extranjeros o argentinos: la obra publica ha generado fortunas enormes, pero también el proteccionismo a industrias ineficaces ha permitido que empresas extranjeras ganen mucho dinero, tan solo acordando ventajas con el gobernante de turno.

Dudo si entiende Fontevecchia que la moneda es un parámetro cultural, que puede ser sensato o insensato. Igual que el metro de longitud: cuando es elástica la vara para medir, la longitud  es insegura. Por eso, es delito alterar las medidas de longitud, volumen y peso, para evitar que entre la gente se engañe. Sin embargo, la Constitución Argentina  por ser antigua,  no contempló el drama de la emisión de papel moneda en forma inflacionaria., y cuando habla de moneda – Art. 75, inc. 11, se está refiriendo a la hoy fuera de uso “moneda metálica”, que podía ser de metal oro o plata hacia 1853/60. En el inc. 11, ya figura la moneda de papel, cuando dice que el Congreso entre las leyes que deberá dictar, está la referente a “falsificación de la moneda corriente y documentos publicos del Estado”. A los metales no se los podía falsificar, pero sí a los instrumentos Publicos  impresos sobre papel. Pueden falsificarse billetes bancarios. Pero también puede el Estado dirigista ladrón emitirlos en forma compulsiva, inundando el mercado de papeles moneda que pierde valor en forma creciente motivado por la ley de la oferta y la demanda. Y quien se enriquece es el Estado Nacional, a costa de la población y los Estados Provinciales y Municipales.

Pero desde la crisis mundial de 1929/30 la moneda metálica dejó de usarse. El dinero de papel o papel moneda se implantó, y como el dólar norteamericano estaba atado al oro para tenedores de billetes que estaban afuera del territorio de la Unión Norteamericana, el resto de los países que confiaron en la seriedad de la Unión prefirieron que las transacciones internacionales se hicieran por medio de dolares convertibles a oro. Así, evitaban tener que movilizar metal oro, porque el papel pesa mucho menos que el metal. Además, con una transferencia bancaria por internet en el acto se trasportan grandes sumas de dolares, y se evita mover físicamente toneladas diarias de metal por avión o buque, y también desaparece el costo del seguro del metal transportado, el costo de esperar que el metal llegue a manos del destinatario, y se gana tiempo y agilidad para las transacciones globales. Si Argentina lograse tener una moneda creíble,  todo funcionaría mejor, no seríamos menos que muchos de los actuales países de vanguardia.

Planificar ya planificaron nuestros Constituyentes, y lo  hicieron inicialmente bien.  Pero sus planes hoy no existen porque desde 1930 en adelante tomaron el Poder los bandidos, que gobiernan para sí mismos,  degenerando las costumbres sanas de la gente. Ergo, si hubiese una Corte Suprema seria y honesta, Argentina hubiera terminado con el Estado Ladrón, pero eso no sucede, porque el Congreso y la Corte Suprema se ponen del lado del PRESIDENTE de turno, al menos los jueces por él designados.  Cuando Cristina el año próximo deje su cargo, ya no habrá mayoría de Jueces Supremos designados por los Kirchners, y al nuevo Presidente nada le deberán, ni siquiera si llegase otro peronista al Poder.  Ojo, como decía Perón, en Argentina todos somos peronistas, pero cada Presidente se protege a sí mismo, a su familia y a sus amigos. Algo tan viejo como la Humanidad y las mafias… que en algunos países ha sido posible ir cambiando a lo largo de siglos, por razones morales, culturales  mentales. Argentina descendimos, pero… nunca es tarde para intentar tener jueces supremos honestos independientes, Congresistas sensatos y honestos y un Presidente honesto, como se dice lo fueron Alvear e Illia.

otro amigo bolivariano K

1 febrero, 2014

http://www.infobae.com/2014/02/01/1540867-correa-aplica-su-ley-mordaza-sanciono-un-caricaturista-denunciar-corrupcion

¿Presidenta abandonada?

31 enero, 2014

http://www.perfil.com/politica/Coqui-contra-todos-empresarios-sin-escrupulos-sindicalistas-y-productores-20140131-0009.html

El modelo bolivariano marxista cristinista no sirve para Argentina, su fracaso era inevitable, pero ¿durará Cristina hasta terminar su mandato? El peronismo  salvaje tiene helicópteros para desalojarla, tal como  con al  no peronista Presidente de la Rúa  en diciembre 20 de 2001 para recuperar el poder de emitir papel moneda  delictivo inflacionario.

Pero hoy el problema es inverso: el peronismo emitió excesivo dinero inflacionario desde que destruyeron la convertibilidad el 2 de enero de 2002. Y robaron tanto, que la economía se empobreció. Los cristinistas desearían resistir, pero olvidan la regla de oro vinculada con la hiperinflación:  los  gobernantes que la provocan (para robar mas) terminan siendo expulsados del Poder,  pues muchos desean  reemplazarlos. Pueden ser incluso peores: Cristina  peor que Néstor y  que Duhalde, el destructor del peso convertible confiable… Por la Presidenta no preocuparse, tiene amigos poderosos en Cuba, Venezuela  y algunos otros países autoritarios.

Pero la Constitución Nacional viene siendo violada por Presidentes bandidos desde 1930 hasta hoy, sin excepción… en perjuicio de la sociedad y para favorecer a los Gobernantes. El sucesor de Cristina: ¿será mejor o peor que ella? Presidente NO peronista necesitamos, pero que no cometa el delito de Fernando de la Rúa, cuando  (asesorado por el peronista Domingo Cavallo, quizás) firmó el criminal y no constitucional decreto Presidencial que impedía a la gente disponer libremente de sus depósitos bancarios. Así destruyeron al sistema financiero, no pueden haber sido tan torpes, malicio lo hicieron para que la indignación popular provocara disturbios, suficientemente alentados por la linea mas fascista del peronismo para que hubiera OTRO Presidente, pero peronista y no radical, obviamente sin ser votado por el pueblo. Y lo lograron…

Fiesta K ¿sigue o ya terminó?

31 enero, 2014

http://www.clarin.com/politica/The-Economist-Argentina-fiesta-termino_0_1076292657.html

CRISTINA ¿KAPUT? ¿la renunciarán?

31 enero, 2014

ww.infobae.com/2014/01/31/1540649-jorge-asis-este-gobierno-esta-terminado

ARGENTINE UPDATE – Jan 27, 28 & 29, 2014

31 enero, 2014

 

Monday, Jan. 27

 
1. ARGENTINA EASES RULES, INTERVENES IN BID TO DEFEND PESO (The Wall Street Journal)
By Ken Parks, Taos Turner and John Lyons
28 January 2014
BUENOS AIRES — Argentina’s government on Monday tried to prevent last week’s currency devaluation from turning into a financial crisis by allowing Argentines to swap some of their pesos for dollars online, but there were signs the move could fall short.
Despite a 15% slide in the peso’s value last week, the Central Bank still burned through dwindling dollar reserves to defend the peso at its new, weaker rate of eight per dollar, compared with 6.9 a week ago.
Although estimates varied, one person familiar with the foreign-exchange market said the bank spent $135 million Monday defending the peso. The intervention helped the peso close almost unchanged at 8.01 on the official, regulated market.
“If the Central Bank hadn’t intervened, the peso would have gone to 8.50 within two minutes,” said one currency trader, who estimated the bank spent $120 million on the day.
Worse, the currency actually fell in the black market to 12.25 from 11.8 on Friday, suggesting many Argentines still view the official rate as too strong.
“The authorities are rearranging the chairs of a sinking Titanic,” said Arturo Porzecanski, an economist at American University, who described the government’s measures as erratic and self-defeating, likely sparking inflation that would soon diminish the impact of the weaker currency.
The stakes are high for President Cristina Kirchner as she tries to avoid a deep recession before she leaves office in December 2015.
The government has been burning through reserves to support the peso and pay servicing on some $66.8 billion in foreign debt, according to government figures, which has some investors wondering if the country will run out of dollars this year or next unless it is able to find new sources of hard currency. Argentina’s reserves sit at $28.9 billion, down from $52.7 billion in 2011.
Unable to tap global bond markets because of a legal battle with foreign creditors, Argentina gets most of its dollars from trade and meager inflows of foreign direct investment. But the trade surplus shrank to $9 billion last year, its lowest level in more than a decade, and the outlook for 2014 is hardly rosy.
Last week, the Central Bank stopped intervention long enough to allow the peso to fall quickly against the dollar, partly to protect reserves by narrowing the difference between the official and black-market exchange rates. A weaker peso might also spur Argentine exports by making them more competitive.
But the move also comes with big risks, particularly in fueling inflation by making imports more expensive in peso terms.
“There isn’t anyone not raising prices now,” said Jose Mair, 64, who manages a store that sells computers and electronics in Buenos Aires. “I try to sell as little as possible because it is so hard to replace my stock. And my stock is much more valuable than my currency.”
Under new currency rules published Monday, individual Argentines who are registered with the tax agency and who earn at least 7,200 pesos ($900) a month will be able to buy dollars at the official exchange rate — plus a 20% tax. Purchases will be capped at 20% of a person’s net monthly earnings. No one will be allowed to change more than $2,000 a month.
But from the start, there were hiccups.
“I got online this morning, before 9 a.m., to get permission to buy dollars and everything went perfectly,” said Matias Zopatti, a 28-year-old computer programmer. “When I went to the bank they said they still hadn’t received authorization from the Central Bank to sell dollars. I’ll go back tomorrow and try again.”
2. AS ARGENTINA’S CURRENCY PLUNGES, ECHOES OF PAST FINANCIAL CRISES (The Christian Science Monitor)
By Jonathan Gilbert
27 January 2014
After a tumultuous week of monetary backtracks and a currency devaluation, Argentines awoke Monday to more economic uncertainty.
The government today announced how it will implement new rules on dollar purchases, a measure that follows its decision to allow the peso to plunge. It claims the moves are astute reactions to “speculative attacks” on Argentina’s economy by destabilizing forces. But analysts argue they are haphazard and foster uncertainty in a country with a history of financial mismanagement and inflationary spirals, including a debilitating crisis in 2001-02.
“These decisions create more doubt than certainty,” Guillermo Nielsen, a former finance secretary, wrote in a financial newspaper. “The government is very disoriented.”
A tumbling currency
The peso tumbled by 15 percent against the dollar in just three days last week, according to Bloomberg, including a drop of 9.5 percent on Thursday, the biggest since 2002, when Argentina’s previous dollar peg collapsed.
Last week’s devaluation followed a policy shift by Argentina’s central bank, which was trying to execute a quick depreciation of the peso but ran into difficulties over its shrinking dollar reserves, which recently touched a seven-year low of around $29 billion. Locked out of global financial markets, the government needs the reserves to pay for energy imports and foreign debt servicing. So the Central Bank kept hold of its dollars and let the peso dive.
In a move that surprised many observers, on Friday the government chose to ease currency controls aimed at curbing capital flight that date back to President Cristina Fernandez de Kirchner’s reelection in October 2011.
The government hopes the measure will reduce the gap between the official dollar exchange rate, which closed on Friday at eight pesos, and the black-market rate that hit a peak last Thursday of 13 pesos. Under the new rules, Argentines can now buy dollars to save, but the federal tax agency is expected to keep a tight control over these purchases in order to shore up the dollar reserves.
‘A lost battle?’
Still, analysts say the government needs to accompany its change in currency policy with tougher action on unofficial inflation, which is estimated to exceed 28 percent.
“There could be a spiral of devaluation and inflation,” says Gaston Rossi, a former deputy economy minister under President Kirchner. “The government can confront that with a credible plan, reducing its spending and raising interest rates.”
Some people here believe Kirchner and her aides are close to losing control of the economy. “It’s not the apocalypse yet, but we’re not in a good place,” says Santiago Sasso, an office worker. “I don’t have faith in the government. It’s a lost battle.”
Axel Kicillof, the economy minister, insisted in an interview published Sunday that the government has a firm grip on the situation. “The economic panorama is very calm,” Mr. Kicillof said. He accused Argentina’s media – with whom the Kirchner government has long been at odds – of trying to fuel a run on the peso.
On Friday, he claimed a “speculative attack” by Shell, the oil company, had contributed to the peso’s dive. “The large and concentrated financial sectors have a lot of experience in destabilization,” Kicillof said. “But we have the tools to face up to them.”
The tumult has thrown a spotlight on Kicillof, a former university professor known for his Marxist interpretations of economic theory. He took up his post in November as part of a cabinet reshuffle that was supposed to favor pragmatists. But his management of the economy is now being widely criticized.
He also lashed out at reporters on Friday in a curt televised comment that showed the strains on an administration, which, commentators wrote in an anti-government newspaper, is facing a crisis of leadership and communication. “It was impulsive,” says Mr. Rossi. “It doesn’t send a message of calm.”
The government today announced new rules that make it easier to buy dollars after the Central Bank let the peso plunge. So far, Argentines are taking it calmly.
3. ARGENTINA SPENDS TO HALT PESO DROP (The Wall Street Journal Online)
By Taos Turner
27 January 2014
Central Bank Move Latest in Series of Steps To Stem Currency’s Fall
BUENOS AIRES—Argentina’s Central Bank spent around $135 million on Monday to prevent the peso from depreciating further, said a person familiar with the matter.
The move indicates new exchange-rate policies may do little to prevent the Central Bank from losing even more of its foreign-currency reserves the government uses to pay its creditors.
The peso closed little changed at about 8.00 per dollar on the regulated MAE wholesale currency market on Monday after losing 15% of its value last week when the Central Bank briefly stopped supporting the peso.
The bank spent several hundred million dollars in recent trading sessions to defend the peso. The spending has depleted the country’s currency reserves to about $29 billion from around $43 billion a year ago.
“If the Central Bank hadn’t intervened, the peso would have gone to 8.50 within two minutes,” said a currency trader who asked not to be identified.
The prospect of more dollars in the economy didn’t tame the black market, where the peso weakened to about 12.25 per dollar, from 11.80 Friday.
The gap between the two rates threatens to boost annual inflation that is believed to be running already around 30% as businesses set the prices for everything thing from televisions to refrigerators with an eye on the black-market rate.
The gap between the official and black-market rates also reinforces expectations that the government will devalue the peso even more. The local Rofex futures market has the peso at 10.73 per dollar in December.
“This won’t take any pressure off the [official] exchange rate,” Fausto Spotorno, an economist at consulting firm OFJ, said of Monday’s new currency policies, which make it easier for people to buy dollars. “On the contrary, this will put more pressure on the rate by increasing demand for dollars.”
The more flexible exchange-rate policies could eventually reduce the gap between the official and informal rates by shifting dollar demand to the regulated currency market, Mr. Spotorno said.
4. LETTERS: DEVALUATION IN A TIME OF FERNÁNDEZ (FT.com)
From Mr Pierpaolo Barbier
January 27, 2014
Sir, The depreciation of Argentina’s peso (reports, January 24) has very little to do with the global ramifications of Fed tampering and much to do with an amateurish government at its wit’s end. The FX controls in place since 2011 have forced the Central Bank to squander dollar reserves to prop up a local currency that is overvalued and therefore uncompetitive. Having destroyed the Central Bank’s independence, and isolated from international markets, the government funds itself and pays debt through its reserves. Deprived of savings mechanisms, Argentines have logically flocked to the informal or “blue rate” market. Eventually something had to give, and it now has: the faster devaluation is the triumph of experience over hope.
Most ironically, this comes after last year’s statements from President Cristina Fernández de Kirchner’s promise that “whoever expected a devaluation would have to wait for another government”. Fortunately for her and her family, she does not seem to practice what she preaches.
So do not blame the Fed, blame the lack of sensible, coherent economic policy in Buenos Aires.
Pierpaolo Barbieri, Special Advisor, Institute of New Economic Thinking, New York, NY, US
5. LETTERS: INFLATION RATE IS AT 63% IN ARGENTINA (FT.com)
From Prof Steve H Hanke
January 27, 2014
Sir, In combat, John Maynard Keynes often had an edge simply because he had a good feel for the data and a sense of magnitudes. Those who report on economics and finance (among others) could benefit from paying attention to that little Keynesian attribute.
Your report on Argentina’s most recent economic travails (“Currencies hit in wake of Argentina”, January 25) is a case in point. Your reporters note that one of the main causes of Argentina’s problems is that Buenos Aires “has allowed inflation to reach 25 per cent”. The Johns Hopkins-Cato Institute Troubled Currencies Project, which I direct, has been producing reliable estimates for Argentina’s implied annual inflation rate since 2012. Our current estimate is 63 per cent – more than double the figure reported in the FT.
Steve H Hanke, The Johns Hopkins University, Baltimore, MD, US
6. ARGENTINA A SPECIAL CASE AMONG EM NATIONS (FT.com)
By James Mackintosh
January 27, 2014
That is not to belittle the problems facing other emerging markets
As warning signs go, the plunge in Argentina’s peso on Thursday was 150 feet tall, surrounded by flashing lights, klaxons and a troupe of acrobats whose bodies spelt out “PANIC”.
Emerging markets duly dropped. The Turkish lira led the way down, hitting another new low. Monday was set to be the lira’s worst day since the post-Lehman crisis before the central bank called an emergency meeting. Tensions spread into developed markets, while emerging equities fell 2 per cent, the worst day since last summer’s taper worries.
 
Argentina’s economy and markets are now so small they are all but irrelevant to global investors. Here is the case for fear: Buenos Aires is merely the first to be caught out by a dollar shortage as the US Federal Reserve tapers off its bond purchases and the tide of greenbacks which flowed into the emerging world recedes.
But Argentina is a special case, even a basket case. It has been bleeding foreign exchange reserves to defend its exchange rate for three years. It saw none of the fast-money inflows which prompted excessive consumption or misdirected investment elsewhere, so there is little reason to expect it to suffer from the outflows. Argentina’s problems could have hit at almost any time.
That is not to belittle the problems facing other emerging markets (EM). The dollar’s value against a trade-weighted EM basket has risen 6.6 per cent since its low in mid-2011, shortly after the post-crisis peak for EM shares. It would need to rise another 12 per cent to return to 2009 or 2003 levels. If that happens, EM countries running current account deficits will have trouble filling their shortage of dollars. A stronger US economy and less Fed liquidity is far from a certainty, but would mean higher EM interest rates were needed to attract dollars.
Markets are challenging EMs. Higher rates and slower growth beckon. Badly managed, this adjustment could prompt more EM crises. But Argentina does not inevitably signal the way for everyone else.
7. ARGENTINA TO KEEP $2,000 MONTHLY LIMIT ON DOLLAR PURCHASES (FT.com)
By Jonathan Gilbert and Jonathan Wheatley
January 27, 2014
Jorge Capitanich, chief of ministers, said Argentines registered with the federal tax agency who earn a monthly salary of more than 7,200 pesos would be able to purchase and save up to 20 per cent of their monthly salary up to a maximum of $2,000. Mr Capitanich told reporters that a 20 per cent tax would not be applied if the dollars were left in banks for more than a year.
“If the person that buys dollars deposits them in a savings or fixed-term account, the 20 per cent tax will not be levied,” Mr Capitanich told reporters. “He can withdraw them when he wants, but if he does it within 365 days, he must pay the tax.”
The government hopes the measure will reduce the gap between the official dollar, which closed on Friday at eight pesos, and the black-market dollar, which closed at 11.7 pesos. As the government devalued on Thursday, it hit a record of 13 pesos.
Cristina Fernández, Argentina’s president, who is in Cuba for a regional summit, used Twitter on Monday to accuse banks of “speculative manoeuvres” on the currency markets. In her first remarks on the recent currency tumult, she said: “It seems like some people want to make us drink the soup again” – a reference to the financial crisis of 2001 – “but this time with a fork.”
However, the government’s announcement left confusion about how the new rules would be applied and doubt about its effectiveness.
Martín Redrado, governor of Argentina’s central bank until 2010, said the latest measures would do little to ease pressure on the exchange rate. “In my view, this doesn’t solve the problem,” he said. “The time of reckoning for all the policy mistakes of the past few years has arrived.”
He said Argentina’s problem derived from a worsening mismatch between money in circulation and foreign currency reserves. “When I left the central bank we had $50bn in reserves and the ratio of reserves to the monetary base was one to four. Now the relation is one to 13. What is behind this is excess public spending and the monetary financing by the central bank of an increasing fiscal deficit.”
In the absence of policies to tackle this, he said, foreign reserves would continue to drain as the economy stagnated and inflation increased. He said the government was hoping to bridge a gap until export revenues from Argentina’s soya harvest began to arrive in 45 to 60 days’ time. “In this context,” he said, “45 days is a really long time.”
Economists have said the federal tax agency will probably obstruct most purchases as the government looks to protect dwindling foreign reserves, which have fallen to a seven-year low of $29bn. “The easing of restrictions will be virtual,” said Gastón Rossi, a former deputy economy minister.
At the weekend, Axel Kicillof, the economy minister, said Argentines would continue to pay a 35 per cent tax on credit and debit card purchases abroad. The government had originally said the rate would drop to 20 per cent from today. He accused the media of trying to fuel a run on the peso in “speculative attacks” by “concentrated financial sectors”.
“They are looking to destabilize the government by saying the dollar is worth 13 pesos,” Mr Kicillof said in a newspaper interview, adding that “we have the tools to face up to them” and that “the economic panorama is very calm”.
Mr Capitanich insisted on Monday morning that the easing of capital controls was not an isolated move amid widespread criticism that the government has no integrated strategy for the economy.
Retailers, meanwhile, were reporting price increases on imported products. JA Aceto, 60, who owns a shop selling electronics in central Buenos Aires, said: “Providers are rising prices by 20 percent and we have to follow in line.”
8. ARGENTINA ROUT: WHICH EMERGING MARKETS ARE IN THE FIRING LINE? (Forbes.com)
By Chris Wright
January 27, 2014
Following the 11% decline in the value of the Argentinian peso in a single day last week, the markets are trying to digest a single question: are these problems localized to Argentina, or ought we to expect a rout in all emerging markets? And if the second conclusion is the correct one, then a further question follows: which ones are exposed?
This blog has written frequently about the BIITS or Fragile Five (Brazil, India, Indonesia, Turkey and South Africa), and at first glance those are the ones with the most to worry about. All five, plus Russia too, suffered declines in their currencies on Friday after the decline in the peso. In South Africa’s case, the rand hit a five-year low on Friday. All of these currencies have already weakened considerably in recent weeks anyway.
The negative view is that we are now in a period of unavoidable contagion through which all these economies, and then other emerging markets, will enter a spiral. In this spiral, investor concerns trigger outflows from those countries, which exacerbate their existing problems, and so we go on in to crisis. Although BIITS its a lazy and convenient abbreviation which brings together some diverse economies with different challenges, those countries do have some things in common: current account and fiscal deficits – both, in most cases – and doubts about the levels of foreign currency reserves they have relative to their short-term borrowings. As I discussed here, five countries – Turkey, South Africa, Chile, India and Indonesia – only had enough reserves in the second half of last year to cover one year of their short term financing requirements, and Hungary, Brazil and Poland, two. And most of those reserves have declined significantly since then: Turkey’s central bank is believed to have poured as much as one tenth of its foreign currency reserves into the market in support of its currency, without any clear success.
The positive view is that Argentina is a special case, and although markets are naturally made nervous by an event like this, they will eventually recognize that Argentina’s problems are not replicated elsewhere (except arguably Venezuela). Confidence in Argentina has fallen because of a host of situations that do not apply in India, or Russia, or Turkey or elsewhere: Argentina faces more international law suits than any other country from companies and sovereign states around the world. It still holds debt in default and has not yet agreed terms for its repayment. It has nationalized companies and scared off foreign investors – see my account of the Repsol situation here – and in doing so it has exacerbated its existing problems with foreign currency reserves relative to outstanding debt.
In support of this positive view is the fact that India, for example, has not fared too badly in light of Argentina’s sudden decline. The rupee did drop almost 2% against the dollar last week, but the Sensex stock market index was roughly flat, and actually rallied on Friday.
As I have written before, here and here, emerging market debt and equities – and, logically, currencies – do have some suffering ahead as tapering gathers pace in the United States. That, in turn, should be expected to lead to some capital flight from risky assets such as emerging markets. Slowing Chinese growth, dampening demand for exports from other emerging markets, isn’t helping either. These, rather than Argentina’s domestic malaise, are the year’s biggest threats for emerging market assets.
But the problem is, so much of market behaviour is based on sentiment rather than logic, and Argentina may be enough to drive extensive capital flight from emerging markets with or without US tapering. And that is a big problem for countries with big debts to pay and dwindling reserves.
9. ARGENTINA EASES LIMITS ON DOLLAR PURCHASES TO CALM MARKET (Dow Jones Institutional News)
By Ken Parks, Taos Turner and Juan Forero
27 January 2014
BUENOS AIRES–Days after a currency devaluation revived concerns of economic crisis in Argentina, the government began allowing locals to buy limited amounts of dollars in a bid to head off potential panic buying of dollars on the black market that could further undermine the currency and fuel inflation.
The measure eased strict restrictions on dollar purchases put in place in November 2011 that were designed to prevent capital flight but which had the side effect of spurring a thriving currency black market, where the peso has plunged.
The government was granting online requests to buy dollars, though banks weren’t ready to exchange currencies.
“I got online this morning, before 9 a.m., to get permission to buy dollars and everything went perfectly,” said Matías Zopatti, a 28-year-old computer programmer. “When I went to the bank they said they still hadn’t received authorization from the central bank to sell dollars. I’ll go back tomorrow and try again.”
A weaker peso might spur Argentine exports like soy by making them more competitive, but also carries big risks, particularly in fueling inflation by making imports more expensive in peso terms. Many stores had already begun to mark up prices last week, reflecting the weaker peso rate.
“There isn’t anyone not raising prices now,” said José Mair, 64, who manages a store that sells computers and electronics in the capital, Buenos Aires. “I try to sell as little as possible because it is so hard to replace my stock. And my stock is much more valuable than my currency.”
Last week, hoping to stop spending dwindling central bank dollar reserves defending the peso, the government allowed the peso to fall some 15% against the dollar to about eight per dollar. That helped narrow the difference between the official and black-market exchange rates, which sits at roughly 12 per dollar. But a big gap remains.
Argentina’s central bank spent around $135 million Monday to prevent the peso from depreciating further, a person familiar with the matter said, indicating new exchange-rate policies may do little to prevent the bank from losing even more of its foreign-currency stocks the government uses to pay creditors.
The sudden devaluation of the peso has unsettled Argentines, many of whom still remember the traumatic devaluation and deep economic crisis of 2002.
“What the government has done is a good thing. It’s a step forward. But I hope this is just the beginning of a lot of things to open up the exchange market and the economy as a whole,” said Nicolás Di Martino, 25 years old, who works at a food exporter in Buenos Aires province and who was authorized to buy dollars at the official rate.
All the same, economists who follow Argentina described the dollar sales as a half-measure that would be ineffective in taking pressure off the peso. Moody’s Investors Service said the government lacks a plan to deal with inflation related to the currency decline, and expects the peso to weaken another 50% of its value by the end of the year.
“They are trying to break what could be a vicious psychological cycle that the more they let the currency go the more people want to buy dollars. And in order to do that they came up the idea of loosening ever so slightly the access to dollars,” said Arturo Porzecanski, an economist at American University. “It’s some kind of Faustian bargain in that dollars were more expensive now than they were before, but you have a better chance to get them from us, as opposed to the parallel market of 12 or 13 per dollar.”
The peso closed little changed at about eight per dollar on the regulated MAE wholesale currency market, virtually unchanged from Friday’s close. The local Rofex futures market had the peso at about 10.49 per dollar in December. In a sign the official exchange rate still looks overvalued, the peso weakened to about 12.25 per dollar on the black market Monday, from 11.80 last week.
Under new currency rules published Monday, individual Argentines–not businesses–who are registered with the tax agency and who earn at least 7,200 pesos ($900) a month will be able to buy dollars at the official exchange rate. Purchases will be capped at 20% of a person’s net monthly earnings. No one will be allowed to change more than $2,000 a month.
The restrictions will leave out the majority of Argentina’s lower classes, who don’t qualify to buy dollars and who are most vulnerable to inflation.
The government is waving the 20% tax deductible surcharge on those purchases if the buyer deposits the money in a local bank account for at least one year, which means the dollars will still form part of the central bank’s reserves.
But that requires a huge leap of faith on the part of the public that the country isn’t headed for a repeat of the 2002 crisis, when the government of the time forcibly swapped dollar-denominated deposits for devalued pesos.
“The only defense that Argentines have always had to save has been the dollar,” said Freddy Micheli, a 69-year-old barber who dodged the 2002 devaluation by keeping his dollars outside the banking system.
The vast gap between official and black-market exchange rates is troublesome for the economy because some businesses start to set prices for goods and services using the former. It also reinforces expectations that the government will have to devalue the peso even more.
The stakes are high for President Cristina Kirchner as she tries to avoid a deep recession before she leaves office in December 2015. Her government has been burning through reserves to support the peso and pay its debts, which has some investors wondering if the country will run out of dollars this year or next unless it is able to find new sources of hard currency.
Unable to tap global bond markets because of a legal battle with foreign creditors, Argentina gets most of its dollars from trade and meager inflows of foreign direct investment. The trade surplus shrank to $9 billion last year, its lowest level in more than a decade.
The outlook for 2014 is hardly rosy amid a drop in commodity prices and sluggish growth in top trade partner Brazil.
The government appears to be gambling that the recent devaluation will spur exporters to part with their grain and soybean stocks because they now get more pesos for their exports than was the case just a week ago. Those trade dollars will help the authorities meet the higher dollar demand resulting from looser currency controls, Jorge Capitanich, Mrs. Kirchner’s cabinet chief, said in a television interview over the weekend.
Critics of Mrs. Kirchner’s policies say she is playing with fire by weakening the currency instead of addressing the root causes of inflation–years of rampant government spending financed in part by money printing. The administration has instead turned to price controls to contain inflation.
Mr. Capitanich rejected those allegations on Monday.
“Those that say that are those who don’t want industry, jobs or a positive outlook. I think this is a positive measure that will create the conditions so Argentina can keep growing,” he said in reference to the new currency rules.
10. ARGENTINA’S CENTRAL BANK SPENDS $135 MILLION TO DEFEND THE PESO MONDAY (Dow Jones Institutional News)
By Taos Turner
27 January 2014
BUENOS AIRES–Argentina’s central bank spent around $135 million Monday to prevent the peso from depreciating further, a person familiar with the matter said.
The move is an indication that new exchange rate policies may do little to prevent the bank from losing even more of the foreign currency reserves the government uses to pay its creditors.
The peso closed little changed at about 8.00 per dollar on the regulated MAE wholesale currency market Monday, after losing 15% of its value last week after the central bank briefly stopped supporting the peso.
The bank spent several hundred million dollars in recent sessions to defend the peso, which has reduced its currency reserves to about $29 billion. A currency trader who asked not to be named said the central bank sold about $120 million in the exchange market.
“If the central bank hadn’t intervened the peso would have gone to 8.50 within two minutes,” the trader said.
The prospect of more dollars in the economy didn’t tame the black market, where the peso weakened to about 12.25 per dollar from 11.80 Friday.
The gap between the two rates threatens to boost annual inflation, which is already believed to total around 30%, as businesses set the prices for everything from televisions to refrigerators with an eye on the black market rate. It also reinforces expectations that the government will devalue the peso even more. The local Rofex futures market has the peso at 10.73 per dollar in December.
“This won’t take any pressure off the [official] exchange rate,” Fausto Spotorno, an economist at OFJ, a consulting firm, said of the new currency policies that make it easier for people to buy dollars. “On the contrary, this will put more pressure on the rate by increasing demand for dollars.”
The policies could eventually reduce the gap between the official and informal rates by shifting dollar demand to the regulated currency market, Mr. Spotorno added.
11. ARGENTINA AIMS TO STEM PESO DECLINE BY EASING CAPITAL CONTROLS (Market News International)
By Charles Newbery
27 January 2014
The government this week likely will seek to contain the peso at around 8.0 to the dollar after allowing it to plunge nearly 18% last week in an effort to arrest a slide in foreign reserves, as the decision to lift the ban on buying dollars for savings takes effect Monday.
Argentines who have been prevented for more than two years from legally purchasing dollars except in small amounts for foreign travel, will be able to again acquire currency at the official exchange rate.
They must request authorization to buy dollars from the federal tax agency, which will allow amounts only in line with the purchaser’s declared income.
This is the first major reversal in the capital controls the government started implementing in October 2011 after capital flight surged that year to $21.5 billion, equivalent to 40% of the nearly $53 billion in foreign reserves at the time.
This raised concern that the government could run low on reserves which it relies on to make debt payments and financing imports, given that it has yet to fully settle a $100 billion debt default from 2001 that would allow it to borrow on global markets.
The government has stepped up efforts to protect reserves since the capital controls were first introduced. Last week, it restricted the purchase of merchandise from overseas-based websites for delivery in Argentina to two transactions per year. People who buy more than $25 a year from such sites must pay a 50% customs tax on the value above that amount.
Economists say these measures hurt consumer confidence, prompting people to buy dollars to protect their savings against more currency depreciation.
This sparked a surge in trading on the black market, driving the rate there to a record 13.10 to the U.S. dollar last week after running at 7 to 10 for most of 2013. This led to gap of 75% with the official rate and further accelerated a decline in foreign reserves, which fell to $29.3 billion last week.
With the easing of the dollar-buying restrictions, economists expect the exchange rate gap to narrow and allow the government to focus on more important issues including a widening fiscal deficit, dwindling investment, worsening energy shortages, double-digit inflation and a narrowing trade surplus.
Some economists say the biggest concern is inflation, which also is fueling demand for dollars and limiting investment.
While the government says inflation is steady at 10.5%, private economists put it at 28% and accelerating, according to an average of different estimates compiled by opposition lawmakers. Some economists say inflation could hit 30% this year.
Most economists say the main driver behind rising consumer prices is that monetary expansion is rising faster than the demand for pesos for savings. An excess of pesos in the market and low interest rates, is prompting spending instead of saving due to concerns that inflation is chipping away at purchasing power – a phenomenon Argentines remember well from the hyperinflation of the 1980s.
The faster depreciation of the peso last week to 60% annual from an average of 20-25% in 2013 has made people even keener to dump pesos, he added.
The central bank this week may continue to raise interest rates to encourage more savings in pesos, a strategy that started earlier this month. The 30-day savings rate for large deposits, for example, has gone up to nearly 22% annual from 14-18% in 2013.
The government will report December retail sales at shopping malls and supermarkets Wednesday, followed Friday by construction activity and consumption of public services for the same period.
12. ARGENTINA’S LYING PRICES SHOW CAPITAL CONTROL LIMITS: CURRENCIES (Bloomberg.com)
By Ian Katz, Katia Porzecanski, Andrea Wong and Ye Xie
Jan 27, 2014
When Argentina decided last week to ease limits on dollar purchases, it became the latest emerging-market nation to acknowledge that capital controls usually fail in masking an economy’s flaws.
Argentina allowed the peso to plunge 15 percent after the central bank began scaling back interventions in the foreign-exchange market on Jan. 22, spurring price increases of as much as 30 percent on consumer goods as international reserves fell to a seven-year low. The black-market price in Argentina rose last week to a record 12.75 pesos per dollar, compared with the official rate of about 8, according to Buenos Aires newspaper Ambito.
“Capital controls signal that a country is very worried about preserving its foreign exchange,” Steve Hanke, professor of applied economics at Baltimore-based Johns Hopkins University and an adviser to the Argentine government in the 1990s, said in an interview. “That means bad things are in the wind.” The restrictions spawn illegal traffic in the local currency that creates “lying prices” in the economy, he said.
Restrictions on capital flow, ranging from Argentina’s tax on vacations abroad to Malaysia’s stabilizing the ringgit after the 1997 Asian crisis, have had mixed results in boosting investor confidence in a country’s economy. Capital outflow restrictions can be effective “if they are sufficiently comprehensive to slow a sudden ‘rush to the exit,’” according to a report by four International Monetary Fund researchers released this month.
Turkey Next?
“For the average country, a tightening of outflow restrictions is ineffective as net outflows increase as a result of it,” wrote Christian Saborowski, Sarah Sanya, Hans Weisfeld and Juan Yepez, authors of the IMF report.
In Turkey, pressure is building on Central Bank of Turkey Governor Erdem Basci to raise interest rates or face the prospect of the lira plunging to fresh records and government bonds extending declines. The scheduling of an extraordinary meeting with a midnight statement tonight by the central bank may signal that policy makers are planning to implement capital controls, said George Magnus, an independent senior economic adviser to UBS AG.
“The odd time does suggest, to me, something that’s going to be much more market-sensitive in that it will affect the operation of markets, not just the cost of funding,” Magnus said by phone from London yesterday.
The announcement from the bank came after the Turkish lira fell to records against the euro and dollar yesterday. The lira touched 2.39 versus the dollar before erasing losses to break a 10-day slump and close at 2.2833 in New York. The lira rose 2.3 percent to 3.1242 per euro after reaching 3.2726.
Venezuela Experience
In Venezuela, a decade of currency controls is fueling the world’s fastest inflation among the 114 economies tracked by Bloomberg and shortages of basic goods.
The official rate of 6.3 bolivars per dollar compares to the 75 bolivar rate on the black market. Official dollars therefore are the most profitable assets in the country, allowing people who have access to them enjoy a lifestyle far beyond the reach of an average Venezuelan.
“Capital controls to avoid excessive inflows have had limited success,” Ricardo Hausmann, a former planning minister in Venezuela who now teaches economics at Harvard University, in Cambridge, Massachusetts, said in an e-mail. “Capital controls to prevent outflows often postpone and amplify rather than moderate the need for adjustment. If they involve a emergence of a black or parallel foreign-exchange market, they lead to a dangerous macro and micro disaster.”
Malaysia Success
The IMF, influenced by then-U.S. Treasury Secretary Robert Rubin and his deputy Lawrence Summers, started to push Asian countries to open their financial markets and lift capital controls in the early 1990s. When the financial crisis started in late 1997, the IMF advised the region to cut budgets and raise interest rates to limit the currency depreciation.
Nobel laureate Joseph Stiglitz, then chief economist at the World Bank, opposed the IMF’s remedies, pushing for capital controls to stem the crisis, advice no Asian countries except Malaysia took.
Malaysia, faced with global investors selling the nation’s assets betting for a depreciation in the ringgit, imposed restrictions in September 1998, including making investors hold the ringgit proceeds of share sales for at least a year and banning the transfer of the local currency between offshore accounts.
‘Revitalizing’ Economy
The ringgit’s real effective exchange rate stabilized the next year, after tumbling almost 20 percent, while the nation’s foreign-exchange reserves gained following the biggest annual decrease on record.
“The restrictions provided room for the authorities to accumulate reserves amid a stable exchange rate and enact policies aimed at revitalizing the economy, such as reducing interest rates,” the Washington-based IMF researchers wrote in the report that examined capital outflow restrictions in 37 emerging markets from 1995-2010.
In Iceland, the krona exchange rate stabilized shortly after restrictions were imposed during the depths of the global financial crisis in November 2008. That gave officials room to ease monetary policy to help revive the economy, according to the report.
The IMF report concludes that capital control can be successful if “supported by either strong macroeconomic fundamentals or good institutions, or if existing restrictions are already fairly comprehensive.”
Fernandez’s Efforts
Since her re-election in 2011 when capital flight almost doubled to $21.5 billion, Argentine President Cristina Fernandez de Kirchner has tried whatever she could to keep money in the country. She implemented more than 30 measures, including blocking most purchases of foreign currencies, taxing online purchases, banning units of foreign companies from remitting dividends, and restricting imports.
Amid annual inflation of more than 28 percent, Fernandez’s controls have failed to stem the outflow of money through the nation’s widening tourism deficit, deepening a plunge in reserves from debt payments and growing energy imports.
The controls cut the total amount traded last year in the local foreign-exchange market in half from 2010, according to data compiled by Argentina’s Mercado Abierto Electronico automated trading system. Still, the robust black market for dollars shows that some Argentines are finding ways around the controls.
‘Very Dangerous’
Argentina Economy Minister Axel Kicillof said Jan. 26 the peso has reached an “acceptable level” at about 8 per dollar, a signal the central bank may continue to spend reserves to keep the rate in check. The bank sold $380 million in the official currency market to defend the price of the peso, dropping reserves to $29.1 billion.
The government also reduced some of currency controls in place since July 2012, authorizing foreign-exchange purchases for people earning a monthly wage of at least 7,200 pesos ($899). Those who qualify, less then 20 percent of the population, can buy as much as 20 percent of their average monthly salary, up to $2,000 a month.
“The problem I see in the longer run for the capital control for outflows is that it interferes with foreign direct investments, because FDI wants to take money out of the country,” Guillermo Calvo, an economist at New York-based Columbia University who was chief economist at the Inter-American Development Bank for five years until 2006, said in a telephone interview from New York. “If a country develops that reputation, it can be very negative for FDI. That’s very dangerous.”
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TUESDAY,Jan. 28


1. ARGENTINA BLASTS ‘SPECULATIVE ATTACKS’ (The Wall Street Journal)
By Ken Parks
29 January 2014
Government Says Businesses, Media Coordinating to Buy Assets Cheaply, as It Tries to Stabilize Peso
BUENOS AIRES — Argentina’s government accused businesses of orchestrating speculative attacks against emerging-market currencies including the Argentine peso, as it injected more U.S. dollars into the economy on Tuesday to try to calm nerves after last week’s devaluation.
Christina Kirchner’s cabinet chief, Jorge Capitanich, said big business and media groups frequently work together to undermine developing countries.
“The modus operandi of these speculative attacks is on all fronts with a single objective: to buy depreciated financial and hard assets,” Mr. Capitanich said. “Our message is: ‘Argentines, let’s not be naive.’ We have seen this movie repeatedly throughout our history.”
Mrs. Kirchner, attending a regional summit in Cuba, blamed Argentina’s currency woes on banks, exporters and businesses. “It looks like there are some people who want us to eat soup again, but this time with a fork,” the president posted on her Twitter account, using an expression meant to convey a swindle.
Argentina’s central bank spent about $115 million on Tuesday in a successful effort to keep the peso exchange rate steady at about 8 to the U.S. dollar, said a person close to the foreign-exchange market. During each of the past few trading sessions, the central bank has spent similar amounts to defend the currency from a more abrupt drop.
Other central banks in developing markets that have recently seen turmoil, such as Turkey and India, also intervened in their financial markets on Tuesday. Investors have worried over signs the U.S. Federal Reserve will tighten its monetary policy and over China’s slowing growth.
But in Argentina, many economists say the economy has been hurt by the high public spending, which has led to high inflation, an overvalued currency and a weakening trade surplus that threatens the government’s dwindling supply of hard currency.
After speeding up the depreciation of the peso against the dollar last year, the Kirchner administration allowed the currency to weaken 15% last week. It was the peso’s biggest drop in more than a decade and unnerved many Argentines who remember the abrupt devaluation in 2002 that came weeks after the country defaulted on $100 billion in debt.
On the black market, the peso weakened slightly to 12.30 per dollar, according to newspaper El Cronista, which tracks black-market rates, suggesting many Argentines still view the official rate as too strong.
Tuesday marks the second day of new rules that allow some Argentines to buy up to $2,000 a month for savings purposes as the Kirchner administration tries to take business away from a black market that is adding to double-digit inflation.
The government hopes that by injecting more dollars into the economy it can reduce the gap between the official and black-market exchange rates. However, banks were still struggling to adapt to the new currency system Tuesday, with most authorized buyers still unable to get their dollars. Some 184,000 people had requested permission to buy $90.2 million. But only $12.8 million had been paid as of Tuesday, the government said.
The measure — aimed at building confidence among ordinary Argentines to prevent a run on banks — could prove unsustainable as it might cost up to $757 million of reserves a month, or $9.1 billion a year, at the current exchange rate, according to estimates by Credit Suisse.
“We would not be surprised to see the limits amended, unless sales are lower than expected or the nominal exchange rate is devalued sharply again,” Credit Suisse economist Casey Reckman said in a note.
The new measure will likely continue to be a drain on Argentina’s diminishing foreign-currency reserves, which dropped to $28.7 billion on Tuesday.
2. BRAZIL’S ROUSSEFF SAYS COUNTRY WON’T OFFER HELP TO ARGENTINA (The Wall Street Journal Online)
By Paulo Trevisani
28 January 2014
Brazil Won’t Offer Help to Neighbor Because ‘It Wasn’t Asked’
BRASILIA—Brazil’s President Dilma Rousseff said Tuesday her country isn’t offering help to neighboring Argentina, which is going through an economic rough patch.
“We won’t offer any help for a very simple reason: it wasn’t asked,” she told reporters in Cuba, according to transcripts of the interview made available by her office. “President Cristina thinks she can deal with that situation,” she said, referring to Argentina’s President Cristina Kirchner.
Both women were attending to a summit of an organization of Latin American and Caribbean nations in Cuba.
Argentina has seen its currency depreciate about 15% last week to 8 Argentine pesos per U.S. dollar. It was the peso’s biggest drop in more than a decade and unnerved many Argentines who remember the violent devaluation in January 2002 that came just weeks after the country defaulted on about $100 billion in debt.
Argentina is the largest market for Brazilian exports in South America and many analysts fear that its economic problems could further slowdown Brazil, where output is already showing subpar growth.
“They have a large crop and will start to sell it,” Ms. Rousseff said of the Argentines. “I believe they will have the conditions to overcome this, at least I hope it will happen,” she said.
 
3. ARGENTINA SPENDS $115 MILLION TO STEADY PESO (The Wall Street Journal Online)
By Ken Parks
28 January 2014
Currency Closes Unchanged at 1.08 to the Dollar
BUENOS AIRES—Argentina’s central bank spent about $115 million on Tuesday to keep the peso steady against the U.S. dollar, said a person familiar with the matter, a day after the Kirchner administration loosened currency-purchase rules in hopes of cooling black-market dollar demand.
The peso closed unchanged at 8.01 per dollar on the regulated MAE wholesale currency market Tuesday after the central bank let the currency slide 15% last week in Argentina’s biggest currency devaluation since the 2002 crisis.
On the black market, the peso weakened to 12.30 per dollar, from 12.25 on Monday, according to newspaper El Cronista, which tracks black-market rates.
Tuesday marks the second day of new rules that allow some Argentines to buy as much as $2,000 a month for savings purposes as the Kirchner administration tries to take business away from a black market that is adding to double-digit inflation and fueling expectations of further weakness in the peso.
Before Monday, individual Argentines were only allowed to buy small amounts of dollars for overseas trips, which sent some people to underground currency dealers to get dollars for travel or to protect their savings from inflation that is widely believed to be running at more than 25% a year.
Now, the government hopes that by injecting more dollars into the economy it can reduce the still wide gap between the official and black-market exchange rates. However, banks were still struggling to adapt to the new currency system Tuesday, with some authorized buyers unable to get their dollars.
The new measure, coupled with the central bank’s ongoing defense of the peso, will likely continue to be a drain on Argentina’s diminishing foreign-currency reserves, which dropped to $28.9 billion on Monday. The unrelenting decline in reserves has some economists wondering if Argentina might struggle to pay its foreign-currency debts and buy enough imports to keep its economy growing.
4. ARGENTINA ON THE BRINK (The New York Times)
By The Editorial Board
Jan. 28, 2014
More than a decade after it defaulted on its foreign debts, Argentina is again facing a financial crisis caused largely by misguided government policies. The administration of President Cristina Fernández de Kirchner recently devalued the peso and relaxed some capital controls in an effort to preserve the country’s dwindling foreign reserves. The government is hoping that these steps will ease some of the pressure on the currency, which does not float freely against the dollar. But Argentina needs to do a lot more to address inflation and other underlying economic problems that have led investors and ordinary citizens to bet against the peso.
In the years after its painful default in 2002, which wiped out the savings of millions of people, Argentina enjoyed a fast growing economy thanks in part to the booming world demand for soybeans and other commodities the country exports. But Mrs. Kirchner squandered the recovery in recent years by increasing spending on wasteful subsidies and financing the government partly by printing pesos. As a result, inflation has shot up; independent economists estimate that consumer prices jumped 28 percent last year.
Mrs. Kirchner has also hurt the economy by picking fights with private businesses and investors. In recent years, she nationalized an oil company, an airline and pension funds. In 2011, Argentina implemented controls on how many pesos its citizens could convert into dollars, which helped create a black market for currency transactions and undermined confidence in the government’s economic policies. A recent poll showed that three-quarters of the country said the economy was headed in the wrong direction.
Government officials have begun taking some steps to correct past mistakes. The economy minister, Axel Kicillof, has been negotiating compensation for the oil company, YPF, that the government seized in 2012. And Argentina will put out a new inflation index next month to convince the International Monetary Fund to accept its official data again. While those are good first steps, Mrs. Kirchner and her aides will have to take much bolder steps to repair the damage that they have done to the economy in recent years.
5. ARGENTINA’S LYING PRICES SHOW CAPITAL CONTROL LIMITS: CURRENCIES (Bloomberg.com)
By Ian Katz, Katia Porzecanski, Andrea Wong and Ye Xie
Jan 28, 2014
When Argentina decided last week to ease limits on dollar purchases, it became the latest emerging-market nation to acknowledge that capital controls usually fail in masking an economy’s flaws.
Argentina allowed the peso to plunge 15 percent after the central bank began scaling back interventions in the foreign-exchange market on Jan. 22, spurring price increases of as much as 30 percent on consumer goods as international reserves fell to a seven-year low. The black-market price in Argentina rose last week to a record 12.75 pesos per dollar, compared with the official rate of about 8, according to Buenos Aires newspaper Ambito.
“Capital controls signal that a country is very worried about preserving its foreign exchange,” Steve Hanke, a professor of applied economics at Baltimore-based Johns Hopkins University and an adviser to the Argentine government in the 1990s, said in an interview. “That means bad things are in the wind.” The restrictions spawn illegal traffic in the local currency that creates “lying prices” in the economy, he said.
Restrictions on capital flows, ranging from Argentina’s tax on vacations abroad to Malaysia’s stabilizing the ringgit after the 1997 Asian crisis, have had mixed results in boosting investor confidence in a country’s economy. Capital outflow restrictions can be effective “if they are sufficiently comprehensive to slow a sudden ‘rush to the exit,’” according to a report by four International Monetary Fund researchers released this month.
Turkey Next?
“For the average country, a tightening of outflow restrictions is ineffective as net outflows increase as a result of it,” wrote Christian Saborowski, Sarah Sanya, Hans Weisfeld and Juan Yepez, authors of the IMF report.
In Turkey, pressure is building on central bank Governor Erdem Basci to raise interest rates or face the prospect of the lira plunging to fresh records and government bonds extending declines. The scheduling of an extraordinary meeting with a midnight statement tonight may signal policy makers are planning to implement capital controls, said George Magnus, an independent senior economic adviser to UBS AG.
“The odd time does suggest, to me, something that’s going to be much more market-sensitive in that it will affect the operation of markets, not just the cost of funding,” Magnus said by phone from London yesterday.
Lira Records
Yesterday’s announcement came after the Turkish lira fell to records against the euro and dollar. The lira dropped to 2.3900 per dollar before reversing its losses and breaking a 10-day slump. It reached a low of 3.2726 per euro and then rebounded. Turkey’s currency was 1.1 percent higher at 2.2590 to the dollar and up 1.2 percent at 3.0856 per euro as of 12:08 p.m. in New York today.
In Venezuela, a decade of currency controls is fueling the world’s fastest inflation among the 114 economies tracked by Bloomberg and shortages of basic goods.
The official rate of 6.3 bolivars per dollar compares with the 75-bolivar rate on the black market. Official dollars therefore are the most profitable assets in the country, allowing people who have access to them enjoy a lifestyle far beyond the reach of an average Venezuelan.
‘Limited Success’
“Capital controls to avoid excessive inflows have had limited success,” Ricardo Hausmann, a former planning minister in Venezuela who now teaches economics at Harvard University, in Cambridge, Massachusetts, said in an e-mail. “Capital controls to prevent outflows often postpone and amplify rather than moderate the need for adjustment. If they involve an emergence of a black or parallel foreign-exchange market, they lead to a dangerous macro and micro disaster.”
The IMF, influenced by then-U.S. Treasury Secretary Robert Rubin and his deputy Lawrence Summers, started to push Asian countries to open their financial markets and lift capital controls in the early 1990s. When the financial crisis started in late 1997, the IMF advised the region to cut budgets and raise interest rates to limit the currency depreciation.
Nobel laureate Joseph Stiglitz, then chief economist at the World Bank, opposed the IMF’s remedies, pushing for capital controls to stem the crisis, advice no Asian countries except Malaysia took.
Malaysia, faced with global investors selling the nation’s assets to bet on a depreciation in the ringgit, imposed restrictions in September 1998. These included making investors hold the ringgit proceeds of share sales for at least a year and banning the transfer of the local currency between offshore accounts.
‘Revitalizing’ Economy
The ringgit’s real effective exchange rate stabilized the next year, after tumbling almost 20 percent, while the nation’s foreign-exchange reserves gained following the biggest annual decline on record.
“The restrictions provided room for the authorities to accumulate reserves amid a stable exchange rate and enact policies aimed at revitalizing the economy, such as reducing interest rates,” the Washington-based IMF researchers wrote in the report that examined capital outflow restrictions in 37 emerging markets from 1995-2010.
In Iceland, the krona exchange rate stabilized shortly after restrictions were imposed during the depths of the global financial crisis in November 2008. That gave officials room to ease monetary policy to help revive the economy, according to the report.
The IMF report concludes that capital controls can be successful if “supported by either strong macroeconomic fundamentals or good institutions, or if existing restrictions are already fairly comprehensive.”
Fernandez’s Efforts
Since her re-election in 2011 when capital flight almost doubled to $21.5 billion, Argentine President Cristina Fernandez de Kirchner has made several attempts to keep money in the country. She implemented more than 30 measures, including blocking most purchases of foreign currencies, taxing online purchases, banning units of foreign companies from remitting dividends and restricting imports.
With annual inflation of more than 28 percent, Fernandez’s controls have failed to stem the outflow of money through the nation’s widening tourism deficit, deepening a plunge in reserves from debt payments and growing energy imports.
‘Very Dangerous’
The controls cut the total amount traded last year in the local foreign-exchange market in half compared with 2010, according to data compiled by Argentina’s Mercado Abierto Electronico automated trading system. Still, the robust black market for dollars shows that some Argentines are finding ways around the controls.
Argentine Economy Minister Axel Kicillof said Jan. 26 the peso has reached an “acceptable level” of about 8 per dollar, a signal the central bank may continue to spend reserves to keep the rate in check. The bank sold $380 million in the official currency market to defend the price of the peso, dropping reserves to $29.1 billion.
The government also reduced some currency controls in place since July 2012, authorizing foreign-exchange purchases for people earning a monthly wage of at least 7,200 pesos ($901). Those who qualify, less than 20 percent of the population, can buy as much as 20 percent of their average monthly salary, up to $2,000 a month.
“The problem I see in the longer run for the capital control for outflows is that it interferes with foreign direct investments, because FDI wants to take money out of the country,” Guillermo Calvo, an economist at New York-based Columbia University who was chief economist at the Inter-American Development Bank for five years until 2006, said in a phone interview from New York. “If a country develops that reputation, it can be very negative for FDI. That’s very dangerous.”
6. ELLIOTT REJECTS GRAMERCY’S ARGENTINA PROPOSAL AS A ‘STUNT’ (Bloomberg News)
By Katia Porzecanski
January  28, 2014
Billionaire Paul Singer’s hedge fund Elliott Management Corp. said efforts by holders of Argentina’s restructured debt to resolve a legal dispute over bonds from the nation’s 2001 default are “bizarre.”
Elliott, which has sued for full repayment on defaulted bonds in U.S. courts, will only negotiate a settlement with Argentina directly, the fund said in a letter to investors obtained by Bloomberg News. A proposal by hedge fund Gramercy Funds Management LLC called for holders of restructured debt to cede a portion of their interest payments to holdouts.
“We find this idea beyond bizarre and entirely impracticable,” Elliott wrote. “It is a stunt.”
A U.S. appeals court ruling in August blocked Argentina from making payments to restructured bondholders without settling in full a $1.5 billion claim from holdouts. Argentine President Cristina Fernandez de Kirchner has said she won’t pay holders of defaulted bonds who rejected the terms of the nation’s two debt restructurings, which imposed losses of 70 percent, any more than what other investors accepted.
Steve Bruce, a spokesman for Gramercy, declined to comment.
Concern Argentina will default on its restructured debt as a result of the litigation has helped to push the nation’s credit-default swap prices to 2,665 basis points, according to prices compiled by CMA, the highest in the world. The decision won’t be enforced until the U.S. Supreme Court decides whether to hear an appeal by Argentina. The country has until February to submit its argument for an appeal.
Good Faith
Changing the terms of the restructured notes to earmark interest payments to the holdouts would require approval from holders of 75 percent of each series of bonds. The Gramercy-led group owns more than $7 billion of the nation’s restructured bonds, or almost 30 percent, according to the group’s legal adviser, Linklaters LLP.
“The only way this dispute can be resolved is for Argentina to negotiate in good faith with holders of its defaulted bonds,” Elliott wrote. “If the Argentine government simply and at long last did what every other sovereign in need of restructuring has done and actually talked to its creditors, we are confident that this long-running saga could be resolved quickly and thoughtfully.”
7. WARY ARGENTINES SHUN OFFER TO BUY DOLLARS WITH STRINGS ATTACHED (Business Week)
By Raymond Colitt and Camila Russo
January 28, 2014
Few Argentine savers are taking advantage of the opportunity to buy dollars from the government for the first time in 18 months following the peso devaluation and easing of currency restrictions in the past week.
“I’m not interested. Between the red tape and the taxes I’m better off buying it in the street,” said Alfonso Iturriaga, a 63-year-old businessman. “It seems more like a measure to reassure people.”
With near 30 percent inflation eroding purchasing power, many Argentines are unable or unwilling to swap their pesos for greenbacks from central bank reserves that tumbled 32 percent to a seven-year low over the past 12 months. The lack of appetite reflects distrust in government policies by buyers, said Juan Curutchet, vice president of Banco de la Ciudad de Buenos Aires. Many remember when bank accounts were frozen in the wake of the nation’s $95 billion default in 2001.
President Cristina Fernandez de Kirchner on Jan. 27 eased restrictions on dollar purchases following last week’s 15 percent devaluation. Since then, banks sold $12.8 million to savers, according to the national tax agency known as Afip. That compares with $188 million the central bank sold on the official currency market yesterday.
Argentines must earn at least 7,200 pesos ($899) a month to be able to buy as much as $2,000 dollars at the official rate, which yesterday closed at 8 pesos per dollar. About 80 percent of the country’s 14.8 million workers earned less than 7,000 pesos in the third quarter of last year, according to the national statistics agency’s website. Those who qualify must obtain authorization from Afip.
‘So Expensive’
Argentines have an estimated $160 billion of undeclared assets stashed in mattresses or deposited abroad.
Some, like Iturriaga, fear increased government meddling, while others have nothing to invest after struggling to make ends meet on what they earn.
“I’d love to save in either pesos or dollars, the problem is I have nothing left at the end of the month,” said Raul Francesci, a 43-year-old shop attendant. “Things are so expensive I’d like to know how some people are able to save.’
Prior to these measures, Argentines were only allowed to buy a limited amount of currency for travel abroad and in some exceptional circumstances.
Along a 200-yard stretch on Florida, a popular shopping strip in downtown Buenos Aires, two dozen informal currency traders hustled passersby shouting ‘‘cambio: dollar, euro, real.”
Black Market
Demand for dollars on the black market rose after the rate fell from a record 13.05 last week to 12.5 yesterday, said John Garcia, who works in the doorway of a bookstore as an informal currency trader with a hip-pouch bulging with cash.
At night the 22-year-old works as a chef’s assistant.
“People expect the peso to slump again so they’re back to buying dollars,” said Garcia as he toyed with a calculator.
The traders are locally known as arbolitos, Spanish for little trees, because they line the streets and sidewalks of the city center.
Cesar Espinoza, a 30-year-old chauffeur, who swaps currencies in the shade of a newspaper stand on Florida in his free time says only tourists are selling dollars. “Argentines won’t dream of getting rid of them — they don’t trust the government.”
Curutchet said he doesn’t expect high demand for government-supplied dollars targeted at savers.
“It would surprise me to see a flood of requests to buy dollars,” Curutchet said in a telephone interview from Buenos Aires.
Options, Reserves
Dollar purchases will be slapped with a 20 percent tax, taking the effective rate to 9.6 pesos per dollar yesterday, unless they deposit them in a bank account for at least one year.
Miriam Espotron, a customer service manager at a Banco de Galicia y Buenos Aires SA branch said yesterday several customers had inquired about the dollar purchase program but no transactions were completed.
“People are evaluating — not everybody has cash available in their account to buy dollars,” Espotron said.
If the latest measures fail to shore up confidence in the peso, Argentina’s international reserves could extend their decline, Santiago Cuneo, an economist at SW Asset Management, said in a telephone interview from Buenos Aires.
“They’ll have to devalue the peso even more and that means higher prices,” Cuneo said.
8. ARGENTINA LINKS PESO CRASH WITH SPECULATORS SEEKING OIL RICHES (Platts Commodity News)
By Charles Newbery
28 January 2014
Buenos Aires (Platts)–28Jan2014/1248 pm EST/1748 GMT   Argentina blamed speculators Tuesday for promoting a sharp devaluation of the peso last week in an effort to buy the country’s energy resources at depressed prices, including its large amounts of undeveloped shale oil and natural gas resources.
“The speculative attacks that emerging markets suffer” are “attacks against governments” that are spurred by “monopoly economic groups,” Presidential Chief of Staff Jorge Capitanich said in a televised news conference.
These attacks are at times deployed “with specific communications campaigns in coordination with monopoly media groups” with the aim of “undermining the credibility and confidence of governments,” he said.
Capitanich said this leads to a depreciation of the currency so the speculators can “buy depressed assets” and impose more orthodox economic policies to boost profit potential.
The US Energy Information Administration estimates that Argentina holds 27 billion barrels of shale oil resources and 802 Tcf of shale gas. Of that, only 13,000 b/d of oil equivalent is so far in production in Vaca Muerta, a play in the southwest of the country that is thought to have the greatest production potential.
Capitanich said speculators want a weaker peso so they can buy into Vaca Muerta at lower prices in dollar terms.
“We cannot be naive as Argentines,” he said. “We have seen this movie repeatedly throughout our history.”
He spoke a day after President Cristina Fernandez de Kirchner discussed the issue of currency speculation with her Brazilian counterpart, Dilma Rousseff, in Cuba.
Capitanich said the leaders spoke about what they view as a spate of currency attacks by speculators over the past few days on Brazil and Argentina as well as other emerging economies like India, Turkey and South Africa.
CRASH IN THE PESO
The Argentine peso dropped 18% against the dollar last week, its worst decline since the country ended a decade long one-to-one peg with the greenback during a 2001-02 economic crisis.
The Fernandez de Kirchner government responded by selling dollars out of the central bank’s reserves, lifting a ban on buying dollars for savings and accusing big business and political opponents of trying to force an economic crisis.
“It appears that some people want us to eat soup again, but this time with a fork,” the president said Monday on Twitter in reference to the hard times during the 2001-02 economic crisis.
Analysts, however, were quick to point at a hole in this argument.
“Speculation always exists in a weak economy,” said Gerardo Rabinovich, an energy expert at the University of Belgrano in Buenos Aires. “When a sheep is left unprotected the wolf is always going to attack.”
He said companies are always looking for opportunities to get into the market at a low cost, but they are not creating the conditions to do so. It is the government’s mismanagement of the economy that has brought these possibilities, he said.
Argentina is suffering from a widening fiscal deficit, dwindling dollar reserves, double-digit inflation and a shrinking trade surplus. It cannot borrow abroad to ride through some of these problems because the government has failed to fully settle a $100 billion debt default from 2001, meaning that creditors could seize the proceeds.
This has left it heavily reliant on central bank reserves, which have dropped 45% to $29.1 billion from a peak of nearly $53 billion in 2011.
The government let the peso depreciate last week after years of saying it would never do so.
LOSS OF CONFIDENCE
This sudden shift in economic policy has “cut credibility in her government,” said Carlos Germano, a political analyst in Buenos Aires.
He added that people are also growing increasingly concerned about the president’s leadership capacity.
Fernandez de Kirchner took a back seat to running the economy after head surgery and a worse-than-expected result in midterm congressional elections in October. For 42 days she didn’t make a single public appearance, and then broke the silence last week. But she made no mention of the economy even as concerns swelled about the peso, inflation and dwindling dollar reserves.
“People see a government that’s not solid enough to take on the economic problems facing the country,” Germano said.
So instead of tackling the problems head on, the president and her ministers are attacking supposed speculators.
“This buys the government time to figure out what to do,” Germano said. “It also sends a signal to society, whether right or wrong, that the government is doing everything it can but forces are out there that are trying to prevent it from doing so.”
COSTLIER E&P TO IMPACT VACA MUERTA
Now adding to the country’s economic worries — in particular for the oil sector — is the currency depreciation.
“It has got more expensive for companies to invest in Vaca Muerta,” said Rabinovich.
He said the cost of investment in exploration and production is based in dollars, including for drilling rigs and supplies. But a company can only sell the output in pesos. He said raising fuel prices at the pump is out of the question.
He said on the radio Tuesday that the government will monitor service stations to ensure they sell sufficient amounts of supplies and don’t raise prices due to the devaluation.
This hits YPF hardest. The state-run company has said it will finance 80% of its $37.2 billion investment program for boosting oil and gas production 36% by 2017 out of cash flow, largely from fuel sales. It has a 50-60% share of diesel and gasoline sales.
“You need more pesos to buy a drilling rig and other supplies now, and salaries no doubt are going to rise because of the impact of the devaluation on inflation,” Rabinovich said.
The higher cost of investment in peso terms “will delay investments in Vaca Muerta,” he added.
While YPF is the only company that has put Vaca Muerta resources into production, other companies are planning to follow suit. Chevron, ExxonMobil, Shell and Total have announced multi-million and even billion dollar pilot production projects in the run-up to putting the resources into mass production.
At the same time, Argentina is betting on shale development to return it to the energy self-sufficiency lost in the late 1990s and early 2000s as production fell on low investment, few finds and limited exploration.
This has led to a surge in imports of diesel, fuel oil, gasoline and gas, and now crude.
Argentina plans to import up to 56,610 b/d of light crude supplies over the next year, the largest amount in two decades. The effort is designed to reduce imports of costlier diesel, fuel oil and gasoline supplies and free up domestic supplies of heavier crude for export.
But with the currency depreciation and a decline in dollar reserves, it may get much harder to pay for the imports, Rabinovich said.
“Imports cost a whole lot more now in pesos,” he said.
9. KBW ANALYST: FOR CITI, CONTAGION IS THE REAL RISK  (WSJ Blog)
By Maureen Farrell
28 January 2014
Citigroup has long been the most international of U.S. banks.
In recent years, that has been a good thing, as growth in emerging markets outpaced the U.S. But in recent days, that has raised questions about how much exposure Citi has to the tumult unfolding in Argentina, Turkey and South Africa.
KBW analyst Frederick Cannon says Citigroup’s exposure to Argentina, the most of any U.S. bank, should be manageable even if the country devalues its currency. In that case, Citigroup could suffer losses, but nothing to cause major issues at the bank.
The real issue for Citigroup will come if Argentina’s woes spread beyond its borders and cause investors to flee Brazil and Mexico, where Citigroup has an even larger presence.
Over the past week, the price of the Argentinian peso has fallen precipitously as emerging-market currencies have come under pressure. The country and investors around the world have been worried that the currency could continue to depreciate rapidly like it did in 2002, which caused a deep economic crisis there.
According to KBW, Citigroup is the twelfth largest bank by deposit operating in Argentina. No other major U.S. bank ranks in the top 30.
Still Citigroup’s exposure there overall is relatively small, amounting to roughly $749 million as of the third quarter of 2013 or 0.4% of the bank’s tangible common equity. Mr. Cannon calls Citi’s exposure “manageable in isolation.” Even if Citi wrote off its entire investment in Argentina based on its third-quarter figures, the bank would only take a quarterly hit of 17 cents per share.
The real risk is contagion. Citi boasts of its exposure to the emerging markets, noting that 42% of its loans are there and half of its corporate loans. As KBW notes, Citi has significantly larger exposure to Brazil and Mexico.
10. ARGENTINE GOVERNMENT REDUCES VEHICLE IMPORTS AS LUXURY TAX IMPACTS SALES (IHS Global Insight Daily Analysis)
By Stephanie Brinley
28 January 2014
Argentina is reducing the number of cars it will import in the first quarter of 2014, particularly from Brazil, while imposing a new luxury tax on imported or domestic luxury goods involving vehicles. The new tax is set at a rate of 30% on cars ranging from ARS100,000 (USD13,959) to ARS170,000, and 50% for those above ARS210,000. With the currency devaluation, the range of vehicles impacted by this tax has widened; as a result, the government may review the price ranges – the peso has lost more than 30% against the US dollar in two months. This devaluation is also likely to slow vehicle sales. This month, Argentina also lifted restrictions in place since 2011 that limited the purchase of foreign currency. The falling peso has temporarily driven up car sales as consumers look to put their money into durable goods rather than holding currency.
Significance: IHS Automotive believes that the tax on luxury vehicles will have a major impact on vehicle demand next year, primarily for the C, D, and E segments, with sales falling below 800,000 units. Our 2014 forecast anticipates 783,000 units, although sales may drop even lower given that the law was enacted in January, usually the region’s strongest month of the year. Argentina is the largest importer from Brazil, predominantly auto parts. Argentina argues that while it has a USD1-billion surplus in the trade of CBUs with Brazil, it has a deficit of USD3 billion in parts, and that gap needs to close. The authorities will continue to review the issue and should finalise an automotive agreement in the coming months. The Argentine government has been working to boost domestic manufacturing and exports, and to increase dollar inflows to tackle foreign debt, with import quotas among the measures to be implemented. The latest move was meant to account for a USD300-million reduction in foreign aid spending by the end of March; the country imported USD5 billion worth of vehicles in 2013.
11. STRAINED ARGENTINA-URUGUAY RELATIONS THREATEN TO ALTER REGIONAL TRADE FLOWS (IHS Global Insight Daily Analysis)
By Laurence Allan, Grant Hurst
28 January 2014
Commercial restrictions imposed by the Argentine government are impeding Uruguayan trade flows and are likely to make exporters more reliant on Brazil and Asia.
IHS Global Insight perspective
Significance
The Argentine and Uruguayan presidents will both be in Cuba this week, raising the possibility that the two leaders will meet to discuss ongoing bilateral diplomatic and trade difficulties. These include an Argentine ban on its exporters using Uruguay’s main port at Montevideo.
Implications
However, even if diplomatic relations become warmer, this is unlikely to result in a complete re-evaluation of Argentine trade policy, given its ongoing domestic economic difficulties.
Outlook
Argentine commercial restrictions will therefore continue to impact on Uruguay, which in turn is likely to seek to build trade ties with Brazil and emerging markets in Asia.
Uruguay’s president Jose Mujica. Montevideo, Uruguay, 26 December 2013.
Argentine president Cristina Fernández de Kirchner and her Uruguayan counterpart José Mujica will attend a summit of the Community of Latin American and Caribbean States (CELAC) in Havana, Cuba on 28–29 January, raising expectations that a damaging dispute between the two countries could be resolved. Argentina’s cabinet Chief Jorge Capitanich said that Fernández will meet regional leaders to discuss improving trade ties. Uruguay has suffered from reduced trade activity since October 2013 as a direct result of commercial restrictions introduced by Fernández’s government. Mujica’s government, in early 2014, said that relations with Argentina were at their lowest point in recent years. Although a possible meeting between the Argentine and Uruguayan heads of state at the CELAC summit, or at an upcoming MERCOSUR summit in February, could ease current problems, the wider background to the dispute probably dampens that opportunity.
Activity at Montevideo port is being seriously disrupted
In November 2013, the Argentine government imposed a de facto ban on its exporters using Uruguay’s main port of Montevideo. According to the decision, Argentine cargoes must only transit via ports whose governments are part of MERCOSUR accords related to shipping. Uruguay, although a full member of MERCOSUR, has not signed the relevant agreements. According to IHS Fairplay, the move has been rumoured since 2010 and is intended by the Argentine authorities to favour Buenos Aires port. The restriction has been interpreted by Mujica’s government as retaliation for its decision in October 2013 to allow increased production at Uruguay’s UPM (formerly Botnia) paper pulp mill, a long standing issue of dispute between the two (see Argentina-Uruguay: 19 November 2013: ).
This has had significant implications for Montevideo Port, given that more than half of its throughput is transshipment, 75% of which originates from Argentina, according to IHS Fairplay. Cargo transiting Montevideo port fell by 43% during November and December 2013, according to the Uruguayan Centre of Navigation (Centro de Navegación de Uruguay: CENNAVE). There has also been a 40% decline in trade activity at the Cuenca de la Plata container facility, according to Belgian-based logistics and port operator Kateon Natie. The move has also been unpopular among Argentine exporters, who are incurring extra costs by using alternatives to Montevideo. The Argentine Chamber of Commerce has claimed that the move damages Argentine export competitiveness, and called on the government to re-evaluate the policy.
Damaging consequences for bilateral trade
The impact on Montevideo port is only one negative side effect on Uruguay of Argentina’s current attempts to lower its trade deficit and protect its foreign currency reserves, which fell below USD30 billion on 12 January (see Argentina-Brazil: 22 January 2014: ). Argentine government restrictions on access to US dollars and on the use of credit cards abroad appear to be having a serious impact on the flow of Argentine tourists into Uruguay during the current vacation high season – Uruguay’s tourism authorities assess 10% fewer Argentine visits in the early weeks of 2014 compared to 2013. The effects of Argentina’s apparent partial relaxation of currency controls on 27 January are likely to be significant for Uruguay (see Argentina: 27 January 2014: ), with a depreciating Argentine peso hitting the competitiveness of Uruguayan exports and making Uruguay more expensive for tourists spending Argentine pesos there.
A series of stringent import procedures implemented by the Argentine authorities in 2011–12 pose a major obstacle affecting the flow of Uruguayan exports to Argentina. According to local media, the value of Uruguayan exports backed up at Argentine customs has increased from USD5 million to USD15 million since October 2013. In January 2014, Uruguayan minister of industry, energy, and trade, Roberto Kreimerman, claimed that USD32 million of Uruguayan exports were delayed at Argentine customs.
Uruguayan agribusiness, manufacturers and port operators bear brunt of dispute
Continued delays to Argentine imports from Uruguay are likely to frustrate Uruguay’s agribusiness and manufacturing export sectors (including food, paper, chemicals, and clothing), which are relatively dependent on the Argentine market. In 2011, Argentina accounted for approximately USD587 million of Uruguay’s exports, making it Uruguay’s second largest export market after Brazil. Exports to Argentina fell by 14.7% in 2012, and are reported to have declined by a further 5.6% during the first eight months of 2013.
Outlook and implications
These dynamics are likely to drive diversification of the Uruguayan export market, and Mujica’s government has already taken several steps in this direction. In 2012, Uruguay set up the Markets Diversification Fund (FODIME), aimed at helping companies find alternative export markets. This has been complimented by official state visits to Asia and Europe during 2013, both of which had the declared objectives of strengthening bilateral trade relations (see Uruguay: 29 May 2013: ). China in particular constitutes a major growth market for Uruguay, exports to which increased by 45.3% in 2013. Brazil, traditionally Uruguay’s largest trading partner, is likely to continue to be a major focus, although despite 6.4% growth in exports in 2012, exports during 2013 fell by 2.2%. The entrance of Venezuela as a full member of Mercosur is also a good opportunity for Uruguay to place its food sector products.
Given that the balance of power in terms of Uruguay and Argentina’s trade relations is strongly weighted in favour of Argentina, Uruguay is highly unlikely to invoke any meaningful retaliatory measures of its own. This was underlined by Mujica’s December 2013 offer to sell energy to Argentina to help address its power shortages. In another strategy that would potentially reduce Uruguay’s economic reliance on Argentina, Uruguay is embarking upon a USD500-million development of a deep water port, largely driven by Brazilian and Chinese interest. The project, located at Rocha on Uruguay’s east coast, is reported to be 80% funded by Brazil and will aim to increase the flow of trade between the two countries while simultaneously seeking to maximise Uruguay’s export potential with a focus on its nascent paper pulp and emerging iron mining industries.
12. FORD CONCERNED ARGENTINA, VENEZUELA MAY BITE INTO 2014 PROFIT (Reuters News)
By Bernie Woodall
28 January 2014
DEARBORN, Mich., Jan 28 (Reuters) – Ford Motor Co on Tuesday joined a growing number of multinational companies expressing concern that economic turmoil in Venezuela and Argentina could spell trouble for 2014 profits.
High inflation in Argentina and Venezuela, along with concern about how the two countries’ governments will try to steady their economies has Ford rethinking its annual forecasts for South America.
Consumer prices jumped more than 50 percent last year in Venezuela and private analysts say inflation reached 25 percent in 2013 in Argentina, fueled by weakening currencies in both countries that have rattled global financial markets.
Ford’s financial outlook first presented six weeks ago called for the company to repeat 2013’s performance in South America, when it lost $34 million before taxes, compared with a profit of $213 million in 2012. Ford’s fourth-quarter losses in South America ballooned to $126 million.
“Since December, we’re more concerned,” about company performance in South America, Ford Chief Financial Officer Bob Shanks told reporters on Tuesday as the company reported an overall annual pretax profit of $8.57 billion.
Shanks said the company is poised to respond in “real time” to the changing economic landscape in both Venezuela and Argentina.
“I think that is an area that we will continue to watch very closely,” he said. Ford will likely have plenty of company.
General Motors Co newly installed Chief Financial Officer Chuck Stevens recently said that GM’s South American operations had a second straight profitable year in 2013, but that continued volatility in Argentina and Venezuela present financial risk. More details may emerge with GM reports earnings next week.
Beyond the auto industry, U.S. consumer products companies from Colgate-Palmolive to Clorox may also take a hit on the worsening crisis, in which the Argentine government’s currency controls, by limiting access to dollars, has led a mad scramble for the U.S. currency on the black market.
The exchange rate on the black market is nearly twice the official exchange rate, said Guido Vildozo, IHS Automotive analyst based in Massachusetts. This led to people selling dollars on the black market and then buying cars at the official exchange rate, “an investment in a durable good that will maintain its value even if currency inflation continues,” said Vildozo.
This led to a short-term gain for Ford and other automakers in the Argentine market last year, but Shanks said that the company hopes that the government institutes longer-term changes that while biting into new vehicle sales will make more sense for consumers and the companies that sell to them.
Last Friday, the day after the Argentine peso had its hardest drop against the U.S. dollar in a dozen years and in the face of an expected 30 percent hike in consumer prices in 2014, Buenos Aires said it would relax currency controls it had long defended as essential.
VENEZUELA
The situation is even worse in the smaller market of Venezuela, where Shanks told reporters on Tuesday, “the government is trying manage every aspect of the economy.”
“You know that just doesn’t work very effectively,” he added.
New vehicles sales in Argentina by all manufacturers were about 900,000 vehicles last year, compared with 100,000 vehicles in Venezuela.
Shanks said a lack of access to foreign currency in Venezuela has caused Ford to cut auto output there “because we simply can’t get the currencies that we need in order to pay for the parts that we need to bring in for production.”
Last week, Venezuelan President Nicolas Maduro revamped 11-year-old currency controls under pressure to fix economic ills ranging from the highest inflation rate in the Americas to shortages of bread and milk.
However, Venezuela’s benchmark bonds fell to two-year lows when investors said the moves did not go far enough to correct policies that critics say have led last year’s inflation rate of 56 percent.
FORD NOT ALONE
Colgate-Palmolive Co derives more than 80 percent of its business outside of its North American base, including 50 percent from faster-growing emerging markets, and Latin America accounts for nearly 30 percent of Colgate’s sales.
Last year, Colgate-Palmolive said it incurred a one-time aftertax loss of about $120 million to adjust its balance sheet in Venezuela, which Morningstar said hit earning by 13 cents per share.
Colgate was joined by Avon Products Inc and Clorox Co last year in having to slash prices for its consumer goods sold in Venezuela after the country’s bolivar was devalued.
13. SLIP SLIDIN’ AWAY IN ARGENTINA: DOES PRESIDENT FERNÁNDEZ DE KIRCHNER HAVE A PLAN TO SAVE HER FOUNDERING CURRENCY? (Foreign Policy Blog)
By Daniel Altman
January 27, 2014
South America Last week, Argentina’s central bank finally abandoned its hopeless battle to keep the peso at an artificially high exchange rate versus the dollar. Immediately afterward, the Argentine government decided to allow more purchases of foreign currency by its citizens. But the transition from the country’s unsustainable currency regime is far from over — and it could get much worse.
The initial devaluation of the peso came on Thursday, Jan. 23, as the central bank abstained from the purchases it had long used to prop up the currency. A drop of more than 10 percent on Thursday was followed on Friday by a smaller dip, with the peso coming to rest at about 8 to the dollar. It had hit 7 pesos just two days earlier.
Just eight months ago, Cristina Fernández de Kirchner’s government had pledged not to devalue the peso. For years, it had been trying to make the central bank’s job easier by restricting Argentines’ sales of pesos in favor of foreign currencies. But as the bank’s reserves dwindled, the risks implied by creating demand for pesos continued to grow. Last week was apparently the end of the line.
A more gradual pullback might have been preferable, but it was healthy to embrace the inevitable sooner rather than later. With the currency falling to its real value in a competitive market, there would be no more need for restrictions on trading. So far, so good, then? Not quite.
The signs of a problem began in the black market for dollars. For the past several years, the black market has operated in plain sight to fill Argentines’ demand for dollars. Private traders sell dollars for many more pesos than the official rate to people who need them for travel, to invest, or simply because they think the peso will lose value in the future.
Before Thursday’s events, the main black market rate, known as the “blue” dollar, sat at about 11.8 pesos. On Monday, after some ups and downs, it settled around 11.7 pesos. To an outside observer, the gap with the official exchange rate looked smaller, which would have been a sign of progress. But from the point of view of an average Argentine, the gap had barely changed at all.
The reason was in the fine print. The government announced on Monday that households with monthly incomes of at least 7,200 pesos would be allowed to buy $2,000 at the official rate each month, more than enough for most Argentines (or at least those with the requisite income). But there was still a surcharge on many of these transactions. For purchases and withdrawals from businesses and banks abroad, the previous surcharge of 35 percent was lowered to 20 percent. Before, the surcharge resulted in an effective exchange rate of about 7 x 1.35 = 9.5 pesos to the dollar. After the change in policy, the effective rate was 8 x 1.2 = 9.6 pesos.
In this case, no news was bad news. The greater availability of dollars should have reduced the gap between the official and black market rates, but neither really changed. Why not?
Argentines may now be skeptical that, having started the peso’s slide, the government can also stop it. As the value of the peso drops, some businesses will be tempted to raise their prices more quickly. But with heightened inflation, a freely floating peso might fall faster as well. In the absence of a credible plan from the government for keeping prices in check — its existing price controls have hardly done the job — a downward spiral could ensue. To all appearances, uncertainty about prices and the peso is still generating demand for dollars in the black market.
So far, Fernández’s government has done little to combat it. Last week, Axel Kicillof, Argentina’s fourth economy minister in five years, and Jorge Capitanich, the cabinet chief, gave conflicting versions of the new rules for trading currencies, citing different surcharges for transactions (dramatized in this cartoon by Javier Rodríguez). On Monday, Jan. 27, Capitanich said the government would publish the names of every purchaser; he later reversed himself. Meanwhile, Kicillof promised to punish businesses that raised prices after the devaluation.
But to stabilize the peso, the government will have to fight inflation with more than rhetoric and threats. The process will not be easy, since inflation in Argentina is like the needle tracks on an addict’s arm — the ugly and unmistakable side effect of a long-term habit. For Fernández, the habit is spending.
During the global boom in commodities, Argentina’s central bank printed pesos to buy the foreign currency earnings of the country’s exporters. Rather than putting the resulting reserves into a sovereign wealth fund, the Fernández government used them to fund enormous increases in public sector salaries, infrastructure projects, and subsidies for energy and other essentials. These huge injections of cash into the economy did not come with equal growth in the production of goods and services, however, so inflation of more than 20 percent became commonplace.
If the government doesn’t rein in its spending, then prices will keep rising while the peso keeps slipping. This process is not always orderly, and any moment of panic can lead to hyperinflation and bank runs. But with less than two years left in her last term, Fernández may be willing to take the risk.
Daniel Altman is the global economics columnist for Foreign Policy. He also teaches economics as an adjunct at the Stern School of Business at New York University. He is a member of the Council on Foreign Relations and serves on the expert advisory board of Dalberg Global Development Advisors. Altman previously worked as an economic advisor in the British government and as an economics columnist at The Economist and The New York Times. He is the author of four books: the international bestseller “Outrageous Fortunes: The Twelve Trends That Will Reshape the Global Economy” (Times Books, 2011), “Power in Numbers: UNITAID, Innovative Financing, and the Quest for Massive Good” (PublicAffairs, 2010; with Philippe Douste-Blazy), “Connected: 24 Hours in the Global Economy” (Farrar, Straus and Giroux, 2007), and “Neoconomy: George Bush’s Revolutionary Gamble With America’s Future” (PublicAffairs, 2004). Altman has lived and worked on four continents and is a citizen of the Canada, the United States, and the United Kingdom. He holds a Ph.D. in economics from Harvard University.
14. ARGENTINA’S ECONOMY IS CRATERING, AGAIN (The New American)
By Bob Adelmann
27 January 2014
While Wall Street declined by three percent over global growth concerns last week, few were noting or even interested in the 11-percent decline in the Merval, Argentina’s stock market index. It hit a high of 5,970 on Tuesday, January 21, the day before the Argentina government devalued its currency. It closed at 5,337 on Monday. The peso itself has been in decline far longer, having lost nearly 35 percent of its value against the dollar over the last 12 months.
In an address to her country the day after the devaluation, Argentina’s President Cristina Fernandez, in a brilliant display of economic ignorance and hubris, announced her solution to the problem: more government spending. This time, she announced a 600-peso ($84) monthly “stipend” to students, to be paid for with more printing-press money.
This was entirely predictable: Efforts were made to grow Argentina’s economy through deficits, and inflation of the currency rose as the peso lost value, reaching 28 percent last year. As citizens tried to preserve what little purchasing power they had left, Fernandez clamped down with more than 30 different stifling capital controls. This would force those with capital to suffer the brunt of the inflation. Those controls included:
• Increased taxes on credit card purchases
• Limits on online purchases of products made abroad
• Taxes on vacations taken outside the country
• Limits on purchases of foreign currencies
• Confiscating private pension plans, converting them into pesos, and then adding them to the country’s social security fund
• Prohibiting foreign companies with a local presence from sending their profits back home
• Surcharges on airline tickets to foreign destinations
• Limits on ATM withdrawals, and only in pesos, not dollars.
The results were also predictable. Citizens who exited the country packed whatever dollars they had into the bottom of suitcases; others put them in safe deposit boxes or hid them under their mattresses. When local police went on strike for higher wages, riots broke out. That was followed by looting. Shop owners were traumatized. Dominga Kanaza, the owner of a corner grocery in downtown Buenos Aires, refused to open the shutters on her store, telling reporters, “It was scary,” and the worst situation she had seen since similar riots occurred during Argentina’s economic collapse and $95 billion default back in 2001.
Soybean farmers began to hoard their harvests rather than bringing them to market, predicting that soy would retain its value better than the peso.
When Vale, the world’s second largest mining company in the world, cancelled plans to invest $6 billion (American dollars) in a new potash mine in Argentina, things got rough. The company did the math and decided that the gap between Argentina’s official and black-market exchange rates would force it to invest real dollars into a project that would only pay back pesos in profits. Argentina’s chief enforcer, Interior Secretary Guillermo Moreno, demanded a meeting with Vale company officials at which he threatened them with jail unless the agreement was reinstated.
The last time such measures were instituted, they were called colloquially “corralito,” meaning that the free market’s operations were corralled or limited so that the government could work its will on it and on the citizens involved in it. This occurred the last time Argentina tried to resist the inevitable effects of making promises it couldn’t keep and then paying for them with phony money. The “corralito” in 2001 froze bank accounts while forbidding the withdrawal of dollars and only allowing minor withdrawals of pesos. This was instrumental in collapsing the economy.
The economy began to revive when the “corralito” was lifted by Roberto Lavagna, who served as Argentina’s minister of economy and production from 2002 to 2005. As it was lifted, the value of the peso stabilized, trade surpluses began to reflect a growing economy, and unemployment began to decline. The poverty rate dropped, and for a period of time Argentina’s economy thrived.
But with the election of former President Nestor Kirchner’s widow, Cristina, in 2007, government promises abounded, with public works programs announced that were promised to offset the impact of the worldwide Great Recession. That was the beginning of the end of the Lavagna resurgence and the beginning of the new “corallito.”
Unless and until Argentina and its citizens learn from history, it will be forced, once again, to enjoy the fruits of government intervention in the free market, running the risk of turning today’s “corrallito” into a “corralón” — a big corral of even more draconian measures, setting the stage for yet another Argentinian crisis that could equal or exceed that of 1998 through 2001.
A graduate of Cornell University and a former investment advisor, Bob is a regular contributor to The New American magazine and blogs frequently atwww.LightFromTheRight.com, primarily on economics and politics.

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WEDNESDAY
, Jan. 29

1. ARGENTINES JOCKEY TO COPE WITH ECONOMIC TURMOIL (The Washington Post)
By  Vicente Panetta in Buenos Aires and Luis Andres Henao in Santiago, Chile,
January 30, 2014
BUENOS AIRES, Argentina — Consumer prices are soaring, the treasury is running low on foreign currency and the peso has had its sharpest slide in 12 years. Instead of rioting, though, Argentines are falling back on tried and true survival skills to cope with the turmoil.
Inflation is at about 30 percent and there’s been a 15 percent drop in the peso’s value against the U.S. dollar over a few days. But Argentina has gone through five much more dire economic times since the 1930s.
So some Argentines are hoarding dollars, while others stockpile goods or plow their savings into real estate.
More people ride bikes now following recent increases in public transportation fares. They eat less at restaurants and cook at home. They buy cheap, pirated DVD copies of the latest films rather than go to the cinema.
Sofia Basualdo, a 43-year-old geography teacher, responded to growing inflation with a shopping spree to beat further price rises.
“I might pay one peso for a product today, but next week I’ll likely have to pay two pesos,” Basualdo said as she left a Buenos Aires supermarket pushing a shopping cart filled to the brim. “In this country, when you start smelling inflation it’s best to buy and save.”
   Many Argentines note that the current economic woes are not as bad as Argentina’s financial collapse in 2001-2002. Unemployment remains relatively low, and many people benefit from government handouts. Yet they worry the country may be at a tipping point.
“People are adopting defensive measures to survive,” said Jorge Raventos, a political analyst and former spokesman for Argentina’s foreign relations ministry. “People endure this by zig-zagging along, but it’s hard to know how much they can take before they explode.”
Although it is exceedingly difficult because of strict regulations, some people and businesses have succeeded in past years in sending their dollars out of Argentina as a hedge against inflation. Then Deputy Economy Minister Axel Kiciloff last year estimated Argentine individuals and companies had socked away up to $200 billion in undeclared currency outside the country.
But like most people, Carlos Partcha, an 80-year-old retired journalist, has taken the simpler measure of buying U.S. dollars and stashing them under his mattress — as he has done for more than a decade.
“We don’t trust anything anymore. Not even the banking institutions,” Partcha said. “I had saved in dollars, and when the banks froze deposits in 2001, I got pesos back and lost my money.”
“We’re so used to these levels of uncertainty that the Argentine has developed a sort of workout routine to deal with” economic instability, he said.
The crisis 13 years ago was so bad that one of every five Argentines was out of work and some reported going hungry. The peso, which had been tied to the dollar, lost nearly 70 percent of its value.
Banks froze deposits and barricaded behind sheet metal as thousands of protesters unsuccessfully tried to withdraw their savings. At least 27 people died in protests and looting that swept Argentina in December 2001 as South America’s second-largest economy unraveled and eventually defaulted on a debt of more than $100 billion. Argentina saw a revolving door of five presidents over two weeks.
Restoring Argentina’s sense of pride and sovereignty after that collapse has been the central goal of President Cristina Fernandez and her late husband and political predecessor, Nestor Kirchner. The presidential couple negotiated or paid off most of Argentina’s defaulted debt, nationalized the pension system, and retook control of the national airline and oil company. They also kept energy cheap through subsidies and dug deep into the treasury to redirect revenue to the poor through handouts.
For several years, Argentina enjoyed annual growth of 7 percent fueled by the high prices foreigners paid for the country’s soybeans and other agricultural commodities.
But now, Argentina suffers from a shortage of dollars, one of the world’s highest inflation rates and an inability to tap into global credit markets because of its debt default.
Argentina’s economy this year is expected to expand by no more than 1.5 percent, mainly because of lower commodity prices and waning demand from China for its agricultural goods. The government’s policy of nationalizing private firms has also spooked investors.
Inflation estimated last year at 28 percent and projected to be even higher in 2014, forces rounds of wage and price negotiations. Hugo Moyano, one of Argentina’s most powerful union leaders, recently said inflation is “eating up salaries” and “must be corrected and compensated.”
The government recently eased tough restrictions on exchanging pesos for foreign currencies after they backfired by pushing many Argentines to buy dollars on the black market.
Independent economists say the government’s pullback on currency controls is just a bandage for a wounded economy that needs to contain inflation by dialing back public spending. The government, in turn, blames banks, energy companies and big businesses, accusing them of speculating with the peso and raising prices to provoke instability.
Kicillof, now the economy minister, on Wednesday announced agreements with business leaders aimed at keeping the peso’s sharp depreciation from leading to higher prices for consumer goods. Producers of steel, aluminum, metal products, petrochemicals and plastics are to hold prices to the levels of Jan. 21 — the day before the peso’s big drop.
Amid fears of even higher inflation, Argentines are seeking to protect their wealth by buying cars and real estate.
“I’m investing in my own house, building it with my husband. That gives me security because I don’t have to pay rent that constantly goes through the roof,” said Miriam Rodriguez, 35, a maid who lives on the outskirts of Buenos Aires.  “Bricks are a good way of guaranteeing some stability.”
Rodriguez said rising prices have forced her to make other changes. She’s stopped buying clothes as well as top brands at the supermarkets, and she canceled her Internet and cable TV service. When she gets together for a dinner with friends, everyone brings their own food.
“I’m not worried about the dollar,” she said. “I don’t even have money to go trade for dollars.”
2. ARGENTINA SEEKS TO CONTROL PRICES AMID DEVALUATION (The Washington Post)
January 29, 2014
BUENOS AIRES, Argentina — Argentina’s government has announced agreements with business leaders to keep the recent sharp depreciation in the peso from pushing up prices for consumer goods.
Economy Minister Axel Kicillof said Wednesday that “there is no reason for up or down movements in foreign currency to translate into all the prices in the economy. Tariffs, taxes and salaries are not in dollars.”
Chronic high inflation is one of the main worries of Argentines, who fear the sharp drop in the Argentine peso against the dollar will heat up the rise in prices even more.
The government says producers of steel, aluminum, metal products, petrochemicals and plastics have agreed to hold prices to pre-Jan. 21 levels. That is the day before the biggest fall by the peso since Argentina’s 2001-2002 economic crisis.
3. ARGENTINA IN PRICE ROLLBACK DEAL WITH INDUSTRY (The Wall Street Journal)
By Ken Parks
January 29, 2014
*Government to Use Fines, Store Closures, Imports to Fight Inflation
BUENOS AIRES—Argentina on Wednesday said it had struck a deal with metals and plastics producers to roll back recent price increases as the government tries to prevent a currency devaluation from stoking inflation that is already believed to be running above 25% a year.
The makers of steel, aluminum and plastics will lower prices to their levels on Jan. 21, a day before the central bank engineered the biggest devaluation of the Argentine currency since the 2002 financial crisis, Economy Minister Axel Kicillof said.
“It’s not an imposition by the government, rather a voluntary agreement between the different parties,” Mr. Kicillof said at a news conference. “There is no reason for movements in the exchange rate, up or down, to directly and proportionally impact all prices in the economy.”
Consumer electronics and appliance manufacturers also agreed to cap year-to-date price increases at 7.5%. The 15% devaluation in the peso last week spurred many businesses to mark up prices on goods ranging from computers to televisions, almost all of which are imported or assembled from imported parts.
The price rollback announcement comes less than a month after price controls were applied to almost 200 basic consumer products, including meat, beer and condoms. More price accords are likely as government officials have said in recent week they are scrutinizing 38 industries to find out if producers and middlemen are raising prices in pursuit of excessive profits.
Businesses that take advantage of consumers could face fines, store closures, competition from imported goods and the withholding of government energy subsidies and soft loans, said Jorge Capitanich, President Cristina Kirchner’s cabinet chief.
“The speculative behavior of many businessmen and merchants in Argentina is antipatriotic and shameful,” Mr. Capitanich said.
The Kirchner administration has devalued the currency, ramped up price controls and tightened monetary policy to contain inflation and a loss of confidence in the currency that threaten to plunge Argentina into its deepest recession since its 2001-2002 economic crisis and default.
At its weekly auction of short-term notes Tuesday, the central bank lifted interest rates to the highest level in more than a decade, seeking to head off the risk of Argentines pulling their money out of banks to buy dollars as a hedge against inflation.
Rates on 98-day peso notes rose to nearly 26% from 20% just a week ago. The higher rates still leave savers at the mercy of inflation that many economists say is approaching a 30% annual rate.
The Kirchner administration on Monday also lifted an 18-month ban on the purchase of dollars for savings purposes to deflate a black market for dollars that was fueling inflation and expectations of more devaluations. So far, the government has authorized dollar sales for about $100 million.
However, higher interest rates, a weaker currency and more dollars haven’t taken pressure off the peso. The peso firmed slightly to 8.00 pesos against the dollar on the regulated foreign-exchange market, where the central bank has been regularly supporting the currency by selling dollars.
But on the black market the peso weakened, with the dollar fetching about 12.90 pesos compared with 12.30 pesos on Tuesday and 11.80 pesos Friday, according to newspaper El Cronista, which tracks black-market rates. That suggests a major problem for Argentine authorities: Many Argentines still see the peso as overvalued at the official rate.
In an equally worrisome sign, the central bank has lost $1 billion in scarce hard-currency reserves since Jan. 21. Reserves are now at $28.5 billion and could head lower unless a weaker exchange rate boosts exports and higher interest rates tempt Argentines to keep their dollars in the banks and not under the mattress.
A key factor in the currency’s stability will be what happens to inflation, which the government says is just 10.9% a year.
Many economists, however, say the government needs to do more beyond strong-arming businesses and raising interest rates to contain inflation, which has its roots in rampant spending financed in part by money printing. But the Kirchner administration has so far avoided the politically poisonous option of cuts to spending, especially generous energy subsidies.
“The government needs an integral plan to lower inflation, and in this case it’s doing it through price accords which on their own aren’t enough,” said Mario Sotuyo, an economist at consulting firm Economia y Regiones. “If it’s not accompanied by monetary and fiscal policies, it’s very hard to lower inflation just with [price] accords.”
Companies are in a bind because price controls would limit their profitability, while at the same time they face significant wage demands from unions that doubt the government will be able to lower inflation, Mr. Sotuyo said.
Argentina’s powerful unions and employers will start annual wage talks next month, and union bosses have already signaled they aren’t going to sacrifice workers’ purchasing power.
4. GLOBAL MARKET TREMORS: AS CURRENCIES FALL, LEADERS CAST BLAME ABROAD (The Wall Street Journal)
By John Lyons, Ian Talley, Patrick McGroarty
30 January 2014
As currencies dive across the emerging world, leaders in countries such as Turkey and Argentina are resorting to a timeworn gambit that rarely succeeds in steadying wobbly money: Blaming outside conspirators.
“The speculative behavior of many businessmen and merchants in Argentina is antipatriotic and shameful,” said Jorge Capitanich, President Cristina Kirchner’s cabinet chief, on Wednesday.
Turkey’s Prime Minister Recep Tayyip Erdogan, meantime, has vowed to “choke” market speculators. With the lira plunging, the leader blamed the “interest-rate lobby” — an alleged conspiracy of bankers and foreign media that he says seeks to stoke political and economic turmoil in Turkey.
The scramble to assign blame shows how currency declines across the emerging markets are creating new political pressures for emerging-market leaders. From Brazil to Russia, developing world currencies are dropping as investors pull money on concern that slowing growth in China and the U.S. Federal Reserve’s move to tighten monetary policy will stunt emerging-market prospects.
Other developing-world leaders resist the temptation to blame the fickleness of global capital for their currency woes. Although currencies have been hit in big Latin American economies such as Mexico, Chile and Brazil in recent weeks, their leaders have reacted with more measured tones.
Part of the reason is these countries, which have followed more conservative macroeconomic policies than countries such as Turkey and Argentina, believe they can ride out the turmoil. Brazil, for example, socked away $380 billion in reserves over the past decade. Argentina’s reserves are only $29 billion.
These countries’ leaders appear to be trying to distinguish themselves from nations such as Venezuela, which have long made international conspiracy theories a part of the regular political discourse. Venezuela’s late-President Hugo Chavez described the cancer that ultimately killed him as a U.S. plot.
His successor, President Nicolas Maduro, often blames foreign conspirators and saboteurs for the oil country’s economic woes, which include a 56% inflation rate and a currency that has plunged on the black market.
“Our economy has been unsettled by an economic war of gross speculation, by hoarding, along with a psychological war from abroad,” Mr. Maduro said in a recent televised address.
Such statements, many of his critics say, are attempts to stir up patriotic fervor to distract attention from deeper domestic problems, such as overspending, inflation and labor unrest.
In Turkey, Mr. Erdogan’s government faced mass protests last year in a country that remains divided between rural conservatives who support him, and an urban middle class and some elites who view his growing power as a threat to democracy.
The Turkish lira has fallen some 20% since mid-December, and some blame Mr. Erdogan’s push for low interest rates, which the leader said were needed to fuel growth. Turkey’s central-bank governor signaled this week the bank will tighten monetary policy, including a rise in interest rates, to stop the plunge in the lira, a challenge to Mr. Erdogan’s policy making.
“Erdogan has used the strategy of blaming outsiders in the past but this has got much worse in recent times in terms of the amount of targets and the intensity,” said Wolfango Piccoli, managing director of Teneo Intelligence, a political risk consultancy.
In South Africa, meantime, the government officials are blaming the aftershocks of the 2008 financial crisis for its economic problems, which include a big current-account deficit, slowing economy and the government’s failure to end strikes that are hurting the crucial mining sector. The bank raised interest rates on Wednesday to try to stem the declines.
When the rand swung widely after the rate increase, an official promptly blamed the volatility on poor investor math skills.
Some of consternation with the fickleness of global is understandable. Investors flooded into emerging markets in recent years amid a frenzy for developing world investing. A few years later, some of that same capital is rushing out. A common critique is that Wall Street overhyped emerging-market prospects on the way up, and is now overselling as they fall from grace.
But much of the problems faced by emerging-market nations are “largely home-brewed,” said Adam Posen, head of the Peterson Institute for International Economics and a former Bank of England official.
5. ANALYSIS-ARGENTINA TO RESTART SOY EXPORTS AS FARMERS FORCED TO SELL (Reuters News)
By Hugh Bronstein
January 29, 2014
BUENOS AIRES, Jan 29 (Reuters) – Grains powerhouse Argentina will jump-start soy exports over the weeks ahead as farmers, who have hoarded beans to protect themselves from the weakening peso and galloping inflation, are forced to sell by the time harvesting starts in March.
The country is the world’s No. 3 soybean exporter and top supplier of soymeal at a time of booming Chinese demand.
A wobbly currency and fast-rising consumer prices have prompted growers to save in soybeans rather than in pesos, drying up Argentine supply and providing a boon to U.S. exporters.
The official exchange rate is 18.5 percent weaker this month while the black market peso has slumped 22.5 percent. The Rosario soy market has virtually shut down in recent weeks as growers pile up beans on their farms to protect themselves from inflation fueled in part by the anemic peso.
With the March-May soy harvesting season approaching, farmers say they will be forced to re-start selling.
“You have structural expenses on any farm, so at some point you just have to sell your reserves,” said Alexis de Noailles, a grower in the bread-basket province of Buenos Aires.
“Most of us pay income taxes around March, for example, and they cannot be paid in soybeans,” he said. “And you wouldn’t want to wait until the last minute to sell your soybeans because there is a lot of soy in the world this year and the closer we get to March the lower prices are likely to be.”
A resumption of farmer selling is expected once the harvest begins, but has not yet been fully priced into the futures market, said Rich Nelson, chief strategist with agricultural trade consultancy Allendale Inc.
March futures on the Chicago Board of Trade may fall to $12.50 a bushel by mid-February, about 17 cents below levels today, and July futures may sink to $11.75 a bushel by the peak of harvest, down about 65 cents from today, as export volumes from both Argentina and Brazil increase, he said.
Argentina’s upcoming soy crop is seen at 53.0 million tonnes, up from 48.5 million in the previous season, according to the Buenos Aires Grains Exchange.
 “The local soybean market will come back to life when the harvest starts coming in. Farmers will need to sell 20 percent of their 2014 soy crop to pay production costs that cannot be bartered for in beans,” said farm consultant Pablo Adreani.
“You will see at least 11 million tonnes of new soybeans hit the market between now and May,” he said.
Over the months ahead big harvests are also expected in Brazil (89.0 million tonnes) and Paraguay (9.4 million), according to the U.S. Department of Agriculture and private analysts. Demand is driven by China, where beans are crushed into cattle feed for the country’s fast-growing beef industry.
Despite huge investments made by exporters in Argentine soymeal plants, idle capacity at the facilities is approaching 50 percent as growers pile beans into white, vacuum-packed plastic bags that serve as horizontal silos dotting the Pampas.
“They see soybeans as a kind of currency now, like the dollar or the euro, which represent a more reliable store of value than the peso,” said Leandro Pierbattisti, an analyst with Argentina’s grains warehousing chamber.
It is not only the farm sector that is feeling the pinch.
Years of erratic policymaking in Argentina have created a gnarl of capital and price controls that have made simple transactions – like buying a refrigerator – impossible, as  merchants are unsure what prices to charge.
“The fact that the economic team does not seem to have a comprehensive strategy, especially to deal with reducing fiscal spending, is likely to hurt the efforts to stem the decline in reserves and lower inflation,” said a recent note from the Eurasia Group consultancy.
EIGHT IS ENOUGH
Economy Minister Axel Kicillof – who engineered the 2012 nationalization of Argentina’s top oil company, YPF – has warned merchants not to hike prices. He has hinted that the government will use central bank reserves to intervene in the foreign exchange market to keep the peso at 8 to the dollar, a level he calls “adequate”.
Central bank reserves fell 29 percent last year to $31 billion. They stand at under $29 billion after the bank burned through $420 million over the last four days to hold the official peso at 8 per dollar.
Inflation is meanwhile likely to keep climbing, due in part to generous state energy and transportation subsidies at the heart of President Cristina Fernandez’s populist policy model.
Her policies, like high soybean export taxes and curbs on corn and wheat shipments aimed at ensuring ample domestic food supplies, tend to take money from sparsely-populated farm areas with crumbling infrastructure and funnel it toward her base in the vote-heavy suburbs surrounding capital city Buenos Aires.
She easily won re-election in 2011 and the race to replace her next year is wide open. Opposition candidates bet that discontent over the consequences Fernandez’s policies will pave the way for voters to embrace a more pro-investment candidate in the 2015 election. She is banned by law from running again.
Meanwhile, farmers like Alberto Pereyra in Buenos Aires province say they are preparing to take their soybeans back to market as costs mount and alternative financing runs dry.
“You can hoard crops as long as you have the financing to keep planting and producing,” he said. “That’s going to run out for most of us before March.”
6. ARGENTINA RESOLVES TO PUNISH PRICE GOUGERS (Dow Jones Institutional News)
By Ken Parks
29 January 2014
BUENOS AIRES–Argentina on Wednesday resolved to punish price gougers as it tries to prevent a currency devaluation from further stoking the second-highest rate of inflation in the Americas after Venezuela, even as the peso came under fresh pressure in the market.
“The speculative behavior of many businessmen and merchants in Argentina is antipatriotic and shameful,” said Jorge Capitanich, President Cristina Kirchner’s cabinet chief. The government will use fines, store closures and imported goods to fight price increases, Mr. Capitanich said.
The rhetoric came amid the biggest challenge to Argentina’s financial stability since its 2001-2002 economic crisis and default. The central bank allowed the peso, which is tightly regulated, to slide some 15% last week in an effort to help exporters and stop spending dwindling reserves defending the currency.
The move hasn’t taken pressure off the peso. Shortly before the end of trading on Wednesday, the peso had gained slightly to 8.00 per dollar on the regulated foreign-exchange market, where the central bank has been regularly supporting the peso by selling dollars.
But on the black market, the peso weakened to about 12.90 per dollar from 12.30 Tuesday, according to newspaper El Cronista, which tracks black-market rates. That suggests a major problem for Argentine authorities: Even after the recent devaluation, many Argentines still see the official rate as too strong.
In the past three trading sessions, the peso has fallen from 11.80 to its current level at nearly 13 on the black market. So far this month, it has tumbled from 10 per dollar–a more than 20% slide.
A key factor in the currency’s stability will be what happens to inflation, which the government says is just 10.9% a year, but which private-sector economists estimate at higher than 25%.
Businesses are in the government’s cross hairs as the Kirchner administration tries to contain inflation through price controls on almost 200 basic goods ranging from food to condoms. The government is also in talks with 38 industrial sectors to limit price increases that officials say are nothing more than attempts by producers to make excessive profits at the expense of consumers.
The government struck a pricing agreement with the steel industry this week and hopes to do the same for construction materials like cement and bricks, Economy Minister Axel Kicillof said Tuesday.
Many economists, however, say the government needs to do more beyond strong-arming businesses to contain inflation. “The government needs an integral plan to lower inflation, and in this case it’s doing it through price accords which on their own aren’t enough,” said Mario Sotuyo, an economist at consulting firm Economia y Regiones. “If it’s not accompanied by monetary and fiscal policies, it’s very hard to lower inflation just with [price] accords.”
Companies are in a bind because price controls would limit their profitability, while at the same time they face significant wage demands from unions that doubt the government will be able to lower inflation, Mr. Sotuyo said.
At its weekly auction of short-term notes Tuesday, the central bank lifted interest rates to the highest level in more than a decade, seeking to head off the risk of Argentines pulling their money out of the banks to buy dollars as a hedge against inflation.
Rates on 98-day peso notes rose to almost 26%, from 20% just a week ago. The higher rates still leave savers at the mercy of inflation that many economists say is approaching 30% a year.
“The key test will be whether authorities raise the interest rate above 30% to push real rates into positive territory for the first time in 11 years,” Daniel Volberg, an economist at Morgan Stanley, said in a video to clients.
The central bank also sold $19 million in dollar-denominated notes at yields between 2.5% and 4%. The government hopes those rates will be enough to convince Argentines to keep their dollars in the banks after it lifted an 18 month ban on the purchase of dollars for savings purposes this week. So far this week, the government has authorized dollar sales for about $100 million.
It is a high-risk strategy aimed at taking away business from a thriving black market for dollars by sacrificing scarce reserves. Some businesses are using the black-market exchange rate as a reference for pricing goods and services.
Last week, the central bank let the peso slide 15% against the dollar with a view to help exporters and to trim the gap between the official and black-market rates. It was the biggest drop in the peso since 2012 and a major political blow to a president who had long promised never to devalue.
Last week’s the devaluation also spurred businesses to mark up prices on consumer goods ranging from computers to televisions, almost all of which are imported or assembled from imported parts.
Mr. Capitanich accused special interest groups of using the media to frighten the public by calling attention to a black-market exchange rate that is used by drug traffickers, money launders and tax cheats.
“No businessman can argue today that there isn’t an exchange rate policy…that guarantees stability,” he said.
7. CONFIDENCE CRISIS TO CONTINUE CHALLENGING ARGENTINA’S ECONOMY (IHS Global Insight Daily Analysis)
By Paula Diosquez-Rice
29 January 2014
On 24 January, the Argentine authorities announced a loosening of controls on purchases of US dollars.
IHS Global Insight perspective
Significance
Argentina is having am economic confidence crisis that has been brewing for the past four years.
Implications
The risk of a major economic crisis has risen as it will be very difficult to avoid further inflationary pressures from the labour corner, and a recession in the short term.
Outlook
The 2014 economic outlook is grim, and economic authorities’ creativity will be put to the test given the markets’ lack of confidence in Argentina in a context of flat and/or slow rising soft commodities prices in the short term.
Some context
Historical data show that Argentina has experimented with its currency over the past century; sometimes this has been good for the domestic market but has usually proven detrimental for external trading. The swings in the country’s real effective exchange rate have been tied to macroeconomic crises and the erratic path of policy making. The Kirchner administration since 2003 has been no stranger to currency manipulation; in the years of the exporting commodities bonanza, the central bank intervened in the foreign exchange market to keep the peso from appreciating. In the past four years, the government has intervened to prevent “imported” extreme volatility. In June 2010, the central bank imposed a restriction on individuals purchasing foreign exchange, introducing an annual quota of USD250,000. In 2011, new foreign exchange controls were introduced and throughout 2012 the restrictions grew and Argentines were prohibited from purchasing foreign exchange for the purpose of savings. Increased controls have fuelled speculation and raised the exchange rate in the parallel market (known as the “blue” dollar in Argentina). Once the country’s foreign exchange reserves declined below the USD30 billion level when including gold holdings (a level not seen since November 2006), the parallel exchange rate moved to ARS11.3:USD1 and closed at ARS13.1:USD1 last Thursday (23 January). Furthermore, after the extreme drop of the Argentine peso last Thursday, the government announced that it would relax its foreign exchange controls a little; that is, it will consent to purchases of US dollars for the purpose of saving, which has been not allowed since July 2012. However, it will have a 20% tax that can be used as credit at the moment of filing income tax. This is intended to keep the parallel exchange rate from even further steep drops.
This move is also politically motivated. The government’s image has suffered domestically since late November 2013, as Argentina experienced a police strike that prompted several days of opportunistic looting nationwide, while electricity shortages prompted sustained power blackouts amid record high temperatures. The partial relaxation of restrictions on US dollar purchases thus looks at least partly to be an attempt to boost government popularity locally. However, the impact of that is likely to be limited, given the conditions the authorities have put on US dollar purchases.
Authorities also disclosed that their objective is to keep the official exchange rate at ARS8:USD1. This figure represents the main rate, since although there are not officially multiple rates, there are implicitly three, given the punitive taxes applied to the purchase of USD depending on the purpose: for travellers and purchases abroad there is the official one, plus a 35% tax (it was first announced that this tax would go down to 20% but this was later retracted), and now for savings it is the official one plus 20% tax.
The main problem in Argentina is the inflation rate; IHS expects that the manipulation of inflation-rate figures will continue in the short term, and only a change in economic policy could bring observed annual inflation rates back to single digits. The lack of reliable statistics has been one of the major sources of inflation acceleration, as economic agents include their own inflation estimates and not the fully observed inflation rate in the price-setting mechanism. The large increase in workers’ compensation is good evidence that price increases are much higher than suggested (up 24.6% y/y in the formal private sector, up 29.5% y/y in the informal private sector, up 22.8% y/y in the public sector) with the government succumbing to workers’ pressures to avoid new mobilisations.
One of the main determinants of the inflation rate in the current year will be the wage increases that trade unions get in 2014; before this devaluation, many opposition unions had already announced that their floor was going to be a 30% increase, and this rapid devaluation will influence those negotiations. In addition, as much as the government worked on price agreements with retailers, anecdotal evidence suggests that prices of food items are still soaring – with expectations of annual inflation rates remaining at 30%.
Outlook and implications
The events of last week, including the steep devaluation of the peso after a run up of parallel market exchange rate, show that the government continues with circumstantial policy making, and thus uncertainty surrounding future policy moves remains. This is what makes the country’s currency risk so high, and unless the prices of agriculture commodities soar, we expect more spur of the moment regulation changes in order to keep the country’s foreign exchange reserves from shrinking at a fast rate. It is too early to predict how far the government will let the peso fall, but the central bank intervention to bring it back to less than 8 pesos per dollar could be a signal that it will not let the peso free fall in one day. However, the risk of having a ARS10:USD1 by the end of the first half of the year is higher, and we will be reassessing our base scenario in the next couple of weeks. In addition, the continued intervention in the foreign exchange market shows that the government might not be ready to let the “managed floating” system go just yet.
Without a clear plan to address the country’s inflation rate, which would require the government to admit that there is an inflation problem in the first place, the confidence crisis will continue, with the memory of the 2000–01 “corralito” (which denied Argentine savers access to their bank deposits) further sharpening the crisis in confidence and influencing Argentines’ behaviour. Moreover, the steep devaluation will imply a jump in prices, which is already materialising, as producers suffering higher costs will continue to pass some of the increase on to consumers in the coming months. Price controls are only a short-term solution that could be effective under strict supervision of compliance, but when over used creates scarcity and even higher consumer prices. Indeed, erratic policy making fuels loss of credibility in the attempt to regain control of the economy’s path. The steep devaluation will not help gain competitiveness for the exporting sector, given that the inflation problem increases their costs.
For the domestic economy, the steep devaluation coupled with the uncertainty of what the government will do in terms of foreign exchange policies has meant a paralysis of economic activity; retailers were not sure how much to raise their prices, while some opted to stop selling for a time.
The question remains whether confidence can be rebuilt without the removal of all the interventionist policies in place. It would be very difficult to suddenly remove capital and foreign exchange controls. The government has for now chosen to slightly relax the foreign exchange controls to allow the purchase of US dollars for the purpose of saving, while maintaining the Central Bank’s intervention in the foreign exchange market to keep the main official exchange rate at ARS8:USD1; this is again a short-term solution to buy some time. The risk of a step-wise managed devaluation of the main exchange rate has risen, as the government may decide to let the peso go to down further and intervene to keep the rate steady for a while, then make the same move a few months later. Without effectively tackling the inflation problem, the risk of a recession in the next 12 months is high.
8. INFLATION SOARING? CURRENCY CRUMBLING? NOT NOW, I’M EATING (Newsweek)
By Leah McGrath Goodman and Karla Zabludovsky
January 29, 2014
Outside an overflowing courtroom in downtown New York, a well-heeled trader from Buenos Aires, Miguel Catella, paces the stairs under a pale winter sun, lost in thought over the plight of his native country.
“Things are out of control in Argentina,” he sighs. “We are in a constant state of panic. We are losing a great deal of money. The government is not listening to its own people.”
Inside the court, Argentina’s economic minister, vice president and a rabble of high-powered lawyers argue against an injunction by the Second Circuit Court of Appeals that would force the country to make full payment on tens of billions of dollars of bonds to a group of New York hedge funds. If the court compels them, they argue, Argentina will simply refuse to pay.
One of the three judges, Reena Raggi, is unable hide her amazement at this line of argument. “So the reason not to grant this injunction – is that Argentina is going to default?” she asks.
The short answer from Argentina’s delegation: Yes.
Fast-forward one year. As Argentina prepares to take its grievances in New York to the U.S. Supreme Court, its debt problems back home have turned into a full-blown financial crisis.
In the same way that Argentina’s legal team threatened to halt payments on its government bonds, the nation’s central bank simply decided last Thursday to cease making purchases in support of the nation’s currency – the peso – sending it into instant freefall.
“The motivation for the timing of the devaluation by the government is not clear,” said analyst Tony Volpon of global research provider Nomura Group in New York. “It is also not clear if this represents a ‘one-off’ devaluation” – or something that will snowball into even bigger trouble for Argentina.
So far, it has been nightmarish enough. The devaluation prompted the biggest one day collapse in Argentina’s currency in more than a decade and the sudden loss of its people’s already waning purchasing power, triggering a rush to buy U.S. dollars and household basics such as appliances and foodstuffs before the devaluation feeds through into the nation’s prices which are set to soar far beyond reach.
(While price accords were reached earlier this month in Argentina on certain crucial food items, mark-ups of as much as 25 percent or more have been seen across the capital for electronics, wine and other goods. Some retailers won’t sell any goods at all until the price volatility levels off.)
9. FOR ALREADY VULNERABLE PENGUINS, STUDY FINDS CLIMATE CHANGE IS ANOTHER DANGER (The New York Times)
By Henry Fountainja
January 29, 2014
Life has never been easy for just-hatched Magellanic penguins, but climate change is making it worse, according to a decades-long study of the largest breeding colony of the birds.
The chicks are already vulnerable to predation and starvation. Now, the study at Punta Tombo, Argentina, found that intense storms and warmer temperatures are increasingly taking a toll.
“Rainfall is killing a lot of penguins, and so is heat,” said P. Dee Boersma, a University of Washington scientist and lead author of the study. “And those are two new causes.”
Climate scientists say more extreme weather, including wetter storms and more prolonged periods of heat and cold, is one impact of a climate that is changing because of emissions of greenhouse gases in the atmosphere. While monitoring the penguin colony, Dr. Boersma and her colleagues also documented regional temperature changes and increases in the number of days with heavy rains.
The study, which is being published online Wednesday in the journal PLoS ONE, is one of the first to show a direct impact of climate change on seabirds. Most studies have looked at how warming temperatures affect animals indirectly, by altering predation patterns or food supplies.
William J. Sydeman, senior scientist at the Farallon Institute in California, who was not involved in the research, said the study linked changes in climate, which occur on a scale of decades, to the daily scale of life in the colony. “That’s a unique contribution,” he said.
The colony at Punta Tombo, in a temperate and relatively dry region about midway along Argentina’s coast, is home to about 200,000 breeding pairs of the penguins, which are about 15 inches tall as adults. Dr. Boersma has been working there since 1982, with long-term support from the Wildlife Conservation Society.
For this study, the researchers compiled data on nearly 3,500 chicks that they meticulously tracked by checking nests once or twice a day throughout the six-month breeding season, which starts in September.
“We knew when each chick hatched, and its fate,” Dr. Boersma said.
Typically, nearly two-thirds of hatchlings at the colony do not survive to leave the nest. In most years, the researchers found, starvation and predation — by other seabirds and small animals — caused the majority of the deaths.
But they found that heavy storms killed birds in 13 of the 28 years of the study. In two years, storms were responsible for most of the deaths. Extreme heat killed more hatchlings as well, although the effect was less pronounced.
Like other young birds, penguin hatchlings can die from hypothermia if their down gets wet and loses its insulating air spaces. The birds are most vulnerable from about a week after hatching — before that they are largely protected by a parent — to about six weeks, when they develop waterproof plumage.
“They didn’t used to have to contend with this variability in the climate,” Dr. Boersma said. “And they certainly didn’t have to contend with all this rainfall.”
Since 1987, the number of breeding pairs in the colony has declined 24 percent, Dr. Boersma said. It is difficult to calculate how much of that decline can be attributed to storms and rain, she said.
Dr. Boersma said the increasing frequency of heavy storms was most likely directly affecting other seabird species that were breeding in the region.
In fact, the same direct effect is being seen half a world away, in a terrestrial bird.
In a study of a population of peregrine falcons in the Canadian Arctic that was published last year in the journal Oecologia, researchers reported that heavy rains killed large numbers of hatchlings, and documented an increase in the frequency of such rains over decades.
Alastair Franke, a University of Alberta scientist who led the study, said he was stunned when he read Dr. Boersma’s paper. “It’s amazing that we’re seeing such similarity between the two studies,” he said.
In her work, Dr. Boersma showed that the mortality caused by storms was in addition to those from other causes.
Dr. Franke said that was one of the most interesting aspects of Dr. Boersma’s study.
“This is a double whammy for the penguins,” he said. “You’re still going to get all the starvation and predation. But now you get increased mortality from rainfall as well.”
10. PENGUINS, EVEN IN ARGENTINA, AT RISK FROM CLIMATE CHANGE, STUDY SAYS (The Christian Science Monitor)
By Noelle Swan
29 January 2014
Global climate change is killing chicks in the world’s largest colony of Magellanic penguins, according to a new report, suggesting that the threat is spreading from ice-bound Antarctica to more temperate zones.
In recent decades, extreme weather events have placed unprecedented strain on penguin breeding grounds. Heavy rains and high temperatures put penguin chicks at risk of either freezing or sweltering to death, says P. Dee Boersma, a University of Washington biology professor and director of the Magellanic Penguin Project in Punta Tombo, Argentina.
This news could mean trouble for more than just penguins. Sea birds, mammals, and people are also susceptible to such changes in climate, Dr. Boersma says. She published her findings in the open- access, scientific journal PLOS ONE on Wednesday.
“Penguins are really the ocean’s sentinels,” she says. “They are telling us that we’d better start paying attention to climate change because penguins are dying from heat and these increased storms. At the same time we’re starting to see increased numbers of people die from these same sorts of things. So these penguins are really the canary in the coal mine.”
While scientists have previously sounded the alarm that melting sea ice has depleted penguin populations in Antarctica, including the Emperor penguins made famous by the National Geographic feature film “March of the Penguins,” this is one of the first indications that global climate change could also be threatening penguins that reside in more temperate zones.
“The focus has been in Antarctica, but global warming is really impacting almost every single penguin species,” says Dyan de Napoli a penguin expert and former penguin aquarist at Boston’s New England Aquarium. “No matter where they are, every one of the 18 species are being impacted in some way.” Ms. de Napoli was not involved in Boersma’s research in Punta Tombo.
Magellanic penguins, sometimes referred to as Patagonian penguins, are social sea birds native to both the Atlantic and Pacific coastlines of South America. Like many species of penguins, the Magellenic penguins are monogamous, frequently mate for life, and share equally in chick rearing.
Biologists estimate that there are between 1.2 and 1.6 million breeding pairs around the world. The International Union for Conservation of Nature lists the species as “near threatened.”
Until recently, commercial fishing and oil pollution were considered to be the major threats facing these penguins.
“Climate change is really a new factor in terms of mortality for Magellanic penguins,” Boersma says. “It’s really these extreme weather events, which all the climate models predict are going to become more frequent and more extreme, that are killing penguin chicks.”
Boersma has been studying the flightless birds in Punta Tombo for 30 years. In that time, she has seen the both the number and intensity of rain storms increase in the historically arid region. One storm was so intense; it wiped out half of the colony’s chicks.
“Penguins like it dry,” she says, “If they get wet when they are chicks and they are covered in down, it’s like you getting wet in a down sleeping bag. It’s not warm and they die because of hypothermia.”
Excessive heat can be just as problematic for young chicks. While the average temperature for the area has not changed, the range of temperatures has expanded since 1983, with more days reaching into the upper 90s F. Boersma and her team routinely found dead chicks lying prone, with their legs extended in an attempt to cool off in the shade following hot days.
Changes in climate have also impacted the penguins’ food supply. As the climate has shifted, the penguins have been arriving in their breeding grounds later and later. However, many of the fish that they rely on for nourishment are leaving the area at roughly the same time that they did 30 years ago, Boersma says. The result is an increasing shorter breeding season.
Male and female chicks take turns sitting on their eggs and caring for newborn chicks while their mates forage for food. This year, many females were left sitting on eggs for much longer than usual while the males struggled to fill their bellies. In some cases, the males did not return until the eggs had hatched and the females were severely undernourished.
When the females were able to go out it took that much longer for them to replenish their own reserves before they were able to begin to look for food to start feeding the chicks. Newborn chicks can only survive for about seven days on their yolk reserves before they begin to succumb to starvation, Boersma says.
While many penguin species would benefit from fishery conservation and pollution control, it will take a global commitment to carbon reduction in order to address the threats posed by climate change, Boersma and de Napoli say.
“I think that there is a mistaken notion that there are millions and millions and millions of them and I don’t think people are aware of how endangered they are; 14 of the 18 penguin species are listed as threatened, near threatened, or endangered,” de Napoli says. “We’ve seen across the board, with most species, population declines of up to 90 percent in the last century, if not the last 40 years.”
Penguins in Punta Tombo, Argentina, have a new foe to contend with – global climate change. Heavy rains and high temperatures are endangering the world’s largest breeding colony of Magellanic penguins.

Photo

Carter Center on 2/13/14 will screen UNC’s Prof Charlie Tuggle’s SEARCH FOR IDENTITY film and hold a President’s panel discussion on the path-setting Carter Administration’s Human Rights Policy in Argentina.

Las Abuelas de Plaza de Mayo and the Search for Identity” – describes the heroic efforts to track down the grandchildren missing as a result of the “dirty war.”
A live webcast will be available here and will be archived for future viewing.

- painting by Alejandro Deutsch (disappeared in La Perla, Cordoba – freed by Pres. Carter’s intervention)

Peronismo ES inflacionista y ladrón

30 enero, 2014
 Lilita Carrió se larga políticamente con todo, pero ideas concretas ¿tiene? Sabemos que Cristina no es persona seria, pero los peronistas tampoco, los radicales y socialistas  idem. Todos son DIRIGISTAS y por eso la burocracia sigue aumentando.Pero  dudo denunciar mas delitos y estafas desde el Estado a esta altura sea la solución.  Cristina sabe que fracasó, y dispara para adelante, porque no puede arreglar nada ni sabe como hacerlo, afuera del modelo bolivariano comunista que se parece al peronismo pero es mucho peor.
Como Lilita se sabe  no  presidenciable, habla de postularse para Intendenta  sucesora de Macri. No es  administradora ni  empresaria, de ganar designaría a políticos,  sería ¿honesta, pero ineficaz… como Arturo Illia? Sospecho la licenciada Vidal sucederá a Mauricio.
La mejor posibilidad de cambio de rumbo sería elegir para 2015  un Presidente no peronista, pero sensato.  Sería viable si  Mauricio Macri se junta a UNEN y desde allí compita para candidato a  Presidente con los otros  candidatos opositores al peronismo. A Macri lo votamos Intendente por no ser peronista. Imagino  perdería si se postula directamente a candidato a Presidente por el PRO o si antes elige competir en una  eventual interna abierta entre peronistas. El peronismo  perdió electoralmente la Presidencia, cuando ganaron Alfonsín y de la Rúa, no es imbatible. Y después de Cristina y Scioli, mucho menos. Y la recuperó la última vez haciendo un golpe de Estado contra de la Rúa para poner a Duhalde.
Repetimos: sin estabilldad MONETARIA no hay reglas de juego civilizadas, los contratos y obligaciones requieren certeza en cuanto a VALOR y eso nuevamente  no existe. El peronismo ES inflacionismo en acción (excepto Carlos Menem). También – en la medida que no aparecen  políticos peronistas pobres –  incorregiblemente ladrón. La convertibilidad fue destrozada precisamente porque el peronismo duhaldista necesitaba robar mas con emisión inflacionaria. Y lo lograron, la realidad hoy indica que nos engañaron  Duhalde, Néstor y Cristina. De un peso por dólares, hoy necesitamos trece para comprarlos, y seguirá desvalorizándose el papel moneda mientras  sigan robando desde el Estado. Lo demás es pura cháchara.

ARGENTINA ON THE BRINK (from Henry)

30 enero, 2014
 

http://mobile.nytimes.com/2014/01/29/opinion/argentina-on-the-brink.html?smid=fb-share&_r=0&referrer=

EDITORIAL

Argentina on the Brink

By THE EDITORIAL BOARD

January 28, 2014

More than a decade after it defaulted on its foreign debts, Argentina is again facing a financial crisis caused largely by misguided government policies.

The administration of President Cristina Fernández de Kirchner recentlydevalued the peso and relaxed some capital controls in an effort to preserve the country’s dwindling foreign reserves. The government is hoping that these steps will ease some of the pressure on the currency, which does not float freely against the dollar. But Argentina needs to do a lot more to address inflation and other underlying economic problems that have led investors and ordinary citizens to bet against the peso.

In the years after its painful default in 2002, which wiped out the savings of millions of people, Argentina enjoyed a fast-growing economy thanks in part to the booming world demand for soybeans and other commodities the country exports. But Mrs. Kirchner squandered the recovery in recent years by increasing spending on wasteful subsidies and financing the government partly by printing pesos. As a result, inflation has shot up; independent economists estimate that consumer prices jumped 28 percent last year. The official inflation rate was only 10.9 percent but few economists or the International Monetary Fund find that data credible.

Mrs. Kirchner has also hurt the economy by picking unnecessary fights with private businesses and investors. In recent years, she nationalized an oil company, an airline and pension funds. And, in 2011, the country implemented controls on how many pesos its citizens could convert into dollars, which has helped create a thriving black market for currency transactions and undermined public confidence in the government’s economic policies. A recent poll showed that three-quarters of the country said the economy was headed in the wrong direction.

Government officials have begun taking some small steps to correct past mistakes. For example, the economy minister, Axel Kicillof, has been negotiatingcompensation for the oil company, YPF, that the government seized in 2012. And Argentina will put out a new inflation index next month to convince the I.M.F. to accept its official data again. But Mrs. Kirchner will have to take much bolder steps to repair the damage.


No se encontraron virus en este mensaje.
Comprobado por AVG – www.avg.com
Versión: 10.0.1432 / Base de datos de virus: 3684/6545 – Fecha de publicación: 01/30/14

FRANCISCO: ¿único peronista exitoso?

30 enero, 2014

http://www.perfil.com/internacional/Francisco-va-por-todos-de-las-iglesias-de-base-a-Obama-20140119-0046.html Se dedicó a la Iglesia, podría haber sido el ESTADISTA que necesitamos, pero eligió “las alturas de la Iglesia”.

La obsesión por la igualdad

29 enero, 2014

http://opinion.infobae.com/adam-dubove/2014/01/29/la-obsesion-por-la-igualdad/ Parece  comunista o estr  atrapada por ellos al asumir que su modelo bolivariano fracasó y su Presidencia termina antes de lo que desea, al igual que su impunidad


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