Archive for the ‘ARGENTINE UPDATE’ Category


28 noviembre, 2013


By Almudena Calatrava
November 26, 2013
MADRID — Spanish energy company Repsol would get $5 billion in compensation from Argentina for the expropriation last year of the firm’s YPF unit and its vast holdings of unconventional oil and gas fields, a person with direct knowledge of the preliminary deal said Tuesday.
Under terms of the proposal to be considered Wednesday by Repsol’s board, the Spanish company would get the money in Argentine bonds denominated in U.S. dollars. In return, it would drop legal action against Argentina for expropriating Repsol’s controlling stake in YPF in 2012 without payment, said the person, who was not authorized to disclose details and spoke on condition of anonymity.
Investors on Tuesday cheered the news, sending Repsol shares up 4.28 percent to close at 19.24 euros ($26.03) in Madrid.
News of the deal came late Monday after Repsol executives met in Buenos Aires with government officials from Argentina and Spain and the chief executive of Mexico’s state oil company, Petroleos Mexicanos, which holds a minority stake in YPF.
The deal could pave the way for Pemex to join the exploration of the vast Vaca Muerta oil deposit in Neuquen province, where YPF says 15 teams are already extracting more than 10,000 barrels a day.
Argentina’s Economy Minister Axel Kicillof, the mastermind behind the YPF expropriation, remained coy about the compensation deal. “The agreement is somewhat confidential because you can’t just go around carelessly throwing out values,” said Kicillof, who is now leading Argentina’s negotiations. “It could affect shareholders and affect the stocks.”
Kicillof said that at the time of the takeover, Repsol was too hasty when it demanded $15 billion in compensation and later $10.5 billion.
“The Argentine state acted with a lot of prudence and sobriety,” he said. “We’re waiting to know more about the company to be able to give it a fair value, but I think Repsol acted rash by giving out just the numbers they wanted.”
The values and instruments of the deal will remain secret until Repsol’s board votes on the proposal on Wednesday, Kicillof said. He added that Argentina is satisfied with YPF’s performance after it seized control of its leading oil company from Spanish hands.
“But we’re now here to look forward,” he said. “We want to finish determining these values to close this deal once and for all.”
The seizure of YPF infuriated Spain and led to harsh criticism of Argentina by the European Union, the United States and some Latin American leaders. Argentina had claimed Repsol SA was not investing enough in the South American country’s oil industry — claims vigorously denied by Repsol.
The expropriation of Argentina’s national oil company, which was privatized in the 1990s, was hugely popular among Argentines because many blame privatizations and other free-market policies of that decade for the country’s economic crisis and debt default in 2001-2002.
Repsol had said its 51 percent stake in YPF was worth $10.5 billion in compensation and sued Argentina seeking payment.
The fight also strained ties between Spain and Argentina, and a statement released by Argentina’s economy ministry said negotiators hoped the deal would “contribute to normalize and strengthen the historic ties between the three countries and their companies.”
Argentina has the world’s third-largest deposits of shale oil and gas, but needs international help to develop them. Only Chevron has so far made a commitment to help develop the fields, and it was subsequently sued by Repsol.
By Stanley Reed
27 November 2013
LONDON — Argentina and Repsol, the Spanish energy company, appear to be nearing a deal on compensation for the government’s seizure of Repsol’s stake in an Argentine oil producer in 2012.
Representatives from the Spanish and Argentine governments and company executives said they had reached an agreement in principle on Monday in Buenos Aires on indemnifying Repsol for the 51 percent of the energy company YPF that Argentina expropriated without payment. The government of President Cristina Fernández de Kirchner had justified the action by saying that Repsol was not investing enough in Argentina.
The government now appears to want to repair relations with global investors and attract badly needed capital to the country’s oil and natural gas industry. Argentina’s Vaca Muerta field, a potentially rich trove of oil- and gas-bearing shale rock, has drawn acute interest from multinational energy companies.
”This is one of the hottest areas now, after Brazil,” said Fadel Gheit, an oil analyst at Oppenheimer in New York.
Argentina is offering about $5 billion in bonds as compensation, and Repsol is likely to accept if the payment is guaranteed, according to a person with knowledge of the matter, who asked not to be identified because the transaction had not been completed.
Repsol lost two-thirds of its global oil production capacity and half of its reserves when the majority of its stake in YPF was seized. Repsol filed a complaint with the World Bank arbitration tribunal and sought $10.5 billion in compensation.
Repsol’s board of directors was expected to examine Argentina’s proposal at its meeting on Wednesday in Madrid.
”Any deal is likely to add value to Repsol’s shares,” said Neill Morton, an analyst at Investec in London. ”The market took the view that Repsol might get nothing” or might require several years to reach a settlement, he said.
Repsol shares closed up more than 4 percent on Tuesday in Madrid. Shares in YPF, in which Repsol still holds a 12 percent stake, were up more than 10 percent in Buenos Aires.
Argentina is under pressure to reach a deal because the seizure of the YPF stake chilled foreign investment in the country. Argentina needs substantial capital to develop the Vaca Muerta, or Dead Cow, field.
Chevron has a $1.2 billion joint venture with YPF to develop a small portion of the field, but YPF would like Chevron to expand its activities and wants to bring in other partners. Repsol has sued Chevron for joining with YPF, but a compensation agreement would probably end that dispute.
Argentina’s production of oil has fallen to about 660,000 barrels a day in 2012, less than 1 percent of the world total, according to the BP Statistical Review of World Energy. The country has begun to import liquefied natural gas at high market prices, giving the government an incentive to encourage domestic production.
Its shale oil and gas resources, which are believed to be among the largest in the world, could drastically change the picture. The United States Energy Information Administration estimates that Argentina ranks behind only the United States and China in shale gas reserves, with 802 trillion cubic feet of technically recoverable gas, and is fourth behind Russia, the United States and China in shale oil, with 27 billion barrels.
”What is holding Argentina back from developing these resources,” Mr. Gheit said, is ”aboveground risk” — including the possibility of government seizure of assets.
In a presentation at an industry conference in London in October, Miguel Galuccio, YPF’s chief executive, said the characteristics of the shale deposits in the Vaca Muerta were superior to those of fields in the United States, making them likely to be prolific producers of oil and gas. He identified several other fields in Argentina that he said had shale potential.
Any agreement between Argentina and Repsol would probably include Pemex, the Mexican state oil company, which has close to a 10 percent stake in Repsol. Pemex helped broker the proposed compensation accord and hopes to help develop Argentina’s shale energy resources.
By Ilan Brat
27 November 2013
MADRID — Spanish oil company Repsol SA would receive $5 billion in Argentine government bonds as compensation for the South American country expropriating its controlling stake in YPF SA last year, according to people familiar with a proposal that Repsol has agreed to bring to a board vote.
The dollar-denominated bonds would be secured by guarantees, and the company would face no requirements to reinvest any money in Argentina and no restriction on its ability to sell the bonds, these people said Tuesday. The interest rate and other terms of the bonds were unclear.
Repsol’s board is likely to accept the basic structure of the proposed agreement at a meeting on Wednesday, because it has the implicit support of the Spanish and Mexican governments, the people said. A compensation deal would end an 18-month standoff between Spain and Argentina over the expropriation of 51% of YPF.
The Spanish oil company currently holds a 12% stake in YPF.
A settlement would be positive for Repsol as it seeks to grow outside its main production areas of Latin America and northern Africa, while for Argentina it could restore confidence as the country needs billions of dollars in investment to exploit untapped hydrocarbon reserves. It would also help to patch up relations between Spain and Argentina, which were strained by the YPF takeover.
Spanish Energy Minister Jose Manuel Soria personally delivered an outline of the proposed deal on Nov. 15 to Mexican government officials and the chief executive of Petroleos Mexicanos, or Pemex, which has a 9% stake in Repsol, said a person familiar with the talks. Mr. Soria accompanied top Repsol executives to a meeting with Argentina’s new economy minister in Buenos Aires, where the plan won tentative approval on Monday. The chairman of Catalan bank CaixaBank SA, Repsol’s largest single shareholder with 12%, also attended that meeting.
Repsol Chairman Antonio Brufau, who had led efforts to fight Argentina’s nationalization of YPF last year, was absent from Monday’s meeting. One person familiar with the matter said Mr. Brufau approved of the proposal but felt the company would make more progress toward a deal if other Repsol executives attended in his place.
An issue for Repsol, and a potential sticking point, is whether its board members trust the guarantees underlying the offer, said a person familiar with the proposed deal. It wasn’t clear on Tuesday what guarantees were offered. Repsol said its decision will be based on what the board considers best for the company and its shareholders.
If Repsol ratifies the deal, both it and Argentina would drop all lawsuits in the case, the two parties said.
Investors welcomed the preliminary accord. In Madrid, Repsol shares rose 4.3% to close at 19.24 euros ($26.01) on Tuesday, and YPF shares traded in New York increased 10% to $29.37.
Some analysts cautioned that, without knowing all the terms, it would be difficult to fully value the deal or predict how quickly Repsol may be able to sell the bonds.
The preliminary agreement “is a step in the right direction, [but] we feel Repsol could still extract better terms for its minority shareholders,” said Alejandro Demichelis, an analyst with Exane BNP Paribas.
In June, Repsol rejected a Pemex-brokered compensation offer that the Argentine government valued at $5 billion. Repsol’s board said the offer, which included a stake in a company that would hold land in YPF’s large oil and gas fields called Vaca Muerta, didn’t fairly value the assets. And Repsol would have been required to reinvest about $1.5 billion of the compensation in Argentina.
People familiar with the matter said that Repsol wouldn’t reinvest in Argentina or take part in the development of Vaca Muerta. It wasn’t clear whether Repsol would keep its remaining stake in YPF.
The government of Argentine President Cristina Kirchner, meanwhile, is seeking to mend ties with foreign creditors at a time when the country faces foreign-currency shortages and limited borrowing options. Mrs. Kirchner’s cabinet chief Jorge Capitanich told reporters on Tuesday that the proposed Repsol settlement could help Argentina attract investment for oil and gas exploration and production.
Argentina is thought to have vast deposits of unconventional oil and gas, ranking second in the world behind China in potentially recoverable shale-gas reserves with 802 trillion cubic feet, according to a recent study by the U.S. Energy Information Administration.
By Miles Johnson in Madrid and Benedict Mander in Buenos Aires
November 26, 2013
The board of Repsol is poised to accept an offer of $5bn compensation from the Argentine government for the nationalisation of its YPF subsidiary in a move that will draw a line under a bitter year-long diplomatic stand-off with Madrid.
The Spanish oil company’s management, under pressure from its largest shareholders, has agreed in principle to settle the legal battle over Argentina’s seizure of its majority stake in YPF but is demanding guarantees over how the $5bn will be paid, people close to the situation said.
While the final details of a deal have not yet been decided ahead of a Repsol board meeting on Wednesday, Argentina has indicated to the company and the Spanish government that it would pay the $5bn using its own government debt.
As a consequence of Argentina’s default at the turn of the century, the country is still being pursued by a long line of international creditors and Repsol’s management is seeking legal assurances that any payment would be enforceable, people close to the talks said.
Repsol, which saw its shares jump more than 4 per cent on news of a possible deal, declined to comment.
If the deal goes ahead, it could help to unlock billions of dollars of investment that YPF is seeking to develop its Vaca Muerta shale reserves, which are among the world’s largest unconventional oil and gas deposits.
An increase in energy production would help Argentina reverse a growing energy deficit, which is putting pressure on rapidly dwindling foreign exchange reserves, jeopardising the stability of the government of President Cristina Fernández.
The populist government seized majority control of YPF, the country’s former state oil company, after accusing Repsol of failing to invest sufficiently in its assets as Buenos Aires moved to alleviate rising fuel prices.
The heads of Repsol’s two largest investors, the Catalan bank Caixabank and Pemex, Mexico’s state oil company, attended a meeting in Buenos Aires on Monday with Argentina’s economy minister Axel Kicillof, Spain’s industry minister José Manuel Soria and three Repsol executives.
The meeting marked a conciliation between Buenos Aires and Madrid after months of tension, with Mr Kicillof having led the drive to nationalise YPF last year and Mr Soria having warned Argentina of “serious consequences” before the seizure took place.
The position of Antonio Brufau, Repsol’s executive chairman, is less clear. Tense relations with its large shareholders in recent months spilled out in public, as Pemex attacked his salary.
While Mr Brufau was not present at the meeting, people close to Repsol’s management said he had personally approved the envoy being sent to Argentina and welcomed an agreement.
In June Repsol’s board voted against an earlier $5bn compensation proposal from YPF which involved the payment of $1.5bn in Argentina-backed debt, and a stake in the Vaca Muerta shale formation, valued by Buenos Aires at $3.5bn.
Relations between Mr Brufau and Isidro Fainé, chairman of Caixabank and deputy chairman of Repsol, who brokered the earlier rejected deal, have been strained by disagreement over how to settle the YPF issue.
Mr Fainé, who had previously travelled to Argentina to meet Ms Fernández, did not turn up to the Repsol board meeting when the proposal he had helped design was unanimously rejected.
By John Paul Rathbone
November 26, 2013
As the saying goes, it is not over until it’s over.
Nonetheless, last night’s putative agreement between Spain, Argentina and Mexico to settle the YPF-Repsol dispute looks promising – Repsol shares spiked over 4 per cent on Tuesday morning on the news – although there are several provisos.
First, this is an agreement between governments, not companies. Repsol’s board still has to consider the offer on Wednesday.
Second, the details of the offer are not public yet, although it is thought to be around $5bn – less than half the amount that Repsol had been seeking in compensation for the nationalisation of its majority stake in YPF.
Third, most of that payment will be in bonds backed by the Argentine sovereign, and Argentine paper is not the best-regarded in the world. In the words of one New York judge, Argentina is a “uniquely recalcitrant debtor”.
Still, Buenos Aires’ formal recognition of this debt – and its offer to settle it – may help restore the government’s reputation. Indeed, it is part of a broader (and recent) Argentine effort to reach what is euphemistically called “financial normalisation” – a mending of broken fences with international financial markets.
Argentina recently settled some of its claims at the World Bank investment tribunal, ICSID. There is market chatter it wants to settle its Paris Club debt. There is talk, too, of possible deal that might resolve its problems with holdout creditors in New York – albeit thanks to the good graces and self-interest of Argentine exchange bondholders.
If – and this is still an ‘if’ – Argentina is also about to reach a deal with Repsol, that would not only remove a long-standing problem from the government’s bulging in-tray, it could also open the spigots on billions of dollars of investment in the country’s giant shale gas formation, Vaca Muerta.
Money coming in today would help alleviate Buenos Aires’ biggest immediate financial problem – the rapid depletion of its foreign reserves. At the current run rate, the country does not have enough reserves to last until 2015, when there are presidential elections.
It would also sow the seeds for resolving one of the country’s biggest medium term problems – Argentina’s growing energy deficit, which next year will cost the country an estimated $8bn, hard currency that Argentina does not have to spend.
So a lot is potentially at stake for Argentina. Still, the deal has not been signed off yet.
By Will Kennedy and Charlie Devereux
November  26, 2013
Repsol SA (REP), the oil producer whose YPF unit was seized by Argentina’s government last year, will get $5 billion of 10-year bonds as compensation, a person briefed on the proposal said.
The agreement to pay the bonds, denominated in dollars and guaranteed by the government, will end the legal dispute between Madrid-based Repsol and Argentina, the person said, asking not to be identified before the company’s board meets to consider the proposal tomorrow.
While the accord is backed by Repsol’s management and its two largest shareholders — Mexico’s state oil company and CaixaBank SA (CABK) — the board will seek assurances that the bonds offer sufficient security and liquidity, the person said.
Spanish Economy Minister Luis de Guindos said any agreements that “remove uncertainties are good,” when asked by reporters to comment today at an event in Madrid.
If ratified, the deal would end a yearlong dispute over compensation for the seizure of 51 percent of Argentina’s biggest energy company. Repsol, which originally sought more than $10 billion, rejected a $5 billion offer in June because it involved reinvesting in Argentina in partnership with YPF.
Repsol rose 4.3 percent, the most in more than a year, to 19.24 euros by the close in Madrid. YPF’s American depositary receipts rose 9.5 percent to $29.20 in New York, the highest since March 2012. The Buenos Aires-based company rallied 11.2 percent to 259 pesos in the Argentine city, after reaching a record 270 pesos.
Buenos Aires
“There was little in Repsol’s share price for a deal,” Neill Morton, an analyst at Investec Bank Plc, said in London. “There are still a number of uncertainties with respect to valuing the impact of any deal, not least how ‘liquid’ any compensation will be.”
The agreement was negotiated in Buenos Aires yesterday by ministers from Argentina and Spain; the head of Petroleos Mexicanos, Emilio Lozoya; the chairman of CaixaBank and vice chairman of Repsol, Isidro Faine; and Repsol Chief Operating Officer Nemesio Fernandez-Cuesta.
Argentina is offering “fair and reasonable” compensation, Economy Minister Axel Kicillof told reporters today in Buenos Aires. He declined to provide the amount and form of payment, citing a confidentiality agreement.
YPF spokesman Alejandro Di Lazzaro and a Repsol official declined to comment.
“The heads of agreement involves setting a compensation amount to be paid with liquid assets and both parties desisting from legal processes,” Argentina’s government said in a statement yesterday, without disclosing details of the package.
Vaca Muerta
Argentine President Cristina Fernandez de Kirchner took control of YPF in April 2012 after a dispute over slumping oil output and investments. A day later, Repsol Chairman Antonio Brufau said the company sought $10.5 billion in compensation, based on the valuation methodology in YPF’s bylaws written by the government that privatized the company in the 1990s.
The Madrid-based producer rejected in June an offer that included a 47 percent stake in a project in the Vaca Muerta shale formation valued by Argentina at $3.5 billion, as well as $1.5 billion for development. Repsol was willing to reach a settlement that didn’t involve reinvesting in the country, Brufau said in a Nov. 21 interview.
State-owned Pemex, based in Mexico City, has an almost 10 percent stake in Repsol. Lozoya said Oct. 31 that Repsol should take a more “proactive and prudent approach” to resolve the YPF matter.
Shale Gas
Argentina holds the world’s second-largest shale gas reserves and the fourth-largest shale oil reserve, according to U.S. Energy Information Administration data. The company is offering tax and export incentives to energy companies that invest at least $1 billion over a five-year period.
Repsol asked a World Bank panel in July to help prevent YPF from developing the company’s seized assets. Repsol also filed a lawsuit demanding fair compensation for the seizure of its YPF stake with the Washington-based International Center for Settlement of Investment Disputes.
The accord will help “normalize and strengthen the historic ties between the three countries and its companies,” the Argentine government said in the statement.
“For us this helps construct a path that will allow us to continue to generate investment for the development of hydrocarbons,” Jorge Capitanich, Argentina’s cabinet chief, told reporters today. “We have an ambitious two-year program.”
By Agustino Fontevecchia
November 26, 2013
The shale gas wars that have pitted the government of Argentina against Spanish oil giant Repsol could be close to concluding, after an initial agreement regarding compensation for the 2012 nationalization of YPF has been signed.  Under pressure by major shareholders CaixaBank CaixaBank and Pemex, Repsol CEO Antonio Brufau appears to have been convinced of taking a $5 billion payment, half of what he was originally asking for, and to drop litigation against the Argentine oil company, which is in the process of joining forces with the likes of Chevron CVX -0.78% to ramp up production at the massive Vaca Muerta shale field.
While the specifics of the agreement haven’t been disclosed, Repsol’s board is set to vote on the agreement on Wednesday.  Brufau, who had remained steadfast in his attempt at getting international courts to rule against Argentina, had created a tense atmosphere in the board room, sparking the rage of his two largest shareholders, CaixaBank and Mexican oil company Pemex.
The administration of Cristina Kirchner is willing to pay Repsol with “liquid assets,” Argentina’s Finance Ministry said in a statement.  Back in June, the internal rifts in Repsol’s board surfaced after the rejection of a previous proposal by the Argentine government which stipulated paying $1.5 billion in government bonds and $3.5 billion in acreage in the Vaca Muerta shale field.  Under the terms of the agreement, Repsol would enter into a joint venture with YPF, with the latter maintaining operational control, and Pemex, in order to commercialize 6.4% of Vaca Muerta.  Brufau, concerned with the Argentine government’s aggressive past, rejected the proposal, sparking the Ire of Pemex CEO Emilio Lozoya who threatened to offload their 9.34% stake in the Spanish energy firm.
Brufau was forced to fold, though, after the Spanish government threw its weight behind Pemex and CaixaBank.  Indeed, while Brufau is said to have approved of the deal, he remained in Madrid, while Spain’s Industry Minister, Jose Manuel Soria, negotiated with Argentine finance minister Axel Kicillof and YPF’s CEO Miguel Galuccio.  Soria was joined by Repsol executives and the heads of both CaixaBank and Pemex.
The deal has important implications for global energy markets.  Vaca Muerta is considered the second largest shale oil reservoir in the world by Chevron, which signed an agreement with YPF to invest in ramping up production.  According to the Argentine oil company, Vaca Muerta contains 27 billion barrels of oil and 802 trillion cubic feet of natural gas.  YPF doesn’t have the technical or the financial capacity to capitalize those resources, though, and has been actively looking for external partners.  Beyond Chevron, YPF signed a deal with Dow Chemicals, but it has been partially blocked by Repsol’s threats of litigation.
The decision to negotiate with YPF marks a turn in the foreign policy of the Argentine government, which has remained intransigent in its financial problems with foreign institutions.  After a dramatic default in 2001/2, the government of Argentina has been engaged in litigation with a group of holdout bondholder led by hedge fund Elliott Management, and has threatened to disobey rulings by the Supreme Court if they aren’t favorable.  Argentina also has several cases open at the World Bank’s International Center for Settlement of Investment Disputes and debts with the Paris Club of rich nations.
Yet, spiraling inflation, which has severely eroded Argentina’s foreign reserves holdings, a difficult loss in October’s midterm elections, and a rising energy deficit seem to have forced Kirchner to change her mind.  After spending about a month out of office due to brain surgery, Cristina Kirchner reshuffled her cabinet, even designating former finance minister Hernan Lorenzino to a special unit in charge of negotiating with holders of sovereign debt, the World Bank, the IMF IMF, and the Paris Club.
It is unclear whether the move represents an ideological shift or purely a pragmatic one.  Reserves have fallen 26% since late-2012, breaching the $32 billion mark in November, and inflation remains out of control.  Argentines are forced to cope with a dual exchange rate as capital controls and the blocking of imports have been the government’s response to the drainage.  Cristina Kirchner’s approval ratings have sunk dramatically, and her party has been punished by the electorate in October.  While Cristina continues to speak of “deepening the [economic] model,” it seems reality has finally dropped in.  Yet, given what has been seen in the past, investors should wait for actions, rather than words, before making a value judgment as to what she is actually thinking.
By Hugh Bronstein
November 27, 2013
BUENOS AIRES (Reuters) – Argentina said on Tuesday that a pending deal with Spanish oil major Repsol is aimed at kick-starting shale drilling in the South American country, putting an end to the long stand-off between energy investors and President Cristina Fernandez.
Nineteen months after seizing control of Argentina’s main oil company YPF (YPFD.BA: Quote, Profile, Research) from Repsol (REP.MC: Quote, Profile, Research), Fernandez’s government announced a preliminary deal late on Monday to pay Repsol for its nationalized shares.
Shares of both companies soared on reports that the pact involved a proposal by Spain’s government that Repsol receive $5 billion in compensation from the Argentine state for the 51 percent stake it grabbed in YPF last year.
The deal could set the stage for a radical increase in unconventional energy exploration and help repair a relationship with global investors left in tatters after Argentina’s massive 2002 sovereign default.
Tapping its vast shale reserves would also bolster central bank reserves drained in part by expensive oil and gas imports.
The Repsol deal showed new flexibility on the part of Fernandez, whose policy model, marked by long-running feuds with private-sector investors from farmers to sovereign bondholders, was rejected by voters who shunned her candidates in the October 27 congressional midterm election.
Early on Tuesday, Argentina’s new cabinet chief Jorge Capitanich, himself a possible 2015 presidential candidate, said the government was out to attract investment in the country’s massive Vaca Muerta shale oil and gas formation.
“We are building a path that will allow for an increase in hydrocarbon exploration and exploitation,” he told a press conference, adding that Argentina has a “very ambitious” energy program scheduled for the years ahead.
Business leaders say they hope Capitanich can moderate the policies of Axel Kicillof, the leftist academic and mastermind behind the YPF expropriation, who was named economy minister last week.
Speaking to businessmen, Kicillof said Argentina had offered Repsol “a fair and reasonable price” for the majority stake in YPF. He declined to comment on the $5 billion figure that Spain is said to want for Repsol’s compensation, or on the form that the compensation might take, cash or bonds.
Already the world’s No. 3 corn and soybean exporter, Argentina stands to become a major oil and gas producer as well if the government can attract the tens of billions of dollars it needs to exploit the Vaca Muerta (Dead Cow) shale formation
The Repsol-YPF deal is set to be voted on at a Repsol board meeting scheduled for Wednesday in Madrid.
Fernandez has long railed against orthodox prescriptions for Argentina’s economy, which is ailing from one of the world’s highest inflation rates and low confidence caused by heavy trade and currency controls. Her interventionist policies have kept investment out of Latin America’s No. 3 economy.
That could change if international energy companies see enough market-friendly signals to tempt them into Vaca Muerta.
“The understanding with Repsol shows that the government, when in need, can show a remarkable degree of pragmatism. An understanding with Repsol should facilitate YPF negotiations with other oil companies interested in Vaca Muerta,” said Ignacio Labaqui, an analyst with Medley Global Advisors.
Equity markets liked the Repsol compensation deal. YPF shares zoomed 10.7 percent higher in early New York trade and 16 percent in Buenos Aires. Repsol’s stock price rose 5.6 percent in Madrid.
YPF is the biggest stake-holder in Vaca Muerta. The company estimates the field contains 661 billion barrels of oil and 1,181 trillion cubic feet of natural gas, making it one of the biggest shale reserves in the Western Hemisphere.
Despite Vaca Muerta’s vast potential, investment in the formation has come slowly so far.
Dow Chemical Co (DOW.N: Quote, Profile, Research) has signed on to invest up to $120 million in 16 Vaca Muerta gas wells, and oil giant Chevron Corp (CVX.N: Quote, Profile, Research) has agreed to invest $1.24 billion in the area.
To clinch the deals, Argentina has allowed the companies to export tax-free up to 20 percent of what they produce. Export revenue of companies that invest at least $1 billion over five years is exempt from government foreign exchange controls.
November 26, 2013
BUENOS AIRES, Nov. 26 (UPI) — Argentina and major Spanish oil producer Repsol are nearer a compromise over last year’s government unsettling seizure of Repsol unit YPF.
Not only did the nationalization sour relations between Buenos Aires and Madrid, it is still hampering Argentine efforts to draw international investors to the South American country.
Argentine government sources quoted in government-backed media gave scant details, and Repsol declined comment on reports it was offered $5 billion compensation, about half of what it demanded after YPF’s nationalization.
But the talks in Buenos Aires, attended by senior Repsol executives and Spanish government officials, did move forward, the reports said, if only because Argentine needs a less quarrelsome Spain to go ahead with its plans for preparing nationalized YPF for bigger things.
Energy giant Chevron pledged support to those plans, despite objections from Repsol, but the government of President Cristina Fernandez is nowhere near implementing its plan to reinvent YPF and develop the country’s newly found shale oil reserves.
Argentina spends about $15 billion a year on oil and gas imports and the shale reserves are seen as a panacea for the country’s growing energy dependence. The shale-oil and gas deposits in Neuquen province were discovered by Repsol just before it lost YPF to the government takeover.
The deposits are considered enough to eliminate Argentina’s energy import bill but industry estimates show developing them will cost more than $60 billion.
The Vaca Muerta, or Dead Cow, shale deposit is said by experts to hold 16 billion barrels of shale oil and 308 trillion cubic feet of shale gas. If properly developed, the shale bonanza potentially will make Argentina the world’s fourth-largest producer of shale oil.
The shale gas reserves in Argentina are estimated to be the world’s third-largest, after China and the United States.
Argentine compromise proposals have included offers to Repsol to return and develop the shale reserves, an offer received with little enthusiasm in Madrid.
Repsol’s 51 percent share in YPF was seized by Fernandez after charges the company didn’t invest enough of its local earnings into developing YPF’s energy potential. Repsol denied the accusation, Argentina’s main reason for nationalization, and pressed for more than $10 billion in compensation.
Repsol has made clear to Argentine it will continue to obstruct Vaca Muerta development and challenge Argentine efforts to bring in other companies unless it is adequately compensated.
Argentine Ministry of Economy officials said an “agreement in principle” for compensating Repsol had been reached but did not outline its terms.
The ministry’s statement, however, said the agreement provides that “both sides will end their respective legal actions” once an agreement is in place. Analysts said it was more important for Argentina not to have a litigant and hostile Repsol in its way as it tries to exploit Vaca Muerta potential for giving it energy independence.
The talks so far have involved, on Argentina’s side, new Economy Minister Axel Kicillof, YPF Chief Executive Officer Miguel Galuccio and Argentine Ambassador in Madrid Carlos Bettini. The Spanish side included Spanish Industry and Tourism Minister Jose Manuel Soria, and Repsol’s Exploration and Production Director Luis Cabra and operations chief Nemesio Fernandez Cuesta.
The reconciliation effort is led by Petroleos Mexicanos, or Pemex, which holds 9.5 percent of Repsol and has been outspoken in its criticism of Repsol management and less so of Argentina.
In a previous mediation bid last June, Pemex proposed a joint venture that could include Repsol, YPF as well as Pemex and exploit the Vaca Muerta shale deposits. Repsol’s board rejected the initiative
By Debora Rey
25 November 2013
BUENOS AIRES, Argentina (AP) – Argentina’s government said Monday it has reached an agreement in principle to compensate Spain’s Repsol for last year’s 51 percent expropriation of the YPF energy company.
Repsol, YPF and Mexico’s Pemex state oil company, which holds a stake in Repsol, said they agreed tentatively on a process for determining a compensation amount. The parties also agreed to suspend legal actions.
Argentina expropriated the Spain-based Repsol’s controlling stake in YPF on April 16, 2012, without paying a single cent. The government claimed Repsol was not investing enough in the South American country’s oil industry.
The recovery of Argentina’s national oil company, which was privatized in the 1990s, was hugely popular among Argentines because many blame the privatizations and other free-market policies of that decade for the country’s economic crisis and debt default in 2001-2002.
But the seizure infuriated Spain and led to criticism by the European Union, the United States and even some Latin American leaders.
The Spanish energy giant has been demanding $10.5 billion in compensation and had sued Argentina seeking payment.
The preliminary deal was reached after company and government officials from Argentina, Spain and Mexico met in Buenos Aires. No other details of the agreement were released and it must be ratified during a Repsol board meeting Wednesday.
If confirmed, it could pave the way for Pemex to join the exploration of the vast Vaca Muerta (Dead Cow) oil deposit in Neuquen province, where YPF says 15 teams are already extracting more than 10,000 barrels a day.
Argentina has the world’s third-largest deposits of shale oil and gas and needs international help to develop them. But only a couple of major oil companies have made commitments since Repsol threatened to sue Chevron and any other company that worked with YPF on the fields that were discovered when Repsol had a controlling stake in YPF.
26 November 2013
An agreement in principle on compensation by the Argentinian government for the expropriation in April 2012 of Spanish energy company Repsol’s 51% stake in Argentinian energy firm YPF has been reached. A final agreement is awaiting approval by Repsol’s board.
A compensation deal with Repsol is vital to YPF’s chances of securing new joint ventures to develop Argentina’s huge shale oil and gas resources. In the 18 months since its nationalisation, YPF has secured a joint-venture agreement with Chevron (US), but total foreign investment (FDI) has been well below the government’s expectations-and below the levels required to reverse Argentina’s growing energy deficit. The latter is becoming a severe drain on the current account and the foreign reserves as energy imports rise to keep pace with domestic demand amid falling domestic production.
The terms of the deal have not yet been made public, and may not in fact have been finalised. In a statement the Argentinian Ministry of the Economy suggested that Repsol would receive liquid assets (possibly dollar bonds) in exchange for agreeing to give up its various legal claims that are stymieing investor interest in YPF. Repsol appears to be seeking cash. A figure of US$5bn is unconfirmed, but would represent an improvement on YPF’s previous offer of US$1.5bn plus participation in a joint-venture in Vaca Muerta (a huge shale oil and gas field first discovered by Repsol when it was operating in Argentina in 2010). It is still far less than Repsol’s original demand of US$10.5bn, but the company’s major shareholders, which include the state-owned Mexican oil company, Petróleos Mexicanos (Pemex; which is apparently interested in investing in Argentinian shale), have been pressuring Repsol’s management to reach a deal, and a final agreement could well be confirmed soon.
By Charles Newbery
26 November 2013
BUENOS AIRES (MNI) – Argentina expects a proposed agreement for compensating Repsol for the seizure of the Spanish energy company’s shares in Argentina’s YPF will unleash fresh investment to rebuild energy supplies after a decade of decline, a senior official said Tuesday.
Argentine Chief of Staff Jorge Capitanich said a deal brokered Monday between Argentina and Repsol will create “a path that will make it possible to continue generating investment mechanisms for the exploration and production of hydrocarbons” in Argentina.
The country has “a very ambitious program for the next few years” in developing oil and natural gas supplies, he said in a televised press conference.
Capitanich, who took over the day-to-day management of the economy after President Cristina Fernandez de Kirchner named him to the post last week, said more details of the Repsol-YPF agreement would be made known by Economy Minister Axel Kicillof as soon as Tuesday.
Capitanich declined to say how much Argentina would offer to pay Repsol for the 51% stake in lost in YPF.
Repsol has said it wants around $10 billion, but reports suggest the amount could be half of that.
The “accord in principle” was reached Monday in talks brokered by Mexico’s state energy company Pemex in Buenos Aires. Pemex has a 9.5% stake in Repsol and a seat on the board, while Repsol still owns a 6% interest in YPF.
Argentina has started to slow a decade-long decline in oil and gas production with YPF now under state control.
YPF, which produces a third of the country’s 540,000 barrels per day of oil and a quarter of its 114 million cubic meters per day of gas, is ramping up investment by reinvesting most of its profits. The aim is to increase its own production of oil by 4% and gas by 1% this year after a decade of declining at a combined 6% annual. The growth targets for 2014 are similar.
However, analysts say the asset expropriation from Repsol has discouraged investors, making it harder for YPF to reach partnership deals with the deep-pocketed companies it needs.
So far, YPF has only reached one major deal with Chevron for a $1.5 billion plan to develop shale resources in the Vaca Muerta play in the southwest. The play is thought to have among the world’s greatest production potential and could put Argentina on track to become a net energy exporter – an impact similar to the shale boom in the United States.
Analysts, however, say that up to $100 billion must be invested to put Vaca Muerta into the mass production, and that without settling differences with Repsol it would be hard to attract such an amount.
Opposition figures applauded the Repsol-YPF agreement, which still needs the approval of the Repsol board due to meet Wednesday.
Buenos Aires Mayor Mauricio Macri, a leading opposition figure, said Tuesday that the agreement was “positive.”
When Argentina seized control of YPF in April 2012, Macri said he publicly opposed what he called “a confiscation,” saying that it was an act of “robbery” that would play against the country.
He said he forecast has come true. “The energy deficit increased and we have isolated ourselves even more from the world,” he said on radio.
Congressman Alberto Roberti, who is aligned with Tigre Mayor Sergio Massa, another leading opposition figure, said that the agreement is a demonstration that “Argentina has gone from a hostile position to one that is more conciliatory.”
He added on radio: “It is impossible to think that Argentina could grow internationally without these types of agreements.”
Argentina seized control of YPF on grounds that Repsol failed to adequately invest to arrest a decade-long decline in oil and gas production that was pushing up energy imports and cutting energy exports.
Oil and gas production, which meet nearly 90% of the country’s energy needs, fell because of maturing reserves and limited exploration to make new finds. Many of the oil companies in the country reined in spending after a 2001-02 economic collapse brought a surge in state intervention in the sector, including price controls, export restrictions and threats of throwing executives behind bars for failing to adequately supplying the sector.
The dwindling production has chipped away at the trade surplus, a major source of foreign currencies for sustaining the foreign reserves to help pay the national debt given that Argentina can’t readily return to global financial markets until it fully settles a $100 billion default from 2001.
The trade surplus narrowed to $7.9 billion in the first 10 months of 2013 from $10.8 billion in the year-earlier period, led by a 26% increase in fuel imports and 22% decline in energy exports.
The government has said that the shrinking trade surplus is behind about a quarter of the drop in foreign reserves this year, which have dropped 27% this year to $31.5 billion from $43.2 billion at the start of the year.
Most of the rest of the drop in foreign reserves stems from paying the national debt, officials have said.
By Charles Newbery
26 November 2013
Buenos Aires (Platts)–26Nov2013/156 pm EST/1856 GMT   Argentina’s Economy Minister Axel Kicillof said Tuesday that Repsol will be compensated for the 51% stake in YPF that Argentina seized from the Spanish company last year, but he declined to say how much because of a confidentiality agreement.
“We are respecting the [Argentinian] law that says that we must pay a compensation to who was the owner of the 51% of the shares,” he said in a televised chat with reporters on the sidelines of a construction conference in Buenos Aires.
Kicillof, a big proponent of the state takeover of YPF from Repsol in April 2012, said he could not say how much will be paid because of a “confidentiality pact” that will remain in force until the Repsol board of directors approves the deal. The board is due to meet on the issue Wednesday.
“We want to pay a fair price,” Kicillof said.
He added that Repsol acted “a bit hastily” in months after the expropriation in suggesting it should be compensated from between $10.5 billion to $15 billion.
Kicillof, who was named as economy minister last week and sits on the YPF board of directors, said the negotiations with Repsol over the past 19 months have been “arduous.”
Mexico’s state energy company Pemex, a main shareholder of Repsol, on Monday brokered “an accord in principle” between Argentina and Repsol for a settlement of the legal and diplomatic dispute. Argentina took 51% of YPF, the country’s biggest energy company, under state control from Repsol in April 2012 on grounds that the Madrid-based company had failed to adequately invest.
Earlier Tuesday, Argentine Chief of Staff Jorge Capitanich said the agreement will open the door for new investment in the Argentine energy sector.
Analysts have said the expropriation scared away many investors on concerns the same could happen to them as Repsol.
Argentina needs billions of dollars in investment as well as foreign equipment, know-how and technology to arrest a decade-long decline in oil and gas production that is pushing it to greater reliance on imported diesel, fuel oil and gas. Argentina holds among the world’s largest shale resources, and analysts say the development of Vaca Muerta, its biggest shale play, will require upwards of $100 billion in investment.
YPF has arranged an investment partnership with Chevron for developing a small tract of Vaca Muerta with an initial $1.5 billion in spending. Another deal with Dow Chemical is for $188 million in spending.
Talks with other companies have yet to lead to more partnership agreements, even as YPF starts producing shale resources, with output reaching 13,000 b/d of oil equivalent in the third quarter of 2013.
By Carlos Caicedo
26 November 2013
Changes in the Argentine cabinet on 19 November appear to have promoted a nuanced change of style in government dealings with the private sector, with more emphasis being put on positive engagement. This was highlighted yesterday (25 November) by sources at Argentina’s ministry of economy, who said on Monday (25 November) that they were close to reaching an agreement with Spanish oil company Repsol over the nationalisation of the latter’s majority stake in YPF in April-May 2012. According to local media sources, the agreement to compensate Repsol was possible thanks to direct negotiations between the governments of Spain and Argentina. On the Argentine side, the talks involved the new minister of economy Alex Kicillof; the influential legal presidential adviser Carlos Zannini; the president of YPF, Miguel Galuccio; and Argentina’s ambassador to Spain, Carlos Bettini.
Spain was represented by the Minister of Industry and Energy Jose Manuel Soria, the head bank Caixabank (holder of a 13% stake in Repsol), as well as senior executives of Repsol. Emilio Lozoya, the president of Mexico’s state-owned energy company Pemex, which has 9.5% stake in Repsol, also took part in the meeting. Significantly, the president of Repsol, Atonio Brufau, under whose leadership YPF-Repsol was nationalised, was not present. Last week, Pemex, in its capacity as a Repsol shareholder, has strongly criticised the excessive payments enjoyed by Brufau. The proposed deal would be put to Repsol’s board of directors on Wednesday (27 November). Although specifics on the amount of compensation were not disclosed, sources at the Argentine government, said that the offer would include payment of liquid assets and the agreement from both parties to renounce international arbitration at ICSID, the World Bank’s foreign investment court.
Significance: The deal is the culmination of a protracted negotiation process in which Pemex appears to have played a vital role. Repsol had initially put the expected compensation at USD10.5 billion to reflect among other assets the loss of Vaca Muerta, considered to be one of the world’s largest shale gas fields, but Argentina considered the valuation as excessively high. However, the recent developments suggest that Repsol has now lowered its compensation expectations. Spanish media sources said that the company has been offered USD5 billion; it is not clear whether a participation of Repsol in Vaca Muerta is part of the deal. While negotiations with Repsol have been going on since early 2013, it appears the recent Argentine cabinet reshuffle has helped to speed up the agreement. After the October mid-term election setback it experienced, and mindful of the need to contain a rapid fall in international reserves and secure the development of Vaca Muerta, the Argentine government has been trying to engage more positively with the private sector and the opposition, including seeking talks with leading opposition politicians Mauricio Macri and Antonio Bonfatti on a range of issues.
By Katy Stewart
26 November 2013
A source familiar with the matter says that Apache and state-controlled energy company YPF may be in talks to sell some or all of its Argentine assets, Reuters reports.
The Houston-based company has stakes in about 25 fields in Argentina and the Argentine assets produced about six percent of Apache’s total output last year.
Should Apache sell the assets to YPF, Argentina would be the second largest holder of shale gas reserves after China, according to Reuters.
Neither Apache nor YPF commented.
Apache (NYSE: APA) has been selling assets elsewhere this year, as well, after the company said in May it would sell $4 billion in assets to strengthen its balance sheets and reduce debt.
In October alone Apache sold $3.75 billion in Gulf of Mexico assets to fellow Houston-based company Fieldwood Energy LLC. Fieldwood is a portfolio company of New York-based private equity firm Riverstone Holdings LLC.
In September, Apache sold $112 million in Canada, and partnered with China’s Sinopec Group for $3.1 billion in exchange for a 33 percent minority stake in its Egyptian oil and gas business.
By Michael T. Luongo
26 November 2013
As many international airlines expanded to take advantage of Argentina’s post-peso crisis tourist boom, the country’s own national airline, Aerolineas Argentinas, seemed to go in reverse, even discontinuing its flight between New York’s Kennedy International Airport and Buenos Aires’ Ezeiza airports in 2008.
Management disarray and frequent worker strikes also meant domestically and within South America, the airline started losing market share to Chile’s LAN and Brazil’s TAM.
Aerolineas has been rectifying this recently, however, purchasing planes to replace and expand its fleet. The airline will also restore its daily Kennedy-Ezeiza flights, beginning on Dec.16. The flight numbers are AR 1300 from Buenos Aires to New York leaving at 11 p.m., and AR 1301 for the return leaving at 3:25 p.m.
Marcelo William Bottini, Aerolineas’ regional director for North and Central America, said the company’s total fleet jumped to 63 planes this year from 26 aircraft in 2006, with the average fleet age dropping from 16 to four years during that time.
Mr. Bottini said two new Airbus 330-200 planes will be used for the new New York flight and the already existing Miami connection, with configurations of 24 lie-flat seats in Club Condor and 242 seats in economy with new on-demand in-flight entertainment systems.
Mr. Bottini acknowledged that the airline has been plagued by issues over the years, but said, “Aerolineas Argentinas has taken many steps to improve our service and reputation, which were both damaged in the past. We have come a long way in a short amount of time.”
He also said that special Visit Argentina saver fares are available only for foreigners to use domestically to travel among 33 Argentine cities if they have entered the country on an Aerolineas Argentinas flight.

President Kennedy on 29 April 1962 at a dinner party honoring Nobel Prize winners:

“I think this is the most extraordinary collection of talent that has ever been gathered together, with the possible exception of when Thomas Jefferson dined alone.”

PILOT’S TEST :- So you think that you know geography?

Just click on where you think the city is and the plane will land there, then it will show where the city actually is!!
Good luck!! This is a lot of fun and informative too.

Warning – it can become addictive!



21 noviembre, 2013


21 noviembre, 2013


November 20, 2013
BUENOS AIRES, Argentina — Argentina’s feared commerce secretary quit Tuesday, a day after a Cabinet reshuffle gave others more power in the inner circle of President Cristina Fernandez.
Guillermo Moreno was a pit-bull for the president, trying to fine and jail economists for publishing independent inflation numbers, threatening black-market currency traders whose business gave many Argentines their only access to dollars in recent years, and breaking up board meetings of the newsprint company jointly owned by the opposition Grupo Clarin.
Farmers and ranchers blamed him for blocking their exports, while executives accused him of holding up their imports, forcing them to freeze prices and making their corporate lives miserable until they went along with the government’s policies.
Many executives, always speaking on condition of anonymity to avoid even more trouble, described how they trembled when Moreno called them into his office, where a handgun was conspicuously within reach on his desk, to personally pressure them to agree to some government demand in exchange for releasing barriers to their commerce.
Presidential spokesman Alfredo Scoccimarro said Fernandez accepted the resignation, effective Dec. 2, and designated Moreno as an economic attache at the Argentine Embassy in Italy.
Moreno, who is under formal investigation for allegedly abusing his authority, made no immediate comment.
The surprise announcement came a day after Fernandez named a seasoned politician and close friend, Chaco Gov. Jorge Capitanich, as her new Cabinet chief, while installing as economy minister the much younger Axel Kicillof, an unorthodox economist who inspired the uncompensated seizure of Argentina’s YPF oil company from Spain’s Grupo Repsol.
“It’s good news that Moreno goes. He thought that by bullying and threatening businessmen he could develop confidence in the country,” Fernando “Pino” Solanas, an opposition senator-elect, told the local Diarios y Noticias news agency. “But it’s not just Moreno; Kicillof and the whole economic team of the government have left the economic ship adrift.”
Moreno was commerce secretary under the late President Nestor Kirchner, who was Fernandez’s husband, and was closely involved in the political intervention in 2007 that forced the national statistics agency INDEC to change its consumer prices methodology. Ever since, official inflation has never budged above 10 percent a year, even as independent economists tracked inflation two to three times higher. Eventually, even close government supporters publicly discredited the official inflation data and the International Monetary Fund formally censured Argentina, refusing to use its numbers in global reports.
Former economy ministers cheered Moreno’s departure in interviews with Todo Noticias, a cable channel owned by Grupo Clarin. Miguel Peirano, now allied with the opposition Renewal Front, called Moreno “a functionary who abused his state authority for an anti-democratic government.”
Opposition deputy-elect Martin Lousteau said it remains to be seen if Moreno quit in a simple power struggle or if this means the government might change its economic policies.
“The first thing this government needs to do is recognize that it has a structural problem and that this problem is called inflation,” Lousteau said.
By Taos Turner
19 November 2013
BUENOS AIRES–One of Argentina’s most controversial government officials, Domestic Commerce Secretary Guillermo Moreno, resigned on Tuesday, marking the end of an era characterized by his efforts to control prices and limit imports.
Mr. Moreno will leave office in two weeks to become an economic attache at Argentina’s embassy in Rome, Alfredo Scoccimarro, a spokesman for President Cristina Kirchner, said in televised statement late Tuesday.
His plans for departure came a day after Mrs. Kirchner named a new cabinet chief, economy minister and central bank president in her biggest cabinet shake-up in years. Mrs. Kirchner made the changes on her first day back at work after having surgery to remove a blood clot near her brain almost six weeks ago.
Mr. Moreno was in charge of the government’s price control polices in an ultimately failed bid to contain rising inflation. His attempts to protect local industry as well as Argentina’s declining foreign currency reserves by limiting imports prompted several major trading partners, including the U.S., to sue Argentina at the World Trade Organization.
Over the years, he pressured executives to freeze prices or agree to stop importing or exporting certain goods, according to businessmen who have met with the commerce secretary.
Mr. Moreno’s office has consistently declined to comment on the allegations. He couldn’t be reached on Tuesday night. Nestor Kirchner, Argentina’s late president who died in 2010, once dismissed claims about Mr. Moreno’s alleged tactics, saying he was “kinder than Lassie,” the famous TV-show dog. Mr. Moreno also had the support of Mrs. Kirchner.
Though he was able to convince companies to temporarily keep prices steady on certain products, he was unable to prevent them from raising prices on others. Skirting price controls was sometimes just a matter of changing the packaging or volume of a certain item. In other cases, companies froze prices on some goods but curtailed production.
In the end, Mr. Moreno’s personalized approach to controlling prices didn’t prevent inflation from running in the double digits in recent years. Many economists say annual inflation likely totals about 25%. Official government data puts inflation at closer to 11%.
In September, a court indicted Mr. Moreno for allegedly abusing his power by fining economist Jorge Todesca for publishing his own inflation estimates. A court threw out the fine, but Mr. Todesca is still fighting criminal charges filed against him by Mr. Moreno.
In an interview Tuesday, Mr. Todesca said government persecution had cost him time, legal fees and had also scared away some clients from hiring his consulting firm, Finosport SA.
Mr. Moreno was also responsible for making broad changes at Argentina’s national statistics agency, Indec, that his critics say undermined its credibility.
The International Monetary Fund has warned Argentina to improve the quality of its data or face sanctions, including potential expulsion, from the fund.
By Ken Parks
19 November 2013
BUENOS AIRES—Argentine President Cristina Kirchner took her first steps to delegate power to ministers who will be charged with keeping a wobbly economy on track and maintaining discipline in the notoriously fickle Peronist movement before she steps down in 2015.
Late Monday, her first day back at work after surgery Oct. 8 to remove a blood clot near her brain, Mrs. Kirchner named the influential governor of Chaco Province, Jorge Capitanich, as her chief of staff and placed heterodox economist Axel Kicillof in charge of running an economy suffering from high inflation and low growth. She also replaced the head of the central bank and her agriculture minister.
The cabinet overhaul marks a shift in political style for a president who surrounded herself with weak ministers and monopolized most decision making in the government. Observers say recent events appear to have forced a change in her highly centralized way of governing.
Mrs. Kirchner’s surgery raised questions about whether she will be able to finish her second term, while political setbacks have loosened her grip on power. Her Peronist faction retained its congressional majorities in midterm elections last month, but failed to win enough support to change the constitution so she could run again in 2015.
Now Mr. Capitanich, 48, is set to become the face of an administration that has just two years left in office.
“Up until now, Cristina’s government was a one person show. This is different. It’s like she has resigned herself to reigning, while leaving management of the government to others,” said Luis Tonelli, director of the political science department of the University of Buenos Aires.
Mr. Capitanich, an economist who was chief of staff for former President Eduardo Duhalde in 2002, is known as a moderate Peronist. Unlike previous cabinet chiefs, Mr. Capitanich has his own political power base after winning two consecutive terms as governor.
His political skills will soon be put to the test amid a struggle within Peronism to find a successor to Mrs. Kirchner. With re-election off the table, Peronist governors, mayors and lawmakers allied with Mrs. Kirchner are casting around for leadership alternatives.
Peronist moderates such as Daniel Scioli, the popular governor of Buenos Aires province, and Sergio Massa, mayor of a Buenos Aires suburb, have already signaled plans to run for president.
Mr. Capitanich’s appointment also shows that Mrs. Kirchner recognizes she has to manage the succession process to ensure governability until she steps down in December 2015, said Francisco Resnicoff, a political analyst at Cefeidas Group.
Mr. Capitanich, who is scheduled to succeed cabinet chief Juan Manuel Abal Medina on Wednesday, couldn’t be reached for comment.
The state of the economy is also a source of concern for Argentines who enjoyed years of prosperity after Mrs. Kirchner’s husband and predecessor, Néstor Kirchner, took office in 2003.
Mrs. Kirchner spent heavily on social programs and public works, but had to expropriate private pension savings and print money when tax revenue didn’t cover expenditures. Unemployment is at a multiyear low of 7.2%, but inflation remains stubbornly anchored around 25% and foreign currency shortages are limiting growth.
Mrs. Kirchner adopted currency controls and restricted imports to contain a slide in foreign currency reserves, which have fallen 25% this year to $32.3 billion as debt payments, fuel imports and capital flight exceeded inflows from exports.
Analysts expect the government to announce further currency and import restrictions in the weeks ahead to stop the drop in reserves. The Kirchner administration is also grappling with increasingly onerous subsidies on public services such as electricity and natural gas.
Mr. Kicillof will likely be in charge of implementing those measures. A student of Keynesian economics and a vocal advocate of state intervention in the economy, Mr. Kicillof helped design a plan last year to nationalize Argentina’s largest oil company YPF SA.
Mr. Kicillof has prevailed over more moderate voices in the president’s economic team-outgoing Economy Minister Hernan Lorenzino and central bank President Mercedes Marco del Pont. That likely means a continuation of the policies that have underpinned high inflation and capital flight in recent years, some observers say.
It remains to be seen how much influence Mr. Capitanich will have over the self-styled heterodox economist who is known to sport Elvis-style sideburns. The two have known each other for years and wrote a book together in 1999.
“Naming Capitanich is a signal of political moderation. If the president wanted to deepen her unconventional policies she would have appointed someone more radical,” says Fabian Perechodnik, a director at pollster Poliarquia.
By Pan Kwan Yuk
November 20, 2013
Guillermo Moreno , Argentina’s combative internal trade secretary, has resigned, the government said late on Tuesday.
A controversial figure, Moreno has been instrumental in keeping the lid on Argentina’s runaway inflation by strong-arming companies into freezing prices and restricting imports.
As Jude Webber, the FT’s former Argentina correspondent, wrote in a profile of Moreno:
His methodology is intimidation – he has been rumoured in the past to carry a gun and he took boxing gloves to a meeting of shareholders of a key newsprint company in which the state has a stake in a bid to show who was boss. And he has slapped private economists with fines for estimating inflation data way above official statistics.
He has been described as Argentina’s de facto economy minister and many businessmen prefer silence to crossing with him – perhaps remembering Martín Lousteau, a former economy minister, who defied him over farm export tariffs. Moreno was seen at an event running his fingers across his throat, indicating Lousteau was playing a fatal game: the minister indeed lost his job, while Moreno has gone from strength to strength.
Concern now is that inflation – which is running at about 25 per cent over the past 12 months according to private economists – may accelerate even further after his exit.
Moreno’s resignation has been widely speculated after local media implicated him earlier in September in a corruption scandal.
The timing – coming just one day after President Cristina Fernández returned to work following a month-long absence after a head injury – raises the question of whether Moreno was forced out.
With Fernández on the backfoot following a dismal performance by her ruling coalition in last month’s midterm congressional elections, speculation has been rife that Moreno has become too compromising of a figure to keep.
UPDATE: In an updated statement, Télam, Argentina’s official news agency said that Moreno’s resignation will be effective from December 2. He will become the Economic Attaché for the Embassy of Argentina in Italy. No announcement was made who will replace Moreno.
By Benedict Mander in Santiago
November 20, 2013
Guillermo Moreno, Argentina’s powerful internal trade secretary, resigned on Tuesday, a day after a Marxist professor was put in charge of the economy ministry, heralding a major shift in economic policy.
The departure of the pugnacious Mr Moreno, who won notoriety for stunts such as bringing boxing gloves to shareholder meetings, marks the end of an era for businesses that have lived in fear of the controversial figure since he was appointed trade secretary in 2005.
His resignation follows the return of President Cristina Fernández to the public arena on Monday, when she posted a video on the internet thanking Argentines for their support during her six-week convalescence after brain surgery.
Economists now fear a jump in inflation, which is running at 25 per cent annually, according to private economists, as one of Mr Moreno’s principal tasks was to keep a lid on prices by strong-arming companies into keeping their prices low.
Mr Moreno, who was long considered the de facto economy minister, was more recently also charged with stemming a sharp decline in foreign exchange reserves by as much as $1bn a month by denying companies dollars to import goods.
With Mr Moreno out of the way, the promotion of Axel Kicillof to economy minister on Monday makes him the undisputed captain of economic policy, already having amassed considerable power since he was made deputy minister last year and placed in charge of the nationalisation of YPF, the state energy company.
“Instead of interventionism in the form of bullying, threats and phone calls, we will have interventionism with rules, regulations and controls. Not much to celebrate,” said Federico Thomsen, an economist in Buenos Aires.
Even so, analysts predicted a rally in Argentine bonds and the local stock market, where prices fell following the promotion of Mr Kicillof, an expert in Keynesian economics who sports Elvis-style sideburns.
Markets would have further reason to cheer if a new and more credible inflation index is implemented. Mr Kicillof himself has publicly criticised Indec, the state statistics agency, as well as the International Monetary Fund.
Mr Moreno has even slapped fines on private economists for estimating inflation data well above official statistics. He is now being prosecuted for “abuse of authority”.
Alfredo Scoccimarro, government spokesperson, said on Tuesday that the president had accepted Mr Moreno’s resignation, which will take effect on December 2, and had appointed him economic attaché for Argentina’s embassy in Italy.
“There was just no more room for him to keep on wreaking havoc,” tweeted Ricardo López Murphy, a former economy minister, who nevertheless finds it “hard to believe” that Mr Moreno’s departure will do much to relieve Argentina’s barrage of economic woes.
By Benedict Mander
November 18, 2013
For the last two centuries or more, creditors have often resorted to desperate measures when countries refused to pay up, from diplomatic pressure to sending gunboats. But with what has been dubbed “the sovereign debt trial of the century” coming ever closer to its conclusion, creditors’ fortunes may be looking up.
The long legal battle between Argentina and a group of hard-nosed hedge funds, led by Elliott Associates, that rejected the terms of restructurings after the country defaulted on almost $100bn of debt in 2001, could have far-reaching implications.
“It has dramatically changed the universe of sovereign debt,” says Mitu Gulati, a law professor at Duke University and former lawyer at Cleary Gottlieb, Argentina’s counsel.
Thanks to the persistence of the “holdout” creditors, Mr Gulati says that the case has effectively created a new mechanism for the enforcement of sovereign debt.
“It’s just like the mafia,” he explains. “We can’t force you to pay, but we can impose pain on your friends and family – and, if you don’t want us to do that, you’ll have to pay us back. That is the strategy at the heart of the case.”
Not only did the hedge funds win their case against Argentina last year, with a US court ruling that the country must pay the $1.3bn it owes the hedge funds, but also district court judge Thomas Griesa prohibited third ­parties from “aiding and abetting” any violation of his order.
That effectively means that Bank of New York Mellon, which processes Argentina’s payments to the holders of its restructured debts, cannot continue to pay them without also paying the holdouts once the trial is over.
If Argentina stays true to its pledge not to pay “vulture funds” a cent more than it has already offered, then it would be forced to default on its debt for the second time in little more than a decade – which would not only be bad news for the creditors that did accept the restructured debt, but also for Argentines and their economy.
Although the trial has yet to conclude, since the US Supreme Court may agree to review the case and Argentina could yet reach a negotiated solution to avoid a default, the court ruling remains. This raises fears that vulture funds will sue more sovereign states in the future.
“It could make it quite a bit more profitable to hold out and, more importantly, much more risky to participate in a restructuring,” says Anna Gelpern, a law professor at Georgetown University in Washington and previously of the US Treasury.
“The bigger implications are for countries that cannot afford a prolonged period of being shut out of the capital markets and litigating,” she added, as Argentina has been able to do. But the threat of legal battles makes defaults less attractive for countries, which will be encouraged to treat creditors better when they restructure defaulted debt.
Others believe that the trial is not quite so important as some commentators may have imagined. Asked what he thought the impact on future debt restructurings will be, Joshua Rosner, managing director at research firm Graham Fisher, says “absolutely nothing”. He adds: “The judge made it quite clear that the case is very specific to Argentina.”
The “pari passu” clause around which the trial revolves, interpreted to mean that creditors must be treated “on equal footing”, is no longer in common use, he says.
Most New York law bonds issued since 2005 include collective action clauses that allow a specified majority of bondholders to force holdouts to agree to settle. One big exception is Jamaica, one of the most indebted countries in the world – many consider its debt to be unsustainable.
“Unless another country embarks on the same type of behaviour as Argentina there is no impact for future debt restructurings,” reiterated Mr Rosner. “It’s really a non-issue.”
Nevertheless, it remains a major issue for Argentina, which has not been able to borrow on the international capital markets since the 2001 default. This has placed heavy strain on dwindling foreign exchange reserves, which many believe will trigger a balance of payments crisis.
The spectre of another default is of serious concern for owners of Argentina debt, since the prices of their bonds would plunge. That explains the emergence of proposals for intercreditor solutions.
Gramercy Funds Management, one of the largest holders of restructured Argentine bonds, has floated a plan that would activate collective action clauses to force Argentina’s exchange bondholders to pay holdout creditors with a portion of their coupon payments, if they agree to drop their demands for Argentina to pay in full.
Many are sceptical that the plan will work and some are optimistic that a default can be avoided.
“It would be in everyone’s interest to sit down and negotiate a settlement,” says Mr Rosner.
By Pablo Gonzalez
November  20, 2013
Argentina’s Interior Commerce Secretary Guillermo Moreno resigned after eight years of controlling prices and imports using strong-arm tactics that earned him a reputation as a bully.
Moreno will now be economic attache at the Argentine Embassy in Italy, presidential spokesman Alfredo Scoccimarro said late yesterday in a televised broadcast from the government house. He didn’t say who will replace the most feared government official who once brought boxing gloves to a shareholders meeting to force Argentina’s demands.
Argentine President Cristina Fernandez de Kirchner reshuffled her cabinet Nov. 18, appointing Axel Kicillof as economy minister and Carlos Fabrega as central bank president on the first day that she resumed duties after a five-week medical leave. Fernandez also ousted her cabinet chief, replacing Juan Manuel Abal Medina with Chaco province governor Jorge Capitanich and appointed a new agriculture minister.
“The government is acknowledging that there is a problem in the macro-economy and that Moreno’s policies have failed to fix it,” said Eduardo Hecker, a former market regulator that now runs consulting firm DEL in a telephone interview from Buenos Aires. “It also shows that there was a political fight inside the inner circle that was won by Kicillof who will became the most powerful economy minister from both Kirchner’s administrations as he has been the only one able to oust Moreno.”
Moreno didn’t reply to after-hours call placed to his office.
Like Lassie
Moreno, 58, was appointed in 2005 by Fernandez’s predecessor and late husband Nestor Kirchner who liked to say tongue in cheek that Moreno was as gentle and relaxed as Lassie, the famed collie of movie and television.
Moreno has recently met with industry groups from electronics to miners in an attempt to convince companies to bring dollars into the economy to invest in government bonds, whose proceeds will go toward energy projects.
Moreno was in charge of controlling imports to ensure the nation maintains a trade surplus and reportedly called currency trading houses personally to attempt to lower the black market currency rate.
Newcomers to the cabinet will sworn in today at the presidential house. During her absence, Fernandez’s party lost the mid-term election in the critical Buenos Aires province, the largest electoral district in Argentina.
By Bob Van Voris
November  19, 2013
Argentina lost its bid for a rehearing of a federal appeals court ruling against it in litigation over $1.5 billion in the nation’s defaulted bonds.
The U.S Court of Appeals for the Second Circuit in Manhattan yesterday rejected Argentina’s request that a larger panel of circuit judges reconsider a decision that a three-judge panel reached in August.
The three judges upheld a lower-court injunction barring Argentina from paying holders of its restructured debt if it fails to pay a group of investors that hold defaulted bonds, led by Elliott Management Corp.’s NML Capital and Aurelius Capital Management LP.
The ruling leaves a possible appeal to the U.S. Supreme Court as Argentina’s last chance at reversing a decision it said threatens the country with a new default. The appeals court delayed enforcement of the August ruling, allowing Argentina to continue paying holders of its restructured debt while it seeks Supreme Court review.
Argentina in 2001 defaulted on a record $95 billion of foreign debt. Holders of more than 90 percent of the bonds agreed to take new exchange bonds in 2005 and 2010, at a deep discount.
The court yesterday also denied requests by groups holding restructured bonds to reconsider the case.
Won’t Comply
A lawyer for Argentina told the three-judge panel in February that the country “won’t voluntarily comply” with a ruling forcing it to pay in full the holders of defaulted bonds.
Yesterday’s decision “further demonstrates that Argentina’s arguments that it cannot keep its promises to U.S. investors and obey lawful orders of U.S. courts are based on nothing more than unfounded speculation and hyperbole,” Theodore Olson, a lawyer for NML, said in a statement. The ruling “only reinforces that Argentina’s self-serving pleas do not warrant the Supreme Court’s attention.”
The lower court case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan). The appeal is NML Capital Ltd. v. Republic of Argentina, 12-00105, U.S. Court of Appeals for the Second Circuit (New York).
By Caroline Stauffer and Guido Nejamkis
November 19, 2013
BUENOS AIRES, Nov 19 (Reuters) – President Cristina Fernandez’s new Cabinet picks this week confirmed a deepening of Argentina’s left-leaning economic model rather than a policy switch needed to confront escalating inflation and dwindling foreign currency reserves.
After the president’s first public appearance since an Oct. 8 operation to remove blood that pooled on her brain, her office late on Monday announced the promotion of leftist economist Axel Kicillof to economy minister and the replacement of the central bank director and agriculture minister. Kicillof has served as deputy economy minister.
Argentine debt prices were little moved on Tuesday by the news, though the Global 2017 bond was down 1 percent. The Merval stock index fell 3 percent.
Analysts said the 42-year-old Kicillof already had more influence on Fernandez than the man he replaced, Hernan Lorenzino, who was given the job of ambassador to the European Union.
Kicillof has advocated more interventionist policies and, as an academic, gave classes and wrote about the theories of economists including John Maynard Keynes and Karl Marx.
“For private investors, Kicillof is a concern, and for Argentines he is the ratification of the current economic course – nothing will change,” said Alberto Fernandez, who was Cabinet chief under former President Nestor Kirchner, Fernandez’s late husband.
Carlos Casamiquela will take over from Norberto Yauhar as agriculture minister in the world’s No. 3 soybean and corn supplier. A 65-year-old agronomist, Casamiquela is known as a serious farm technician who understands the issues facing growers.
His appointment may improve dialogue between the government and the agriculture sector, but no big changes were expected in the interventionist policies that farmers say wreck their profits.
In addition, Carlos Fabrega was named central bank chief, replacing Mercedes Marcó del Pont.
Domestic Trade Secretary Guillermo Moreno, Fernandez’s right-hand man in negotiating with the private sector and a lightning rod for criticism of her most contentious economic issues, resigned on Tuesday.
He is known for his tough stance with foreign firms, particularly grains trading companies, and has sent companies like Brazilian miner Vale running for the door.
Moreno’s resignation takes effect on Dec. 2; there is no word on who will replace him.
In a video shown Monday before the Cabinet changes were announced, Fernandez looked healthy and rested, holding a small white dog she said was sent to her by one of the brothers of the late leftist leader of Venezuela, Hugo Chavez.
Argentina, Latin America’s No. 3 economy, faces inflation that private economists estimate at 25 percent and a currency, the peso, that is 65 percent weaker on the informal market than at the government’s official rate.
The government is also in the midst of a decade-long legal battle with holdout creditors and is blowing through foreign currency reserves to import energy and fund popular subsidies.
Kicillof steered the Argentine government’s expropriation of a controlling stake in energy company YPF from its former parent company, Spain’s Repsol. Argentina, once a net energy exporter, needs foreign capital to develop its vast Vaca Muerta shale reserves.
Amid concerns over the economy’s health, Fernandez’s supporters suffered heavy losses in congressional elections on Oct. 27 that ended her chances of securing a change to the constitution that would have enabled her to run for a third term in 2015.
“Since there’s no chance of Fernandez holding on to power, she might just throw caution to the wind and really double down on some of these ideological reforms pre-2015,” said Michael Henderson, a Latin American economist at Capital Economics.
Most observers expect Fernandez’s government to maintain or intensify measures to keep the economy growing even as foreign investment abandons Argentina. She increased public spending to keep voters happy before the mid-term vote, causing prices to rise and reserves to melt away.
“The bottom line is that if the government fails to tackle the underlying inflation problem – which the new economy minister doesn’t even recognize – there will be a strong risk of some sort of currency crisis in the rest of Ms. Fernandez’s term,” said Fiona Mackie, an Argentina analyst for the Economist Intelligence Unit.
Mackie said bondholders who refused to participate in two debt restructurings dating to the country’s 2002 default had more confidence in Lorenzino as a dealmaker than in the abilities of Kicillof, who previously focused on domestic policy.
“This could dash hopes that were only recently raised that some sort of negotiated settlement to the holdout problem could finally, and against the odds really, be found,” Mackie said.
By Erin McCarthy
19 November 2013
Argentina’s dollar bonds slid Tuesday in response to President Cristina Kirchner’s cabinet shuffle.
Argentina’s 2017 dollar bond fell in price to 90 cents on the dollar, from 92 cents the previous session, according to data provider Markit. The bond’s yield rose to 12.33%.
Mrs. Kirchner announced her biggest cabinet shuffle since the start of her second term on Monday, her first day back in over a month after surgery. She appointed as economy minister Axel Kicillof, who had been deputy economy minister and seen as one of the leading forces in her administration’s effort to intervene in the Argentine economy. Mrs. Kirchner also named a new central bank president and cabinet chief.
Analysts said the reorganization of her cabinet raised the possibility of future government intervention in the economy, something that has made some investors wary of investing in the country.
“We’re seeing a more drastic change in terms of the people and the ideology” in the Argentine government, said Robert Abad, an emerging-markets fixed-income portfolio manager at Western Asset Management Co.
Such concerns broadly pushed down Argentine assets. Argentina’s 2015 dollar bond dropped to 95 cents on the dollar, from 96.29 cents late Monday. The bond’s yield rose to 10.59% from 9.193% the previous session, according to Markit.
The dollar-denominated GDP warrants, which pay out based on economic growth during the previous year, slid 2.5% to ARS86 ($14.33) while the euro warrants lost 1.9%, selling at ARS104.95 in early trade.
The cost to insure Argentine debt against default also rose Tuesday. It currently costs $1.85 million annually to protect $10 million of Argentine debt from default for five years, from $1.78 million the previous session, according to Markit.
Also on Monday the U.S. Second Circuit Court of Appeals rejected Argentina’s request that it reconsider an earlier decision blocking it from paying bondholders unless it also pays hedge funds that are trying to collect on debt that dates back to the country’s 2001 default.
While the ruling was widely expected by analysts, it likely means that Argentina will ask the U.S. Supreme Court to take up the closely watched case for a second time as it seeks to avoid defaulting on its bonds.
–Ken Parks and Shane Romig contributed to this article.
11. ARGENTINA RISK: ALERT – RISK SCENARIO WATCHLIST (Economist Intelligence Unit – Risk Briefing)
19 November 2013
Scenario                                       Category      Probability    Impact Intensity
Security                                              High             Low                     8
Security                                              High            Moderate          12
Political stability                               Low             Very high           10
Political stability                               Moderate           High            12
Government effectiveness              Moderate          High            12
Government effectiveness           Very high        Moderate         15
Government effectiveness           Moderate         Moderate        9
Legal & regulatory                         High                    High            16
Legal & regulatory                         High                   Very high      20
Macroeconomic                             High                   Very high      20
Macroeconomic                             Moderate           Very high      15
Foreign trade & payments           Moderate           Very high      15
Foreign trade & payments           Very high              High           20
Financial                                           Low                   Very high      10
Financial                                         Very high V          Very high      25
Tax policy                                       Moderate               High            12
Tax policy                                          High                Moderate        12
Labour market                                Very high         Moderate       15
Labour market                               Moderate          Moderate        9
Infrastructure                                 Very high            Moderate       15
: 1 to 4    5 to 8    9 to 12    13 to 16    17 to 25
: Intensity is a product of the probability and impact ratings, where ‘Very low’ scores 1 and ‘Very high’ scores 5.
High probability; Low impact; Risk intensity = 8
There has been a rise in crime since the 2008-09 downturn. In response the government has established a Ministry of Security, which is in charge of all armed forces (including the Federal Police, the Gendarmería Nacional and the Prefectura Nacional). The decision to create the security ministry seemed to indicate a more proactive approach to security from a government that had previously persistently denied the severity of the problem, pointing to the low murder rate in relation to the rest of South America (3.4 per 100,000 population in 2009, compared with 21.7 in Brazil, according to the UN), while criticising media coverage and opposition criticism as sensationalist. But huge challenges remain in increasing the presence and effectiveness of the security forces and in improving transparency within the federal police, which is widely viewed as corrupt.
There has been little concrete success and the president, Cristina Fernández de Kirchner, was recently forced to reshuffle her cabinet, with the appointment of the defence minister, Arturo Puricelli, as security minister, and the promotion of Agustín Rossi to replace Mr Puricelli as the minister of defence. The cabinet reshuffle was largely cosmetic, however, and we do not expect it to have a dramatic impact on the security situation. Although the chances of a foreigner falling victim to violent crime are small, business travellers should nonetheless avoid carrying valuables, particularly at night and in urban areas. It is useful to have some cash available to yield if attacked. Victims must not resist, as their attacker could be armed. Withdrawals from automated teller machines should be avoided in deserted areas or late at night. Kidnappings are relatively rare, but precautions are advisable to reduce the risk of robbery. Firms should insist that their employees use radio cabs, which are generally a safer option than hailing a cab on the street, given instances of robberies in false taxis.
High probability; Moderate impact; Risk intensity = 12
Public demonstrations are a frequent occurrence in Argentina’s capital, Buenos Aires. There has, however, been a notable pick-up in anti-government demonstrations in the past year, as the government has grappled with discontent over rampant inflation and the imposition of foreign-exchange controls. Although often disruptive to transport, demonstrations are rarely violent. Demonstrations could well grow in scale and frequency in coming months, and with anti-government sentiment rising, there is a growing risk of violence that could impact on business activity. There was, for example, a spate of looting in cities throughout the country at the start of the year. Although security forces quickly clamped down on looters, there is a risk of new outbreaks in coming months.
Low probability; Very high impact; Risk intensity = 10
Ms Fernández suffered a subdural haematoma in early October and, following surgery, has spent more than a month recovering out of public sight. This latest health scare adds to a history of concerns. The president has during her time in office centralised power in her hands and relied on a small inner circle of advisers. Given this centralisation of power, any serious deterioration of Ms Fernández’s health in her remaining two years of office would risk creating a power vacuum and serious instability. This would be particularly difficult because the vice-president, Amado Boudou, is currently being formally investigated on charges of corruption (although the charges seem likely to be dismissed).
Moderate probability; High impact; Risk intensity = 12
On February 1st the Fund issued a declaration of censure against Argentina for failing to provide accurate statistics necessary for the Fund to do its work, one of its key commitments under the Fund articles of agreement. This was the first time since its creation in 1944 that the Fund has issued such a declaration against one of its members. The Fund’s Board has called on Argentina to adopt measures to address the inaccuracy of inflation and GDP statistics no later than September 29th 2013. Since 2007, when staffing and methodological changes were made at the official statistics bureau, the consumer price index is believed to have underestimated real inflation substantially. The government appears unrepentant, and has a strong incentive to underreport the inflation statistics, which have produced huge savings on coupon payments on inflation-linked government bonds. There is some time before the Fund takes any further moves against Argentina. In the first instance, the country could have its voter rights revoked when the Fund next meets to discuss Argentina in November.
Ultimately, however, Argentina could be expelled from the Fund. The Fund is still widely blamed for the 2001-02 crisis and widely discredited among the political class inArgentina, and many government members would probably be in favour of a formal break with the Fund. Moreover, the government has had no borrowing relationship with the Fund since 2006 and therefore would face few immediate consequences from any further Fund action. However, it would cement already dismal perceptions of Argentina’s creditworthiness and further complicate access to investment guarantees and to much-needed multilateral lending. Ultimately, this would drag Argentina’s already weak medium-term growth and investment outlook down even further. Another risk is that official Fund censure will trigger new legal claims from holders of inflation-indexed bonds, on the basis that they have been underpaid.
Moderate probability; High impact; Risk intensity = 12
The Supreme Court recently ruled a controversial media law constitutional. The media law is presented by the government as an attempt to break up media monopolies;Argentina’s media companies, like Clarìn, assert that it is an attempt by the government to silence criticism that puts press freedoms at risk. The Supreme Court ruling prompted claims by the opposition that the court is open to government influence. That said, the Supreme Court had previously ruled against the government on several occasions this year. It had for example, declared a reform to the Magistrates’ Council that had been pushed through by the government amid controversy and public protest in May unconstitutional.
That ruling was a major setback for the government and its attempts to exercise greater control over the judiciary. The reform of the Magistrates’ Council was the key element of the judicial reform project led by the president, Cristina Fernández de Kirchner. It proposed the selection of members (who are tasked with appointing judges) by popular vote, in a move that was widely criticised both domestically and internationally (among others by the UN Special Rapporteur on the independence of judges and lawyers) as putting the independence of the judiciary at risk. The ruling will force the cancellation of Magistrates’ Council elections that the government had been pushing ahead with. It also nullifies the government’s attempts to increase the number of council members from 13 to 19 and to allow the removal of judges by a simple rather than a two-thirds majority. These efforts had been widely seen as an attempt to pack the council with pro-government members and allow the government to remove judges as it saw fit. The government’s options are now extremely limited, but we do not expect it to back down from its confrontational stance. It may attempt to force the resignation of individual Supreme Court members (such as Carlos Fayt, who, at 75, is above the age limit set out in the constitution). As in the past, government investigations into judges and their close associates could also escalate in an effort to secure favourable rulings. Judges therefore seem likely to come under ever continuing pressure from the government in the rest of the Fernandez administration.
Very high probability; Moderate impact; Risk intensity = 15
Ms Fernandez’s Frente para la Victoria (FV, a faction of Argentina’s dominant Peronist party) just managed to retain a congressional majority in October. But she clearly lacks the two-thirds majority in Congress required to change the constitution and run for a third term, and has no obvious successor to groom. This has increased perceptions that her star is on the wane, and opposition politicians have rushed to jockey for position ahead of the October 2015 presidential election. In Argentina’s clientelist political system, where loyalties are extremely weak, her supporters in Congress and in the provinces (provincial governors are powerful in Argentina) have already started to desert her, and she seems likely to lose her congressional majority via defections at some point in coming months. Although power is centralised in the executive inArgentina, the loss of its congressional majority would complicate the policy agenda of the government somewhat, and raise the risk of legislative gridlock.
Moderate probability; Moderate impact; Risk intensity = 9
There have been several accusations of corruption against members of the government. In 2010, for example, it was confirmed that in October 2008 (as the global financial crisis began to deepen and just before the nationalisation of the private pension system) Néstor Kirchner, the former president, purchased a hotel worth US$2m in Calafate (where the presidential couple own several properties). This follows closely on the heels of an investigation into illegal enrichment by the Kirchners surrounding an unexplained rise in their personal wealth. In December 2009 a federal judge acquitted the Kirchners of corruption, but members of the opposition claim the court was subject to political influence.
The president is not the only government member to face accusations of corruption. The vice-president, Amado Boudou, is currently under investigation for influence-peddling in a case surrounding his dealings with a printing company that was awarded government contracts when he was economy minister. Going forward, the government’s ambitious public works plans and the lack of transparency in the planning ministry heighten the risk that corruption scandals may hit the government. If this occurs, it could undermine the government’s political support among left-wing parties.
High probability; High impact; Risk intensity = 16
An increasingly prominent role for Axel Kicillof, the architect of the nationalisation of Spanish-controlled oil company Yacimientos Petrolíferos Fiscales (YPF), suggests a deepening of interventionist tendencies in the government. Two government decrees this year have given more power to Mr Kicillof—a left-wing economist and a close advisor to the president—in a move interpreted as an attempt to take greater control of private-sector operations in key sectors under his watch. The first decree creates a Strategic Planning and Co-ordination Committee, headed by Mr Kicillof, which will oversee a national investment plan for the energy sector. The second makes Mr Kicillof formally responsible for state participation on corporate boards where it holds a minority stake through the social security agency, Anses. The new energy sector regulations allow Mr Kicillof to determine reference prices for the sale of energy products. They also force private energy companies operating in Argentina to present annual investment plans to his committee, additionally giving Mr Kicillof the power to amend company plans to bring them in line with national goals and to impose sanctions including fines and the withdrawal of concessions for failure to meet targets.
At the same time, under his guidance, the government seems increasingly determined to use its presence on the boards of private companies (mostly as a legacy of the nationalisation of Argentina’s private pension funds in 2008, the state has a presence on the board of 41 private companies in the country) to influence investment decisions in the private sector. The government first lifted a 5% cap on the voting rights of government representatives in companies where Anses holds stakes in early 2011. It has now formally transferred responsibility for co-ordinating and directing state representatives to Mr Kicillof. As occurred with YPF before its nationalisation earlier this year, state representatives now seem likely to push harder for companies to focus on reinvestment and to limit the distribution of dividends.
High probability; Very high impact; Risk intensity = 20
The nationalisation of YPF in 2012 raises concerns that the government will seek to increase state control in other sectors. The government nationalised private pension funds amid the global financial crisis in 2008, and in 2010 threatened to nationaliseTelecom Argentina amid a dispute with its joint owner, Telecom Italia. This was widely viewed at the time as sabre-rattling by the government in an effort to secure its objectives, and investments in that sector have grown rapidly since then amid a consumer spending boom. Despite some shift to the left among the president’s key economic policy advisers, we do not currently believe that a wave of nationalisations is planned as part of a shift towards state-led development (unlike Venezuela, where a series of nationalisations has taken place over recent years as part of an explicit shift to a socialist development model). But the risk is that, with access to finance becoming ever more restricted, and with speculation over a peso devaluation rife (amid high inflation and net capital outflows), asset grabs in sectors such as telecoms, banking and electricity—and in the remainder of the privately-owned oil and gas industry (YPFaccounts for only around one-third of Argentina’s oil output, with the rest made up by a large number of other domestic and international players)—will become an increasingly attractive option for a government that has proved unmoved by international criticism and amenable to heavy-handed interventionism. In this environment the threat of expropriation may also be used as a bargaining tool to extract concessions from companies concerned, so that contract rights will remain weak even if outright expropriation is avoided.
High probability; Very high impact; Risk intensity = 20
Growth is projected to weaken in 2014-15 as underlying competitiveness problems go unaddressed. Combined with continued recourse to heterodox and interventionist economic policies, which will sustain uncertainty over tariffs; import, foreign-exchange and capital controls; and the legal and regulatory environment, this will increasingly affect confidence, investment, employment and consumer purchasing power. Moreover, we still consider that there are significant downside risks to our forecasts, withArgentina among the most vulnerable countries in the region to a deterioration in global conditions. In particular, a renewed weakening of Argentina’s key trade partners, Brazil and China, or a sharp drop in commodity prices would set the stage for further forecast downgrades and a sustained period of volatility. This is in a context of severe economic distortions, with double-digit inflation having eroded peso competitiveness and shifted the current account into deficit. With net capital flows persistently negative ever since the 2001 default, this has increased speculation of some sort of peso adjustment to improve the balance-of-payments dynamics, increasing capital flight and prompting the government to instate a series of foreign-exchange and capital controls to support the peso. With reserves cover falling and the global environment becoming much less supportive, the potential for confidence shocks will remain strong.
Moderate probability; Very high impact; Risk intensity = 15
Restricted access to credit will sustain uncertainty over the government’s ability to finance its deficit. A restructuring of US$30bn in outstanding defaulted debt concluded in June 2010 was considered successful. However, a return to international capital markets remains off the agenda while the question of the ‘holdouts’ (creditors who did not participate in the 2005 or 2010 restructurings) remains unresolved, and the government will continue to rely on domestic sources of finance, particularly intra-government transfers. The outcome of a US court case, which is now awaiting appeal, may soon leave Argentina with the unpalatable choice of repaying holdout creditors in full (something that it has sworn never to do) or falling into technical default to avoid repaying current creditors in a US jurisdiction. Technical default would not have a direct impact on the sovereign—which already has no access to international finance—but it would complicate trade financing, with damaging knock-on effects for the economy. The risk of technical default may actually help spur some sort of negotiated agreement between the government and holdouts. Bondholders that took part in the sovereign-debt restructurings of 2005 and 2010 have waded into the stand-off and now seem to be willing to grant part of their interest earnings to the holdouts in order to avoid a technical default that would cause the price of the bonds that they hold to plunge. Obstacles remain, however, and we have not changed our forecasts to include any sort of international bond issuance by Argentina in the short term.
Moderate probability; Very high impact; Risk intensity = 15
Chaco province was forced in late 2012 to pay a US dollar-denominated bond issued locally (worth US$260,000) in pesos after the Banco Central de la República Argentina(BCRA, the Central Bank) refused to sell the province the dollars required for the transaction. The ‘pesification’ of Chaco province’s US dollar-denominated debt came amid increasingly harsh foreign-exchange controls. Nonetheless, the announcement was surprising, given that the sum involved was so small and the governor of Chaco, Jorge Capitanich, is very close to the president, Cristina Fernández de Kirchner. The result was major market jitters over the risk of future pesification of public- and private-sector dollar-denominated debt. The BCRA later asserted that funds would be made available to the sovereign and sub-sovereign issuers for dollar-denominated debt issued under foreign legislation. Bonds issued by the central government—which are being repaid out of the foreign reserves—and financial trusts for infrastructure works will also be repaid in dollars. This leaves open the question of whether debt issued in the local market under national legislation, like Chaco’s dollar bond, will be repaid in pesos or dollars. Foreign exposure to local dollar-denominated debt is low, and the BCRA says that funds will be made available for external payments, but events in Chaco highlight the fact that the risks to currency convertibility have grown.
Very high probability; High impact; Risk intensity = 20
The government tightened import controls in 2012. In certain sectors import controls had already been in place for a year, in the form of requirements that imports be matched by an equal amount, in dollar terms, of exports. Under the newer measures, all imports need to be authorised by the secretariat of interior commerce (headed byGuillermo Moreno, a close ally of the president), in order to establish the potential impact on the domestic market. A host of objections to the move have been raised. There are fears over the operational efficiency of the regime (bearing in mind that an import licensing regime has led to substantial delays in recent years for affected products). Perhaps more significantly, the criteria for the approval of import operations have not been clearly defined, opening the door to further discretionality in foreign trade operations. There is also a strong possibility that a cumbersome import regime will backfire (in its aim of propping up the trade surplus), by driving shortages and bottlenecks and negatively affecting the output of exported goods in complex industries with high levels of imported inputs. Intermediate goods, fuels and capital goods represent around 60% of total imports. The share of imported inputs in the production process differs according to each industry, but is particularly high in sectors such as the car industry, which is a major driver of manufacturing production and also an important exporter (cars account for 12% of total exports).
Low probability; Very high impact; Risk intensity = 10
The imposition of foreign-exchange controls in late 2011 produced a spike in interest rates and large dollar deposit withdrawals, and there have been periodic bouts of volatility ever since, as controls have failed to reduce speculation of an eventual peso devaluation. Ultimately there is a risk that renewed volatility would produce a freeze in lending, a deterioration in asset quality and widespread bank runs (in a country with very weak confidence in banks). Fears of further foreign-exchange controls and the memories of the “corralito” (the freezing of bank withdrawals) imposed during the 2001-02 financial crisis resulted in the steady withdrawal of dollar-denominated deposits since late 2011 and a subsequent rise in interest rates. There is a risk that despite recent events, steps will be taken to encourage (or force) banks to lend that will harm financial soundness indicators and ultimately raise the risk of bank runs.
Very high probability; Very high impact; Risk intensity = 25
Amid falling reserves, we have revised our currency forecasts and now expect a nominal depreciation next year of close to 25%, and still-substantial depreciation of close to 20% in 2015 and around 10% per year in 2016-18. This will, however, do little to reverse the accumulated real trade-weighted appreciation of 45% in the past five years. In these circumstances, strong soybean output will remain crucial to staving off pressures for a much larger devaluation. Even under our benign baseline forecast, inflation will come under control only very gradually, and so devaluation pressures will persist—despite controls—in the medium term. In this context, there are substantial risks of a peso devaluation. Currency volatility will be a persistent risk, particularly if soft commodities prices were unexpectedly to fall substantially. Ultimately, the risk that macroeconomic policy mismanagement leads to spiralling inflation, renewed recession, and devaluation at some point in the medium term cannot be discounted. There has also been some local speculation about a shift to a dual exchange-rate system, a possibility that cannot be discounted, despite the distortions that such a system would create.
Moderate probability; High impact; Risk intensity = 12
The government has limited access to external sources of finance, and is being forced to seek greater recourse to funding from the social security agency, public-sector banks and the Central Bank to meet its financing gap. In this context the possibility of further tax increases cannot be discounted. An increase in consumption taxes would increase already strong inflationary pressures. Increases in agricultural export taxes would also face strong political opposition, and potentially spur renewed rural protests of the kind that brought activity to a halt in 2008, suggesting the government would be most likely to increase corporate tax rates if financing needs were to rise further.
High probability; Moderate impact; Risk intensity = 12
Reforms to the system of revenue-sharing with the provinces are badly needed to secure the stability of the tax system, but continued delays on a comprehensive reform are in prospect. The opposition tried in 2010 to increase the percentage of revenue from the financial transactions tax that is transferred automatically to the provinces from 15% to 54% of total, but the bill failed to prosper in a divided Congress. The executive has instead announced a series of rollovers of provincial debt. In mid-2010 the government had announced a roll-over of provincial debt worth Ps65bn (US$16.7bn at 2010 average exchange rate; out of a total Ps100bn), for a 30-year period and with a two-year grace period, which ended in December 2011. At this point the government announced an extension of the grace period for another two years, to December 2013. This reduced provincial debt service by Ps6.9bn (out of a total Ps23bn) in 2012 and will reduce debt service by another Ps6.7bn in 2013, providing some relief to the provincial finances. However, there are growing concerns that further measures will need to be taken to assist the provinces. Without a more comprehensive reform, weaknesses in the provincial finances will sustain the need for further central government bailouts and thus raise the risk of periodic ad hoc measures at the national revenue to increase tax revenue.
Very high probability; Moderate impact; Risk intensity = 15
Hugo Moyano—who has recently become a harsh critic of the president, Cristina Fernández de Kirchner—has been re-elected as head of the trade union federation. However, a major split in the Confederación General del Trabajo, the main trade unions confederation, has seen a number of groups (some anti-government and some pro-government) break away from the main union leadership. On the face of it, this would appear to be good news for the government, as it will help keep Mr Moyano in check. However, the atomisation of a union movement that has until now been under the close control of successive Peronist administrations has the potential to create even more union disputes, raising the risk of labour unrest in coming months.
Moderate probability; Moderate impact; Risk intensity = 9
Strong rates of growth in the past decade mean that skills shortages have become more of a problem for business, compounded by a lack of effective training programmes in both the public and private sectors. Secondary and tertiary enrolments are very high by regional standards, but educational outcomes are not as good as would therefore be expected and vary widely by region, while access to job training tends to be unequal and informal. Where possible, in-house training programmes are advised.
Very high probability; Moderate impact; Risk intensity = 15
The risk of periodic electricity shortages, particularly during peak winter and summer periods, will persist. Reflecting the freezing of tariffs since the 2001 crisis, the finances of most electricity companies operating in the country are now so precarious that in August 2012 the government was forced to intervene in the sector. As part of the intervention a new regulatory commission, headed by influential deputy economy minister Axel Kicillof and incorporating representatives of the Ministry of Energy and the Ministry of the Interior on its board, has been created. This commission will be in charge of analysing electricity companies’ costs, investment projects and efficiency as part of a new regulatory framework, full details of which have yet to emerge. Although details provided by the government remain vague, it seems likely that the electricity sector will move towards a system where the government will set companies’ tariffs, earnings and ‘reasonable’ profit rates, according to their cost structure, efficiency and investment projects. Under this regime, companies will mainly play an operating role, in line with decisions taken by government authorities. Since private companies had all but given up hope of moving to a more market-oriented system (through a liberalisation of tariffs) under the current government—and feared outright nationalisation after Yacimientos Petrolíferos Fiscales’s nationalisation—they will probably welcome the government’s willingness to re-establish better profitability levels. However, there are serious doubts that this will prompt major long-term investments in increasing capacity. Under these conditions, the risks of shortages will remain high at least in the short term.
Moderate probability; Moderate impact; Risk intensity = 9
Comparatively large investments in the 1990s expanded and modernised Argentina’s physical infrastructure. The new model of public utility concessions that the government has been implementing since October 2003 consists of leaving repairs and maintenance in the hands of the private sector, while assuming control of strategic decisions on where new investment should be directed. Over the medium term the success of the new regime will require a clear delimitation of responsibilities between the private and public sectors in order to prevent the kind of disputes that plagued concessions during the 1990s. In cases where the government takes over a concession from the private sector, as appears possible in a few cases where foreign investors are negotiating new contracts with the government, investment is likely to fall. At the end of 2008 the government unveiled a Ps110bn (US$31.9bn) plan for public works The plan, named Plan Obras para Todos los Argentinos (Plan of Public Works for all Argentinians), aims to improve infrastructure, mainly in energy, transport and housing. However, implementation has proved problematic, not least because of pressure on the government finances. Companies should make provision for deterioration in the quality of the physical infrastructure if investment fails to rise in the medium term.
19 November 2013
On November 18th on her first day back to work after more than a month spent recovering from surgery, the president, Cristina Fernández de Kirchner, announced a major cabinet reshuffle that cements the influence of hardliners, and raises risks to the inflation and balance-of-payments outlook.
The reshuffle suggests that hardliners have won out against moderates such as the vice-president, Amado Boudou, and the economy minister, Hernán Lorenzino. The latter has lost his job, and will be relegated to a special commission to negotiate debt restructuring (Mr Lorenzino’s specialty). He will also become ambassador to the EU, where he is set to attempt to negotiate a deal on outstanding Paris Club debts. However, it is unclear whether Mr Lorenzino can make fresh progress on either front if he does not have the clear backing of Ms Fernández or the new economy minister, Axel Kicillof.
Mr Kicillof takes charge
Mr Kicillof is a left-wing academic whose star has risen rapidly in government over the past two years. He was until now deputy economy minister, but had already been seen as the real power in the Ministry of the Economy. He was the driving force behind recent key policy decisions, such as the nationalisation of an energy company, YPF, in 2012 and the tightening of foreign-exchange controls. His appointment to the top spot in the economy ministry makes heterodox measures such as a shift to a dual exchange-rate system more likely. It also produces substantial risks to our assumption that fiscal and monetary policy will be tightened moderately in the next year to help to rein in inflation. Despite the clear deterioration of the balance of payments and consequent fall in the foreign reserves stemming from growing external competitiveness problems, Mr Kicillof has consistently denied that Argentina has an inflation problem.
This is in contrast with the president of the Banco Central de la República Argentina (BCRA, the Central Bank), Mercedes Marcó del Pont, who recently admitted publicly that inflation (currently running at close to 20%) must be reined in, and who had presided over a gradual rise in interest rates in recent months. For her efforts, Ms Marcó del Pont has been replaced by Juan Carlos Fábrega. Mr Fábrega was previously president of Argentina’s largest bank, the state-owned Banco de la Nación. He is seen as a capable banker, but the chances are that under his watch inflation control will take a backseat to deficit financing.
Capitanich looks to 2015
Mr Kicillof will not have complete carte blanche. Ms Fernández has added another political heavyweight to her cabinet in the form of her new cabinet chief, the governor of Chaco province, Jorge Capitanich. Mr Capitanich is a powerful politician in his own right, and his new appointment could place him as the ruling party’s successor to Ms Fernández in 2015. Mr Capitanich has a long history in government-he was cabinet chief in 2002 under the administration of a former president, Eduardo Duhalde (2002-03). He will view the post as a jumping-off point for the 2015 race, and may clash with Mr Kicillof if the latter attempts to impose policies that put political or economic stability at risk.
A riskier outlook
Our assumption that controls and interventionism will feature heavily in the remainder of the Fernández administration is unchanged. However, there are now strong risks to our forecast that the government will gradually rein in inflation and help to stem the outlflow of reserves via a modest tightening of fiscal and monetary policy. Ultimately, this heightens the already-substantial risk of a currency crisis occurring within the forecast period.tedly responsible for the 2012 expropriation of oil company YPF. Lorenzino will remain in charge of negotiating with holdout creditors; a US court of appeal yesterday rejected a petition for a holdout lawsuit to be reheard, leaving the Supreme Court as the only remaining option.
======================================================= Read Later
Confidence Man   John Kerry has the skill, toughness, and ego to be a great secretary of state. But will the world let him?
* Nov. 18, 2013
* original

I’ve met John Kerry only once. Earlier this year, I was invited to a dinner at the State Department with the secretary and a few others to talk about U.S. options on Syria.
The secretary asked more questions than he answered and didn’t reveal much about the specifics of where he stood. But it was stunningly clear from the direction of the conversation that he believed Washington needed to find a way to do more — much more. I didn’t. And Kerry for sure wasn’t convinced by my Dr. No point of view. I give him credit for including me. But rarely have I encountered anyone — let alone a secretary of state — who seemed more self-confident about his own point of view and not all that interested in somebody else’s.
This sense of self-confidence is the hallmark of the Kerry style of diplomacy. No problem is too big that it can’t be made better. Trying and failing isn’t ideal; but it’s better than not trying at all. And if given enough time and focus — will and skill, too — there’s always a way forward.
Only someone with this kind of can-do attitude would venture into Israeli-Palestinian diplomacy against such extremely long odds; keep pushing for a Geneva conference to end Syria’s civil war with the faintest of hopes of success; and (not or) be bullish on a deal with Iran that has alienated key U.S. allies and much of Congress, too.
Having watched Kerry operate for almost a year now, I’m less interested in an interim report card on his record. It is way too soon for that. What intrigues me more are the trend lines, and specifically what will be required at the end of the day for him to be judged a truly consequential secretary of state, let alone one of America’s best. Perhaps this isn’t his goal. But watching John Kerry — the Energizer Bunny of U.S. diplomacy — I’d be stunned if it wasn’t.
Having worked for and watched a number of his predecessors, I’ve identified at least five elements that need to be present for success. In Kerry’s case, they’re all there, at least on paper. Each has a fairly large asterisk, to be sure. And much will have to break his way to admit  him into the secretary of state hall of fame.
Is there real opportunity?
I don’t care how smart, brilliant, or passionate a secretary of state may be, unless the world cooperates, significant success — let alone real breakthroughs — aren’t possible. It’s the interaction between human agency and circumstance that usually defines what happens and doesn’t in international politics.
The notion that secretaries of state — or presidents, for that matter — make their own breaks and luck is true enough, provided there’s enough raw material out of which to fashion success. For all of Henry Kissinger’s brilliance and negotiating skills, had there not been an October 1973 War, there would have been zero chance to for him to produce three Arab-Israeli agreements in 18 months. Had the Soviet Union not been in its last gasps, neither George Shultz nor Ronald Reagan would have been able to pursue successful arms control agreements and end of empire diplomacy. Had Saddam Hussein not invaded Kuwait, James Baker could never have gotten the Arabs and Israelis to the Madrid Conference.
So are there real chances for transformative change in Kerry world? The Middle East is certainly in flux; and that’s where the secretary is spending most of his time. But a lot of motion doesn’t necessarily mean movement that can be channeled into agreements. And one success — an interim agreement on Iran, for example — could actually create other complications, such as alienating key U.S. allies (if my read on Benjamin Netanyahu is accurate), making much more difficult progress with the Palestinians. Indeed, the U.S.-Russian framework accord to dismantle Syria’s chemical weapons — seen by most (now that it’s being implemented) as something of an achievement — resulted in bucking up Assad and will likely have negative consequences for the other Geneva accord on Syria the secretary would like to broker. And let’s be clear: even a temporary deal with Iran would be no guarantee that a final agreement will be reached, or that U.S.-Iranian relations are going to be transformed.
Still, Kerry has the kind of running room both abroad and at home that his predecessor never did. Hillary Clinton was constrained by President Barack Obama’s controlling nature, her own risk aversion, and a lack of real opportunities. Kerry’s world may not offer up the kind of opportunities for transformative change along the lines of a dramatic opening to China, Anwar Sadat’s visit to Jerusalem; or the collapse of the former Soviet Union. But it may well be a world marked by potential transactions and smaller deals of consequence.
I think Kerry gets this, though it’s hardly surprising that he aspires to much more. That’s fine so long as he doesn’t get carried away and allow rhetoric to outstrip action or to obscure a realistic assessment of what can actually be accomplished. These are traps that Kerry needs to be careful to avoid. His supreme confidence in public leads him too frequently to overdramatize: for example, comparing Assad’s use of chemical weapons to Munich or warning of last chances for Middle East peace and a third intifada should no agreement be reached.
Are you in the middle of the mix?
The Hippocratic Oath also apples to diplomacy: above all, do no harm. But while prudence is critically important in diplomacy, giving yourself a chance to succeed is too. And you can’t do that by just sitting on the sidelines. I hate turning U.S. foreign policy into a breakfast analogy, but it’s true that omelets can’t be made without breaking eggs.
The evidence to date that Kerry wants to cook is pretty clear: negotiating a U.S.-Afghan security agreement; putting together a U.S.-Russian framework agreement to destroy Assad’s chemical weapons; working toward a political solution to the Syrian civil war; gunning for an interim deal with Iran on the nuclear issue; and relaunching Israeli-Palestinian negotiations. Granted there’s a lot more process still in these enterprises than real sustainable accomplishment, but Kerry’s in the game. His situation reminds me of the joke about the guy who jumps off the top of a 10-story building. As he’s passing the 5th floor, somebody yells out, “How you doing?” “So far, so good!” he replies.

So are there downsides to being diplomacy’s Energizer Bunny? Sure. You take a lot of heat for being naïve, overextended, too eager for the deal. And there’s always the risk of being taken for granted. A secretary must maintain a certain amount of detachment, creating the mystique of being unavailable and inaccessible. It creates authority. Too many phone calls, meetings, trips and you become part of the political furniture. It took us almost two years to persuade Baker to take up the Arab-Israeli issue. We kept telling him he had to engage; and he kept telling us, “no.” And he was right to wait and engage at the right moment. Kerry could borrow a page out of Baker’s book.

In Italy, visiting the UN FAO headquarters there, located in downtown Rome, in what was the old Italian Colonial Ministry, Critchfield, looking out at the classical Roman ruins nearby, writes:

“One was reminded by the ruined splendor how one of the Romans’ failures was their disinterest in the world around them.  They failed to learn anything about the ordinary people of India, China Persia, Scythia, the Huns, the Africans, the Scandinavians, or Buddha or Zoroaster, or the mysteries of the Western seas.   It was a social atmosphere that made such indifference possible, an attitude one writer called the ‘mindless conservatism of the affluent.’  She was Barbara Ward and she was writing about us.” p. 308

And Critchfield goes on to write that after more than 20 years of visiting villages in the developing world, he is not worried about them and their future.  He is largely optimistic that the green revolution and rural development will yield a great improvement in the villagers’ lives.  But on p. 332 he writes:

“Is our cultural future at stake too?  I’ve been going and coming to and from the Third World for 22 years now and growing steadily less concerned about them and more about us.  Americans still possess the most vital society on earth, but wealth and technology keep taking us farther away from natural things (all those farmers leaving the land).”

Villages by Richard Critchfield (March 1983)


19 noviembre, 2013


18 noviembre, 2013


16 noviembre, 2013


14 noviembre, 2013


By Nicole Winfield
November 13, 2013
BUENOS AIRES, Argentina — Ultra-traditionalist Roman Catholics have openly challenged Pope Francis by disrupting one of his favorite events, an interfaith ceremony in the Metropolitan Cathedral meant to promote religious harmony on the anniversary of the beginning of the Holocaust.
The annual gathering of Catholics, Jews and Protestants marks Kristallnacht, the Nazi-led mob violence in 1938 when about 1,000 Jewish synagogues were burned and thousands of Jews were forced into concentration camps, launching the genocide that killed 6 million Jews. Before he assumed the papacy, Buenos Aires Cardinal Jorge Mario Bergoglio and his good friend Rabbi Abraham Skorka led the ceremony every year.
A small group disrupted Tuesday night’s ceremony by shouting the rosary and the “Our Father” prayer, and spreading pamphlets saying that “followers of false gods must be kept out of the sacred temple.”
Buenos Aires Archbishop Mario Poli, named by Francis to replace him as Argentina’s top church official, appealed for calm as others in the audience rose up to repudiate the protesters, who were soon escorted out by police.
“Let there be peace. Shalom,” Poli then said, urging everyone to take their seats.
“Dear Jewish brothers, please feel at home, because that’s the way Christians want it, despite these signs of intolerance,” Poli said. “Your presence here doesn’t desecrate a temple of God. We will continue in peace this encounter that Pope Francis always promoted, valued and appreciated so much.”
Skorka, who co-wrote a book of dialogues with Bergoglio seeking common ground between Judaism and Catholicism, described the incident in an interview with Radio 10 on Wednesday.
“The cathedral was full, with people standing, prepared for a profound act of introspection, when a group of about 40 people began to recite from the Christian liturgy, the ‘Our Father,’ and began to hand out little pieces of paper saying that Jews were blaspheming the place,” Skorka said.
Skorka said protesters made cutting comments like “the Jews killed Jesus.” He said one Jew confronted them, saying, “My grandmother died in Auschwitz,” to which an activist replied, “Do you belive that lie?”
The Rev. Christian Bouchacourt, the South America leader of the Society of Saint Pius X, said Wednesday that the protesters belong to his organization and that they have a right to feel outraged when rabbis preside over a ceremony in a cathedral.
“I recognize the authority of the pope, but he is not infallible and in this case does things we cannot accept,” Bouchacourt said in an interview with Radio La Red.
“This wasn’t a desire to make a rebellion, but to show our love to the Catholic Church, which was made for the Catholic faith,” Bouchacourt said. “A Mass isn’t celebrated in a synagogue, nor in a mosque. The Muslims don’t accept it. In the same way, we who are Catholics cannot accept the presence of another faith in our church.”
The Vatican spokesman declined to comment, saying the issue was outside his normal area of jurisdiction.
The Society of St. Pius X is a breakaway group of traditionalist Catholics who are attached to the old Latin Mass and follow the late Archbishop Marcel Lefebvre, who founded the Swiss-based society in 1969 in opposition to the modernizing reforms of the Second Vatican Council. The Vatican II meetings made a point of reaching out to Jews and people of other faiths.
Lefebvre and four of his bishops were excommunicated after he consecrated them without papal consent in a schismatic act. The excommunications were lifted in 2009 but the group still has no legal standing in the church.
Pope Benedict made reconciling with the society a priority, but Pope Francis has made clear he has little interest in courting the traditionalists.
The same society was in the news in October when one of its Italian priests offered to celebrate the funeral of Nazi war criminal Erich Priebke after the Rome archdiocese refused to allow him a church funeral. The society’s funeral service was later called off at the last minute because protesters and Priebke’s supporters clashed outside.
By Gilles Castonguay
14 November 2013
MILAN—Telecom Italia SpA has agreed to sell all of its controlling interest in Telecom Argentina SA to Fintech Group in a deal worth $960 million, allowing the Italian operator to pay down debt.
The company said Thursday that the bulk of the deal would consist of Fintech paying $859.5 million for Telecom Italia’s 68% ownership of the voting shares in Sofora Telecomunicaciones SA, one of the holding companies through which it has had control over its Argentine peer.
Fintech will also pay $100.5 million for Telecom Italia to provide technical support to Telecom Argentina and other services for up to three years, among other conditions.
The sale is part of Telecom Italia’s effort to raise about €4 billion ($5.39 billion) by 2016 to bring down its €28.2 billion of debt.
It also marks its first major move since Spanish peer Telefonica SA announced plans to become Telecom Italia’s dominant shareholder.
Telecom Argentina has fixed-line and mobile operations in Argentina, as well as mobile services in Paraguay. It accounted for almost €2.86 billion, or 14%, of Telecom Italia’s total revenue in the first nine months of 2013.
By Daniele Lepido and Manuel Baigorri
November  14, 2013
Mexican billionaire David Martinez agreed to buy control of Telecom Argentina SA in a $960 million deal, pitting him against the wireless business of Carlos Slim in South America’s second-biggest economy.
Martinez’s investment firm Fintech will pay about $860 million for Telecom Italia SpA (TIT)’s 22.7 percent indirect stake in Telecom Argentina and $100 million for agreements related to the deal, according to a statement from the Italian carrier today.
The deal expands Martinez’s bets beyond holdings such as cable assets and Argentina’s sovereign debt as he seeks to benefit from increasing Web and video use on mobile devices. Telecom Argentina and the local unit of fellow Mexican billionaire Slim’s America Movil SAB (AMXL) each have about a third of Argentina’s wireless market.
Shares of Buenos Aires-based Telecom Argentina have more than doubled this year as increasing demand for data services boosted sales. The stock fell 1.8 percent to 34.70 pesos yesterday in the company’s home town. Calls to Fintech’s office in London weren’t returned.
Telecom Italia, led by new Chief Executive Officer Marco Patuano, is slimming down as part of a turnaround bid. Its shares rose 0.2 percent to 67.5 cents at 11:27 a.m. in Milan, giving the carrier a market value of 12.3 billion euros. The stock had lost 1.5 percent this year through yesterday and has had eight straight annual declines.
Former Priest
Telecom Argentina reported a 22 percent gain in first-half sales as more of the country’s about 42 million people used mobile devices to access the Internet and send e-mail. Telecom Argentina and America Movil’s Claro unit each had about a third of the country’s mobile-phone market, according to data earlier this year from Signals Telecom Consulting.
Argentina’s economy will expand 2.8 percent next year, trailing the Latin America average of 3.1 percent, the International Monetary Fund said in last month’s Regional Economic Update. Brazil, South America’s largest economy, will expand about 2.5 percent this year and next, IMF has projected.
Fintech has investments in Argentina’s sovereign debt as well as in many restructured companies including a stake in the country’s largest cable company, Cablevision SA. Founder Martinez, a former priest, lives half of the year in London and the other half in Manhattan.
He built his fortune by buying and helping to restructure the debt of troubled countries and companies, including Telecom Argentina, according to public filings.
Martinez has also invested beyond Argentina and Latin America. In September, Fintech bought almost 5 percent of Spanish lender Banco de Sabadell SA during a share sale.
Patuano’s Turnaround
Telecom Italia CEO Patuano, taking over from Franco Bernabe, who resigned last month after clashing with top shareholder Telefonica SA (TEF), is selling assets to revive Italy’s largest phone company as sales shrink. This month, the Milan-based company sold 1.3 billion euros of mandatory convertible bonds as part of a plan to raise about 4 billion euros ($5.4 billion) to pare debt. The carrier’s rating was cut to junk last month by Moody’s Investors Service.
The company said the disposal’s effect on its net debt won’t be material. Telecom Italia’s adjusted net debt was 28.2 billion euros at the end of September, and the company plans to trim it to less than 27 billion euros by the end of 2013.
Other Assets
Argentina has been one of Telecom Italia’s three core markets, along with Italy and Brazil, and accounted for about 13 percent of 2012 revenue. Telecom Italia also has a presence in Paraguay through its indirect stake in Buenos Aires-based Telecom Argentina.
Telefonica, which in September increased its holding in Telecom Italia, favors selling the Italian company’s Brazilian division, Tim Participacoes SA (TIMP3), people familiar with the matter have said. Tim has a market value of $11.5 billion and Telecom Italia owns a 67 percent stake.
Among other assets on sale, Telecom Italia has said it expects to reap more than 2 billion euros for its mobile-phone towers and the TI Media Broadcasting unit.
Patuano said last week that the company had received a $1 billion offer for the Argentine unit, without naming the bidder.
Yesterday, Telecom Italia said its offices were inspected by stock market regulator Consob and Italian financial police seeking information about the convertible-bond sale and the Argentina disposal.
Asati, a group of Telecom Italia small investors, said Nov. 11 that minority shareholders were discriminated against in the sale of the convertible bonds. Asati also asked Consob for clarification of the Argentina sale, saying the phone company hadn’t provided enough details about the deal.
By Camila Russo
November  13, 2013
By exploiting Argentina’s illegal currency market, buyers are extracting 39 percent discounts on luxury imports such as the Porsche 911 Carrera S sports car and creating the biggest foreign auto boom in five years.
It’s also exacerbating the fastest drain on the nation’s dollar reserves in a decade, sparking a government clampdown as it tries to preserve the primary source of cash for creditor payments. Argentines who buy a car valued at more than 350,000 pesos ($58,600) will now be required to justify the transaction with the Financial Information Unit, the nation’s money-laundering watchdog, according to a Nov. 11 decree.
Argentina, whose reserves dropped below those of Angola, Lebanon and Romania this year, is boosting its currency controls as consumers faced with 25 percent annual inflation turn to everything from luxury cars to gold and bitcoins as a store of savings. Surging demand for premium models from Volkswagen AG’s Porsche and Bayerische Motoren Werke AG is fueling a 33 percent jump in automobile imports this year.
“It’s clear that the government is keeping an eye on luxury cars because sales are rising at very high rates while the economy loses foreign currency,” Gonzalo Dalmasso, vehicle industry analyst at research company, said by telephone from Buenos Aires. “It won’t make a big change, but at this point the objective is just to contain the situation.”
Land Rovers
To lock in the discount, Argentines sell dollars in the black market, where the U.S. currency fetches 9.8 pesos, and use the proceeds to buy vehicles imported at the official exchange rate of 5.9762. As the gap between the two rates has swelled over the past two years, the number of Argentines seeking to exploit it by buying imported vehicles has grown, Dalmasso said.
The government measure is aimed at discouraging these buyers by forcing them to disclose information including bank account details and tax returns, he said.
Car imports accounted for 9.2 percent of the total $56.3 billion of imports as of September, up from 7.7 percent in the same period last year, according to the latest data from the National Statistics and Census Institute.
Dealers sold 87,014 cars in October, 24 percent more than a year ago and a record for the month, according to the country’s dealer association, Acara. Sales are headed to a record 930,000 this year, the Nov. 4 report said. Imported cars accounted for 60 percent of sales.
Sales of luxury cars are rising the most this year, with purchases of Tata Motors Ltd.’s Land Rover brand jumping 170 percent, the biggest increase out of the 40 brands in the Acara report. Alfa Romeo, BMW and Porsche were next, with gains in sales of 139 percent, 96 percent and 76 percent, respectively.
‘Best Year’
“It’s been our best year in a long time,” said Martin Gerona, a sales executive at a BMW dealership in Avenida del Libertador in Buenos Aires. “People come in with their minds set on buying. They don’t think about it too much. They just come and leave with a new car because it’s become a very good deal with the gap in the exchange rates.”
BMW dealers sold 390 cars in October and 3,699 this year through October.
For would-be Porsche enthusiasts, the 911 Carrera S costs about 1.4 million pesos in Buenos Aires, or $234,000 at the official exchange rate. A prospective buyer can purchase the same car by exchanging just $143,000 in the black market, resulting in a 39 percent discount.
The most expensive 911 Carrera S listed on New Country Porsche of Greenwich, Connecticut, costs $124,365, according to the dealership’s website.
Peanut Exports
The surging demand for imported cars, along with an increase in energy imports and spending by Argentine tourists abroad, contributed to a $10.6 billion drop in reserves this year, the fastest rate since 2002, a year after Argentina defaulted on $95 billion of debt. The current level of $32.7 billion is the lowest since January 2007.
The government had sought to compensate dollar demand from car importers by forcing companies to export national products. This prompted Porsche to ship wine, Mitsubishi Motor Corp. to export peanuts and imported Subarus were matched by sales of chicken feed to Chile.
While the latest measure will probably cause sales to slow, it won’t be enough to contain the fall in reserves, according to Camilo Tiscornia, a former economist at the central bank who currently runs C&T Asesores Economicos in Buenos Aires.
“The boom will cool a bit because it’ll make the process more bureaucratic and people who are going to the black market may find it hard to justify where they got the funds,” Tiscornia said in a telephone interview. “But this alone won’t be enough to contain dollar outflows.”
Inflation Hedge
Argentina started using reserves to pay debt in 2010 and plans to draw $8 billion of the funds through the end of the year. Its borrowing costs of 11.2 percent are almost double the average for emerging markets, according to JPMorgan Chase & Co.
South America’s second-biggest economy still has almost five times the dollars it needs to pay $6.8 billion of principal and interest due on its foreign currency government bonds next year, according to Economy Ministry data.
While Argentines see investing in cars as a good alternative to holding pesos that have weakened 20 percent in the last year, luxury models are especially attractive. Unlike cheaper options built locally or in the Mercosur trade block, BMWs and Porsches are imported with prices set at the official rate, making them relatively cheaper, Dalmasso said.
Cars tend to drop about 15 to 20 percent when driven off the lot and then appreciate at about 18 percent a year due to inflation, according to an In comparison, the benchmark deposit rate, or what banks pay on 30-day deposits of more than 1 million pesos, was 19.19 percent on Nov. 11.
“In Argentina, used-car prices increase, which might seem strange to countries with no double-digit inflation,” Dalmasso said. “You won’t make money with a car but you’ll hedge against inflation and at least it’ll be more enjoyable than keeping the money in the bank.”
November 13, 2013
Uncertainty regarding Argentina’s mining industry caused Stillwater Mining Company (NYSE: SWC, TSX: SWC.U) to lower the value of its Altar mineral property and take an impairment charge of $290.4 million, the firm said in its third quarter earnings.
The write-down led to a third quarter net loss of $201.5 million, or $1.69 per diluted share, for Stillwater, compared to net earnings of $13.1 million, or 11 cents per diluted share for the third quarter of 2012.
“The business climate in Argentina of late has clouded the outlook for exploration and mining development there,” said Terry Ackerman, Stillwater interim chief executive officer, during the company’s conference call Wednesday. “A number of mining projects in Argentina have been scaled back recently leading us to conclude that was appropriate to reassess the carry value of Altar’s mineral asset.”
According to several media reports, Argentina has been come unappealing for the mining sector due to high costs, capital controls and legal insecurities. In the last few months the Argentine government has tried to control capital outflows with measures including forced repatriation of export revenues on local markets and forcing company to purchase equipment locally.
The property has a new fair value of $102 million and its future could be in doubt. During the conference call the company wasn’t able to comment on any future plans for the Altar project, saying that they will hold it for now and address what to do with it in 2014.
Despite the write-down, Stillwater’s earnings were positive as the company saw strong growth in the recycling sector. Greg Wing, vice president and chief operating officer of Stillwater, said that without the write down the estimated net income for the third quarter would have been about $25 million.
“Total revenues from mining and recycling in this year’s third quarter were $280 million, up 55% relative to the third quarter of 2012,” Wing said.
According to the earnings statement, revenues from recycled platinum group metals totaled $156.8 million in the last three months and more than doubled the revenues of $74 million during the same period in 2012.  The revenue from mine production for the third quarter totaled $123.2 million.
Wing pointed out that the increase in revenue from recycled material helped lower the company’s cash costs to a range of $530 to $540 per mined ounce from the previous guidance of $560 per mined ounce.
Although the margins on recycled PGMs are roughly around 3% to 4%, Wing said there are no major expenses and the company can “turn” those margins four or five times during the year.
“It turns out to be a really nice business,” he said.
During the conference, call the company also said it will start shifting its focus away from the jewelry side of the industry. Ackerman said that according to media reports, inventories appear to be tight and with higher vehicle sales in North America and China, he is expecting demand for PGMs to remain strong in the long-term.
The shift away from the jewelry industry could be seen in the company’s marketing budget; Wing said that for the third quarter the company spent only $200,000 in marketing, down sharply from $1.9 million spent in the third quarter of 2012.
“In the face of steadily increasing demand for PGMs in catalytic converters, we believe the opportunity for palladium growth in the jewelry sector likely will be constrained,” he said.
Despite the third quarter write-down, Ackerman remains optimistic about the company’s future and platinum and palladium market.
Uncertainty regarding Argentina’s mining industry caused Stillwater Mining Company (NYSE: SWC, TSX: SWC.U) to lower the value of its Altar mineral property and take an impairment charge of $290.4 million, the firm said in its third quarter earnings.
The write-down led to a third quarter net loss of $201.5 million, or $1.69 per diluted share, for Stillwater, compared to net earnings of $13.1 million, or 11 cents per diluted share for the third quarter of 2012.
“The business climate in Argentina of late has clouded the outlook for exploration and mining development there,” said Terry Ackerman, Stillwater interim chief executive officer, during the company’s conference call Wednesday. “A number of mining projects in Argentina have been scaled back recently leading us to conclude that was appropriate to reassess the carry value of Altar’s mineral asset.”
According to several media reports, Argentina has been come unappealing for the mining sector due to high costs, capital controls and legal insecurities. In the last few months the Argentine government has tried to control capital outflows with measures including forced repatriation of export revenues on local markets and forcing company to purchase equipment locally.
The property has a new fair value of $102 million and its future could be in doubt. During the conference call the company wasn’t able to comment on any future plans for the Altar project, saying that they will hold it for now and address what to do with it in 2014.
Despite the write-down, Stillwater’s earnings were positive as the company saw strong growth in the recycling sector. Greg Wing, vice president and chief operating officer of Stillwater, said that without the write down the estimated net income for the third quarter would have been about $25 million.
“Total revenues from mining and recycling in this year’s third quarter were $280 million, up 55% relative to the third quarter of 2012,” Wing said.
According to the earnings statement, revenues from recycled platinum group metals totaled $156.8 million in the last three months and more than doubled the revenues of $74 million during the same period in 2012.  The revenue from mine production for the third quarter totaled $123.2 million.
Wing pointed out that the increase in revenue from recycled material helped lower the company’s cash costs to a range of $530 to $540 per mined ounce from the previous guidance of $560 per mined ounce.
Although the margins on recycled PGMs are roughly around 3% to 4%, Wing said there are no major expenses and the company can “turn” those margins four or five times during the year.
“It turns out to be a really nice business,” he said.
During the conference, call the company also said it will start shifting its focus away from the jewelry side of the industry. Ackerman said that according to media reports, inventories appear to be tight and with higher vehicle sales in North America and China, he is expecting demand for PGMs to remain strong in the long-term.
The shift away from the jewelry industry could be seen in the company’s marketing budget; Wing said that for the third quarter the company spent only $200,000 in marketing, down sharply from $1.9 million spent in the third quarter of 2012.
“In the face of steadily increasing demand for PGMs in catalytic converters, we believe the opportunity for palladium growth in the jewelry sector likely will be constrained,” he said.
Despite the third quarter write-down, Ackerman remains optimistic about the company’s future and platinum and palladium market.
November 13, 2013
Nov 13 (Reuters) – The International Monetary Fund’s board plans to meet on Dec. 9 to review a fund report about Argentina’s economic data, following concerns about the quality of official figures, the IMF said on Wednesday.
The IMF, which requires accurate statistics to analyze the world’s economies, censured Argentina in February for failing to improve the accuracy of its inflation and gross domestic product data. It gave Buenos Aires until Sept. 29 to take action.
IMF staff prepared a report including Argentina’s official response, which they presented to the board on Wednesday, IMF spokesman Gerry Rice said in an e-mailed statement. He declined to provide further details about the report or its contents.
Analysts have accused Argentina’s government of under-reporting inflation since early 2007 for political gain and to reduce payments on its inflation-indexed debt.
Inflation has been around 25 percent for several years, according to private estimates, one of the highest rates in the world. The government says inflation is less than half that.
IMF head Christine Lagarde last Sunday said Argentina had made “positive progress” in reforming its data.
If Argentina fails to make progress, the IMF board could choose to impose sanctions, barring Latin America’s third-largest economy from voting on IMF policies and accessing financing.
By Hugh Bronstein
13 November 2013
BUENOS AIRES, Nov 13 (Reuters) – Argentina’s next leader will likely try to end interventionist policies that scare off investment, although any reform effort is sure to hit a wall when it comes to cutting popular subsidies that also distort the economy.
Global oil companies, eager to tap Argentina’s vast Vaca Muerta shale reserves, took notice last month when allies of President Cristina Fernandez got thumped in the midterm congressional election.
The result set the stage for a market-friendly candidate to win the presidency in 2015 and raised expectations that the country might become safer for foreign capital after a decade of nationalizations and heavy-handed currency controls.
The question is whether Argentina’s next leader can do enough to trigger the tens of billions of dollars in foreign investment needed to exploit Vaca Muerta (Dead Cow) and put an end to expensive energy imports.
“Any change in direction toward a more investment-friendly environment would increase interest. But the devil is in the details of which policies can be reformed,” said an official at a top global oil company, who described Vaca Muerta as a “very enticing formation.”
“Every oil company has a different threshold in terms of the risk they’ll be willing to take,” added the official, who asked not to be named.
Fernandez has not chosen a successor to run when her second term ends in two years, her coattails cut short by 25 percent inflation and an unpopular ban on buying dollars, the currency of choice for savers seeking shelter from the wobbly local peso.
The midterm threw the October 2015 presidential election wide open by slamming the door on Fernandez’s chances of clinching a change in the constitution to allow her to run for a third term, as had been proposed by her allies in Congress.
The market has already caught an intoxicating whiff of change. Since the August midterm primary showed Fernandez losing influence, the Merval stock index has leaped 48 percent.
Yet even Fernandez’s most free-market-oriented opponents shudder to think of the political consequences of ending energy subsidies that voters have come to rely on as a buffer against soaring consumer prices.
“Whoever wins will have to make a lot of populist promises. They won’t have the political leeway to hike prices of things that are subsidized or price controlled. So you will have a continuation of the inefficiencies that you see now,” said Karen Hooper, an analyst with the U.S.-based Stratfor consultancy.
Re-elected in 2011 on promises of deepening the government’s role in the economy, Fernandez has clamped down on access to U.S. dollars in a bid to halt capital flight, erected import barriers that make it hard for businesses to get needed inputs and stopped foreign-owned businesses from repatriating profits.
Central bank reserves have sunk 24 percent to $33 billion so far in 2013. Shunned by the global bond market, Fernandez uses the bank to pay government debts, finance the Treasury and prop up an overvalued currency.
The peso’s official rate is about six to the greenback while the black market rate is reaching toward 10 units per dollar.
Sergio Massa, mayor of the Buenos Aires suburb of Tigre, is an up and coming opposition leader who says he wants to reduce inflation as well as the interventionist policies that have hurt farm profits in the world’s No. 3 soybean and corn exporter.
His economic team is headed by former cabinet ministers who are strong critics of Fernandez’s economic populism.
Another possible candidate is Buenos Aires governor Daniel Scioli. Officially, he is a Fernandez ally, but business sees him as far preferable to the incumbent.
Despite their pro-market stance, it would be political suicide for either to suggest cutting back popular subsidies that are partly blamed for high inflation.
Should either of them win the presidency, they would be more likely to take on unpopular currency controls and interventions in grains markets – such as corn and wheat export curbs and high soybean export taxes – that are hated by Argentina’s farmers.
That could be enough to reassure foreign firms and investors that the political tide is turning away from populism.
Argentina needs help to complete its five-year, $35 billion investment program in the untapped Vaca Muerta shale formation that lies under the country’s windswept Patagonian plains.
Investors have been scared off after Fernandez seized oil company YPF, accusing its former parent, Spain’s Repsol, of underproduction.
Argentina’s oil and natural gas output has declined since 2006 while families continue to enjoy subsidized energy, turning the country into a net oil and gas importer.
YPF estimates Vaca Muerta contains 661 billion barrels of oil and 1,181 trillion cubic feet of natural gas, making it one of the biggest shale reserves in the Western Hemisphere.
Investment in the formation has however come very slowly.
Dow Chemical Co has signed on to invest up to $120 million in 16 Vaca Muerta gas wells and oil giant Chevron Corp has agreed to invest $1.24 billion in the formation.
To clinch the deals, Argentina has allowed the companies to export tax free up to 20 percent of what they produce. Export revenue of companies that invest at least $1 billion over five years are exempt from government foreign exchange controls.
Despite these signs of flexibility, Argentina remains a high risk investment. Fernandez, sidelined since early October by a cerebral hematoma, may yet find a second wind allowing her to exert more influence than expected over contest to succeed her.
“The two year transition ahead will be plagued with uncertainties,” said Ignacio Labaqui, a local analyst with the Medley Global Advisors emerging markets consultancy in New York.
13 November 2013
BUENOS AIRES, Nov 13 (Reuters) – Argentina’s economy likely expanded by 3.9 percent in September versus the same month last year as consumption increased while industrial production slowed, according to the median estimate from nine analysts polled by Reuters.
If the forecast proves accurate it would mark a slight slowdown from the 4 percent growth in economic activity recorded in August, which exceeded analyst’s expectations for that month.
The survey for September yielded estimates ranging from 1.5 percent to 5.6 percent growth in the monthly EMAE economic activity index, which is a close proxy for gross domestic product.
The reading should benefit from a low base of comparison – Argentina’s economy contracted 0.7 percent in September 2012 compared with a year earlier. The month also had more business days this year, leaving more time for commerce.
“September had the statistical effect of having more working days,” said Inaki Alvarez, an analyst at Bein & Associates. “Specifically, consumption indicators, such as construction … were positive throughout the month.”
Latin America’s No. 3 economy grew 1.9 percent last year, the lowest expansion since 2009, and the government expects 5.1 percent GDP growth for 2013.
Industrial production shrank 0.2 percent in September from a year ago, data released on Oct. 28 showed.
The International Monetary Fund censured Argentina in February for failing to improve the accuracy of its inflation and gross domestic product data and said on Wednesday it would meet on Dec. 9 to review a report on the topic.
The EMAE reading for September will be published on Friday around 1900 GMT. Monthly inflation data will be released on the same day.
13 November 2013
Michelle Bachelet, former president and clear favorite in Chile’s presidential elections Sunday (Nov 17), looks to promote energy swaps between Chile and Argentina.
The opportunity would be interesting given the high power prices in northern Argentina and the surplus power on Chile’s northern SING grid and lack of gas in Chile. However, Argentina shut off pipelines in 2007 which in turn caused a spike in power prices and a rapid buildup of coal plants and LNG terminals in Chile.
“If they shut of the valve [again], we cut the power elsewhere; tit-for-tat,” said Bachelet’s senior advisor and former public works minister Eduardo Bitran.
“It would be a different strategic pretense than in the past in terms of dependency, because both [parties] would have something to lose this time,” said Bitran at an energy conference in Santiago organized by power transmission council Cigre Chile.
Earlier this year generator AES Gener informed Chilean grid operator CDEC-SING of its intentions to link the two countries’ grids via its 345kV line which connects the SING to the generator’s 643MW TermoAndes plant in Salta, on Argentina’s SADI grid. Bilateral negotiations on a possible interconnection took place in August.
In addition to energy swaps Argentina, Bitran presented 12 other short-term power sector initiatives which form part of Bachelet’s plan for her first 100 days in office.
Among the initiatives to improve competition in a market where four companies indirectly control more than 80% of power generation were the increased usage of LNG terminals and closing combined cycle units; a push for the interconnection of the central SIC and SING grids in 2016-2017; and modifications to distributor power auctions to eliminate barriers for nonconventional renewable energy.
Laying groundwork for a 2030 energy matrix plan and changes to transmission line planning were also included in the short-term goals.
By Donald G. McNeil Jr.
14 November 2013
The idea came to Jorge Odón as he slept. Somehow, he said, his unconscious made the leap from a YouTube video he had just seen on extracting a lost cork from a wine bottle to the realization that the same parlor trick could save a baby stuck in the birth canal.
Mr. Odón, 59, an Argentine car mechanic, built his first prototype in his kitchen, using a glass jar for a womb, his daughter’s doll for the trapped baby, and a fabric bag and sleeve sewn by his wife as his lifesaving device.
Unlikely as it seems, the idea that took shape on his counter has won the enthusiastic endorsement of the World Health Organization and major donors, and an American medical technology company has just licensed it for production.
With the Odón Device, an attendant slips a plastic bag inside a lubricated plastic sleeve around the head, inflates it to grip the head and pulls the bag until the baby emerges.
Doctors say it has enormous potential to save babies in poor countries, and perhaps to reduce cesarean section births in rich ones.
”This is very exciting,” said Dr. Mario Merialdi, the W.H.O.’s chief coordinator for improving maternal and perinatal health and an early champion of the Odón Device. ”This critical moment of life is one in which there’s been very little advancement for years.”
About 10 percent of the 137 million births worldwide each year have potentially serious complications, Dr. Merialdi said. About 5.6 million babies are stillborn or die quickly, and about 260,000 women die in childbirth. Obstructed labor, which can occur when a baby’s head is too large or an exhausted mother’s contractions stop, is a major factor.
In wealthy countries, fetal distress results in a rush to the operating room. In poor, rural clinics, Dr. Merialdi said, ”if the baby doesn’t come out, the woman is on her own.”
The current options in those cases are forceps — large, rounded pliers — or suction cups attached to the baby’s scalp. In untrained hands, either can cause hemorrhages, crush the baby’s head or twist its spine.
Although more testing is planned on the Odón Device, doctors said it appeared to be safe for midwives with minimal training to use.
Along the way, it has won research grants from the United States Agency for International Development and from Grand Challenges Canada. ”We’ve given out $32 million for 61 different innovations, and this one is the farthest along,” said Dr. Peter A. Singer, the chief executive of Grand Challenges Canada.
The device will be manufactured by Becton, Dickinson and Company, or BD, of Franklin Lakes, N.J., which is better known for making syringes.
”My first reaction, as soon as I saw it, was positive,” said Gary M. Cohen, the company’s executive vice president for global health. It was at the World Economic Forum in Davos, Switzerland, that Dr. Merialdi asked him to consider taking it on.
”Many inventions get to the prototype stage, but that’s maybe 15 percent of what needs to be done,” Mr. Cohen said. ”There’s finalizing the design for manufacture, quality control, the regulatory work and clinical studies. Absent that, they don’t see the light of day.”
So far, the device has been safety-tested only on 30 Argentine women, all of whom were in hospitals, had given birth before and were in normal labor.
”I was glad they asked me, because it was for a good cause,” said Luciana Valle, a kindergarten teacher who was 31 two years ago when her son, Matteo, was one of the first babies extracted with the device. Because Matteo weighed almost nine pounds, ”it really helped,” she said in a telephone interview. ”His head came out on my second push.”
The W.H.O. will now oversee tests on 100 more women in normal labor in China, India and South Africa, and then on 170 women in obstructed labor.
In a telephone interview from Argentina, Mr. Odón described the origins of his idea.
He tinkers at his garage, but his previous inventions were car parts. Seven years ago, he said, employees were imitating a video showing that a cork pushed into an empty bottle can be retrieved by inserting a plastic grocery bag, blowing until it surrounds the cork, and drawing it out.
That night, he won a dinner bet on it.
At 4 a.m., he woke his wife and told her the idea that had just come to him. (His own children were born without problems, he said, but he has an aunt who suffered nerve damage from birth.)
His wife, he recalled, ”said I was crazy and went back to sleep.”
The next morning, a somewhat skeptical friend introduced him to an obstetrician. ”You can imagine these two guys in suits in a waiting room full of pregnant ladies,” he said.
The doctor was encouraging, so he kept working. Polyethylene replaced the bag his wife had sewn, and the jar was replaced by a plastic uterus.
With the help of a cousin, Mr. Odón met the chief of obstetrics at a major hospital in Buenos Aires. The chief had a friend at the W.H.O., who knew Dr. Merialdi, who, at a 2008 medical conference in Argentina, granted Mr. Odón 10 minutes during a coffee break.
The meeting instead lasted two hours. At the end, Dr. Merialdi declared the idea ”fantastic” and arranged for testing at the Des Moines University simulation lab, which has mannequins more true-to-life than a doll and a jar.
Since then, Mr. Odón has continued to refine the device, patenting each change so he will eventually earn royalties on it.
”My daughter said, ‘And now I can have my doll back,’ ” he said.
It is too early to know what BD will charge, Mr. Cohen said, but each device should cost less than $50 to make. While the company expects to profit on all sales, it will charge poor countries less.
Dr. Merialdi said he endorsed a modest profit motive because he had seen other lifesaving ideas languish for lack of it. He cited magnesium sulfate injections, which can prevent fatal eclampsia, and corticosteroids, which speed lung development in premature infants.
”But first, this problem needed someone like Jorge,” he said. ”An obstetrician would have tried to improve the forceps or the vacuum extractor, but obstructed labor needed a mechanic. And 10 years ago, this would not have been possible. Without YouTube, he never would have seen the video.”

ARGENTINE UPDATE – Nov 12, 2013 Bis

14 noviembre, 2013


Buenos Aires Herald
10/11/2013 |
  • Dictatorship’s archives take centre stage

    By Luciana Bertoia
    Discovery reignites the debate over Papel Prensa case following the ruling on Media Law

    The discovery of the dictatorship-era archives announced last week by Defence Minister Agustín Rossi reignited a debate over how those documents should be used in the trials against perpetrators who are currently being held in the country and the role state authorities should play in the information disclosure.

    On Monday, Rossi called a press conference to announce that around 1500 documents concerning repression unleashed by the military regime that ruled Argentina between 1976 and 1983, had been found in a cellar at the Air Force building the previous week and handed over by an officer.
    In his presentation, Rossi made clear that the discovery included archives referring to Papel Prensa, the largest manufacturer of newsprint in the country. Rossi’s words seemed to attempt to restart a long-running battle between the Kirchnerite administration and Clarín media group, days after the Supreme Court had put an end to the main legal conflict between both parties by declaring the Broadcast Media Law constitutional .
    “The thing is that they bought Papel Prensa newsprint and that situation was discussed by the Junta members. It’s obvious that it was not a minor topic,” Rossi yesterday stated in reference to Clarín media group, adding that there are 13 dictatorship’s minutes referring to the controversial transfer. The minister also dismissed criticism from those who questioned the announcement.
    Papel Prensa case
    The corroded relationship between Kirchnerism and the media giant was worsened when the Media Law was passed in 2009, risking Clarín’s profitability, and then when two cases regarding human rights violations were reignited by the Cristina Fernández de Kirchner administration: the strange purchase of Papel Prensa newsprint and the irregular adoption of Marcela and Felipe Noble Herrera, the owner of Clarín’s children, during the dictatorship. War was soon declared.
    In August, 2010, the president ordered then-Human Rights Secretary Eduardo Duhalde to file a suit to request the Judiciary to investigate how Papel Prensa was sold during the dictatorship. The issue was also left in the hands of the controversial Domestic Trade Secretary Guillermo Moreno, who released the brief “Papel Prensa, the truth.”
    The original Papel Prensa idea was floated by dictator Juan Carlos Onganía, who ruled the country between 1966 and 1970 and wanted to establish a newsprint manufacturer in order to promote industrialization via import substitution. But Papel Prensa SA was actually founded in 1971, during Alejandro Lanusse’s dictatorship.
    Later, during Juan Perón’s third presidency (1973-1974), businessman David Graiver, allegedly linked to the left-wing Peronist organization Montoneros, purchased the private shares of the newsprint. Graiver died in a strange plane accident in México in August, 1976. His heirs were his wife, Lidia Papaleo, and his daughter Sol. Papaleo and other members of the so-called Graiver group were reportedly kidnapped by the dictatorship squads, tortured and forced to sell Papel Prensa newsprint to Fábrica Argentina de Papel para Diarios (FAPEL SA) on November 2, 1976, which later sold its shares to the dailies La Nación, Clarín and La Razón.
    The Kirchnerite administration recalled the reports made by the irregular transfer of Papel Prensa in 1985 and in 1988, when Prosecutor Ricardo Molinas said that the Graiver Group was not able to select its buyer and that a “throw-away price” was paid for the transfer.
    The case filed in 2010 was aimed at showing the connection between the kidnappings and the transfer but the investigation currently led by Judge Julián Ercolini has not made as much progress as the government might have expected.
    “We have filed several requests before Judge Ercolini to ask him to move forward in the case,” Agustín Di Toffino, the Secretary-General of the Federal Council from the Human Rights Secretariat, told the Herald, adding that the discovery raised expectations among the officials working at the Secretariat headed by Martín Fresneda.
    “The archives found could be important evidence in the Papel Prensa case. We are going to provide that information to the judge,” he added. Though he praised the information that the documents contained, he said that experts from the Defence Ministry were analyzing them and denied having seen the material.
    Di Toffino, a former member of the organization HIJOS (that groups children of disappeared parents), said that the evidence regarding the Papel Prensa case could be disclosed in the following weeks, though the ministry headed by Rossi said that the total analysis of the document might take around six months.
    Announcement reignites debate
    The discovery made public by Rossi raised doubts among some members of the human rights movement while others celebrated the news.
    “It’s great that the Armed Forces were the ones to hand over the evidence, Lidia “Taty” Almeida, the iconic figure of Mothers of Plaza de Mayo, celebrated on Friday evening at a meeting held at the ESMA memorial.
    “The finding made it clear that we were right when we demanded the state authorities to open the archives,” survivor Nilda Eloy and also one of the workers from the Buenos Aires province Memory Archive told the Herald.
    “They can have access to this material and I found it quite surprising that they have not entered the room where the documents were found for the last ten years,” the member of the Association for Former Detained- Disappeared (AEDD) added.
    Sociologist Daniel Feierstein said that it would be necessary to wait until after all the archives are released and made available to make a complete analysis.
    “But I think it’s good news and it shows that there could be more information locked somewhere, so the point would be investing more resources in order to locate it,” the head of the International Association of Genocide Scholars explained to the Herald.
    As anthropologist Ludmila da Silva Catela points out in one of her papers, the memory archives available in the country are mainly from the security forces. The one being currently analyzed was found in the Air Force’s main headquarters, which also adds to its intrigue.
    Every time those secret archives were discovered, an institution to protect them was established but this seems not to be the case now.
    Rossi has announced that the Air Force will be in charge of protecting the documents as a sign of change in one of the armed forces that unleashed repression in the country, focusing mainly in the Western part of Buenos Aires province.
    “I think there are many places and many experts who can analyze and protect those documents in a better way,” Nilda Eloy highlighted, adding: “The Air Force was in charge of producing those documents about the repression, so they shouldn’t be allowed to hold on to them.”
    There are also other debates taking place on whether the information should be distributed among those newspapers aligned with the government before it is publicly released. Should repression archives be used discretionarily by the government?
    All in all, secret archives ring “fetish.” Secret, prohibited, when they are discovered, they are thought to be a talisman that can prove what survivors, relatives and experts have been reporting for decades.
November 11, 2013
BUENOS AIRES, Argentina — Argentine President Cristina Fernandez needs one more week’s rest before she can go back to work after head surgery, doctors announced Monday, recommending that she not resume formal activities before Nov. 18.
That would add up to a six-week absence for the normally loquacious leader, who has vastly increased executive power during her eight years in the presidency, and many Argentines have wondered out loud who has been making decisions in her stead.
The 60-year-old leader has been in total seclusion, following doctors’ orders to avoid all stress, since neurosurgeons opened her skull on Oct. 8 to remove blood from burst vessels that had been pressuring her brain.
The doctors’ report on Monday was positive, saying she has no major heart trouble other than an occasional blockage on her left side that requires continued monitoring.
Presidential spokesman Alfredo Scoccimarro said that the return date was set by her surgeons at Favaloro hospital but that all future reports on her health will come instead from the presidential medical unit.
Argentines are ill-accustomed to silence from Fernandez, and even her small circle of close advisers has had reduced access to her, sending conflicting messages about how involved she has been with the country’s day-to-day affairs.
For a leader who is usually on television nearly every day and capable of sending dozens of Twitter messages at a time, the situation has prompted no end of conspiracy theories about her intentions.
Vice President Amado Boudou, still nominally in charge, has tried to tamp down the speculation.
“Not one day has she left aside her administration,” he insisted at a rally Monday. “We’re very happy that she’s returning. Be strong, Cristina!”
By Ken Parks
November 11, 2013
Argentine President Will Return Nov. 18 After Recovering From Head Surgery Last Month
Argentine President Cristina Kirchner faces high inflation, depleting foreign-currency reserves and a political succession struggle when she resumes her duties on Nov. 18 after recovering from head surgery last month.
Mrs. Kirchner passed medical tests and will retake the reins of government from her vice president on Monday, said her spokesman, Alfredo Scoccimarro, in a televised address.
Mrs. Kirchner, 60 years old, is recovering from an Oct. 8 operation to drain a blood clot near her brain that was caused by a head injury. The president’s medical team ordered Mrs. Kirchner to avoid flying for 30 days and to return for additional tests next month.
Argentina’s economy is hobbled by inflation and foreign currency shortages.
Inflation has been running at or above 20% for almost four years, according to many economists. Private-sector forecasts currently put annual inflation at about 25%, compared with the 10.5% reported by the government.
High inflation led to a run on Argentina’s foreign currency reserves two years ago as Argentines and foreigners tried to pull money out of the country. The Kirchner administration has so far managed to avoid devaluating the Argentine peso by strictly rationing the hard currency it makes available to people and businesses.
The upshot is a small, but vibrant currency black market where the U.S. dollar fetches a 64% premium to the greenbacks the government sells to the public through the regulated foreign-exchange market. The gap between those exchange rates has aggravated inflation as some businesses reprice goods based on the black-market rate.
Currency controls haven’t stopped reserves from approaching a seven-year low of about $33 billion as debt payments, persistent capital flight and fuel imports outweigh dollar inflows from exports.
“The most urgent matter that needs to be addressed are reserves,” said Fausto Spotorno, an economist at consulting firm Orlando J. Ferreres & Asociados. “The loss of reserves has accelerated and now we are losing almost $1 billion a month even with controls.”
The government could stanch dollar outflows by further limiting imports or making it more difficult for Argentines to shop and travel abroad if its willing to pay the economic price.
“The impact on the economy from more restrictions will probably be negative,” Mr. Spotorno said.
Mrs. Kirchner will also have her hands full shaping the succession struggle within the ruling Peronist movement during her last two years in office.
Her Peronist faction, the Victory Front, retained its majorities in both houses of Congress in midterm elections Oct. 27, but fell well short of the support needed to reform the constitution so she could run again in 2015.
Peronist moderates like Mayor Sergio Massa and Daniel Scioli, the popular governor of Buenos Aires province, have already signaled plans to run for president—offering voters an alternative to Mrs. Kirchner’s confrontational brand of left-wing Peronism. Investors have bid up Argentine stocks and bonds in hopes that Mrs. Kirchner will be succeeded by a more business-friendly leader.
Peronists are notorious for abandoning leaders who are perceived to be on their way out of power, and Mrs. Kirchner will have to guard against defections from the Victory Front to other Peronist factions seen as best positioned to win the presidency.
Juggling a deteriorating economy and a political succession would be a tough job for any leader, much less one with a long history of health problems. In recent years, low blood pressure forced Mrs. Kirchner to suspend her activities for several days and cancel international trips. In January 2012, surgeons removed a noncancerous growth on her thyroid gland
By David Luhnow and Taos Turner
11 November 2013
David Martinez’s Group to Buy Telecom Firm for $960 Million; Investor Sees Potential Despite Government Policies
BUENOS AIRES — As head of a hedge fund that specializes in distressed debt, David Martinez has had lots of practice trying to figure out when an asset’s value has been beaten down so much that it is a buy. He has just made an unusual call: Invest in Argentina.
Mr. Martinez’s investment group, Fintech Advisory, plans to buy Telecom Argentina and related assets for $960 million from Telecom Italia, which is selling its Argentine unit to pay down debt. Mr. Martinez confirmed the purchase Friday.
Argentina has been a cautionary tale for many investors since its 2001 default on $100 billion in sovereign debt. Since then, a husband-and-wife team of populist politicians, the late Nestor Kirchner and his wife, President Cristina Kirchner, has used higher commodity prices and public spending to get the economy back on its feet. But it has come at the cost of high inflation, price controls and growing fiscal problems.
The Kirchners have also repeatedly gone mano a mano with big business, including a long battle with the country’s top soy farmers as well as having nationalized oil company YPF SA, previously owned by Spain’s Repsol SA. Mrs. Kirchner’s government is now moving to force media giant Clarin SA to break up its business.
“Argentina presents incredible long-term growth opportunities, in my view the highest in Latin America,” said Mr. Martinez in an interview. “There is tremendous value in the company. Clearly Argentine values are depressed, but the long-term potential is overwhelming.”
Mr. Martinez was born in Mexico and dropped out of a seminary to become a financier. He made a fortune investing in distressed debt from Mexico to India and Pakistan. While he may hunt for bargains in the investment world, Mr. Martinez is known as a free spender in his personal life. He set a record in 2003 for having spent about $42 million for an apartment in Manhattan atop the Time Warner Center. He now spends most of his time in London.
Mr. Martinez is part of a small group of investors who are willing to overlook Argentina’s status as a financial pariah and bet long term. Mrs. Kirchner’s term ends in 2015, and many investors expect the next government to be more pragmatic and less hostile to business. Chevron Corp. recently agreed to fund most of a $1.5 billion joint venture with YPF to develop Argentina’s vast shale oil and gas deposits.
Still, while Argentina may look appealing down the road, risks abound, said Jorge Mariscal, chief investment officer of emerging markets at UBS Wealth Management.
“You can see light at the end of the tunnel,” Mr. Mariscal said, “but you don’t know if it’s the train coming towards you.”
Among other things, Mr. Mariscal said Argentina’s currency is overvalued. If the government suddenly let it trade freely, it could cut the value of dollar-denominated Argentine assets in half overnight, he said.
Argentina still hasn’t paid Repsol for expropriating its 51% stake in YPF last year, and the Spanish company is suing the government for $10.5 billion in compensation. Before taking over YPF, the government had expropriated Argentina’s flagship airline from another Spanish company.
In April, Brazil’s mining giant, Vale SA, decided to leave Argentina and halt work on a nearly $6 billion potash-mining project after investing $2.2 billion in the project. Like other companies, Vale struggled with rampant inflation, rising costs, a ban on sending dividends abroad and a heavily regulated foreign-exchange market.
There are also risks in the telecommunications market, as the story of Clarin shows. Mr. Martinez has seen from up close how Argentina’s government can favor a company one day and undo it the next. He has a 40% stake in Clarin’s cable-TV unit.
In 2005, Mr. Kirchner extended Clarin’s broadcast licenses for a decade and later let Clarin buy a rival cable TV company. After relations soured, however, the government stripped Clarin of lucrative soccer-broadcasting rights, seized control of a newsprint maker in which Clarin is a shareholder and passed a media law aimed at breaking up the company.
If Telecom Italia and the Argentine government give Mr. Martinez approval for Telecom Argentina, he said he hoped he could keep his minority stake in the cable firm but would comply with any decision from the government, including giving up voting rights or selling his stake. He said it had been a profitable investment.
Argentine officials say Mr. Martinez laid the groundwork for Clarin to comply with the media law by first presenting a plan that voluntarily called for the company’s breakup. And as the owner of $1 billion in Argentine bonds, he is trying to help Argentina deal with creditors suing it over the 2001 default.
There are challenges, too, in the telecommunications business. Mrs. Kirchner’s government called Telecom Argentina a monopoly a few years ago and threatened to nationalize it. Argentina hasn’t let telecom companies buy spectrum to improve mobile services, and the country has fallen behind its peers in offering options such as 4G data communications.
“There are obviously some policy limitations that exist in the short term, but that is the short term,” he said. “Overcoming that and many other difficulties involves talking to the government and negotiating. These environments are difficult and challenging but that doesn’t mean those bottlenecks can’t be overcome. I’m quite confident they will.”
Mr. Martinez could also find it challenging to compete against the local units of Mexico’s America Movil SAB and Spain’s Telefonica SA, whose size offers advantages, said Enrique Carrier, a telecom analyst. But Mr. Martinez plans to retain technical assistance from Telecom Italia, which could give him added leverage in the market.
By Benedict Mander in Buenos Aires
November 10, 2013
President Cristina Fernández’s doctors confirmed on Saturday that she was recovering well from brain surgery a month ago. But as she prepares to return to office, her priorities and ambitions have radically altered during her enforced break.
On the one hand, she suffered a big setback while in hospital from the results of Argentina’s midterm elections at the end of October. Ms Fernández failed to win the necessary congressional majority to amend the constitution and allow her to stand for a third term in 2015, and the succession battle is already under way.
On the other, just two days after the disappointing polls, the president scored a welcome victory with a Supreme Court ruling that upheld a controversial 2009 media law she herself had championed.
The ruling – that the law was constitutional – could end a bitter four-year legal battle with Argentina’s most powerful media conglomerate, Grupo Clarín, which owns the country’s most-watched broadcast network, and has been ordered to sell off dozens of operating licences.
“They have chosen Clarín as an enemy to defeat and destroy,” said Ricardo Kirschbaum, editor-in-chief of the group’s Clarín newspaper, Argentina’s widest circulating daily.
Now that re-election is out of the question, analysts say Ms Fernández will attempt to divert attention to other battles – especially with Grupo Clarín, one of her most bitter adversaries.
The new law attempts to “democratise” the media and prevent monopolies by stopping companies from having more than a 35 per cent market share in broadcast television, cable television or radio, as well as capping the number of licences that companies can own.
This means Clarín, a fierce government opponent, must now sell off some of its most lucrative assets to comply with the law, sending its share price tumbling by more than 40 per cent after the ruling. Its cable television operator Cablevision will now have to reduce its 158 licenses to a maximum of 24.
One close ally of the government, Luis D’Elía, gleefully spoke last week of chopping up Clarín “with a butcher’s knife”.
Although the new law replaces an obsolete code that dates back to Argentina’s 1976-83 dictatorship and has widespread support among civil society and free-speech advocates, many are concerned that it will be implemented arbitrarily.
Claudio Paolillo, president of the Press Freedom Commission of the Inter-American Press Association, says the media regulator is controlled by Martín Sabbatella, who openly supports the government, and adds that regulations are not applied to government-friendly media.
“We are enormously concerned that the law is being implemented with the sole objective of destroying Clarín,” said Mr Paolillo, who argues that the government’s goal is to silence the critical voices given airtime by Clarín. “That is a step backwards for the freedom of expression.”
Clarín used to be considered a government ally. Néstor Kirchner, Ms Fernandez’s husband and predecessor, allowed it to grow into the behemoth that it has become by approving its 2007 purchase of a major cable television company. However, it fell out of favour after criticising the government’s role in a row with farmers in 2008.
“This is about revenge,” said Alvaro Herrero, a senior investigator at the Laboratory for Public Policy, a think-tank in Buenos Aires.
In the past four years, the government has brought criminal charges against Clarín’s owners, even accusing one of them of adopting children abducted by the military dictatorship in the 1970s.
It has also removed football broadcasting rights from Clarín, seized newsprint producers it owned, and not only starved its newspaper of state advertising but also forbidden other companies from placing adverts in its paper, according to Mr Kirschbaum.
“If this continues and multinational companies like Carrefour and Walmart continue to obey this boycott – which is an absolute disgrace – then [the newspaper Clarín] will cease to be profitable,” said Mr Kirschbaum.
Faced with the threat of expropriation if it fails to comply with the law, last week Grupo Clarín presented a plan that would split the conglomerate up into six units, while allowing it to keep its most valuable television and radio licences.
“If the government was smart, it would accept Clarin’s plan,” said Mr Herrero, who explained that the plan was legal even if it may end up just splitting the company up between partners and family.
Mr Herrero said that if the government rejects the plan but allows other media groups to go ahead with similar proposals, Clarín could argue that, although the law itself has been determined to be constitutional, its practical application is unconstitutional, thus prolonging the legal battle – perhaps beyond Ms Fernandez’s presidential term.
Furthermore, other media groups are unlikely to move to break up their monopolies until the case with Clarín is resolved. “If Clarín doesn’t comply with the law, no one will,” said a top executive at a major Argentine media company.
By Camila Russo
November  11, 2013
Billionaire hedge fund manager Paul Singer has dismissed attempts by Argentine bondholders to orchestrate a deal that would end his legal claims against the country, calling the initiative pointless.
Exotix Partners LLC and Capital Economics Ltd. say Singer, whose Elliott Management Corp. is suing Argentina for payment on defaulted bonds, isn’t bluffing.
After a decade-long legal battle, Singer may be only months away from receiving full payment on the debt through U.S. courts, giving him no incentive to accept lesser terms in a settlement, according to Stuart Culverhouse, chief economist at Exotix. Singer’s disinterest in negotiating with owners of restructured debt led by Gramercy Funds Management LLC may halt a rally in the bonds as investors realize the legal claims against the country won’t be dropped, said Culverhouse.
Elliott officials “just want to maximize their return,” Michael Henderson, an economist at Capital Economics in London. “It’s been a decade already, so for an additional six or nine months, it’s probably well within their interest to stick with their timetable.”
Argentine dollar bonds have gained 0.9 percent since the first reports of the Gramercy-led talks to find an inter-creditor solution on Oct. 20, beating returns on emerging-market debt, which lost 1.9 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified index. The gains extended year-to-date returns to 17.8 percent, the best among developing countries after Belize.
Gramercy Plan
Gramercy’s preliminary plan calls for most holders of restructured bonds to agree to cede part of their interest payments to investors with defaulted securities in exchange for the holdouts to drop their lawsuits, according to five bondholders approached by officials from the Greenwich, Connecticut-based firm.
In order to change the terms of the notes to earmark coupon payments to holdouts, Gramercy must garner approval from holders of 75 percent of each series of bonds, according to the bond prospectus.
Katrina Allen, a spokeswoman for Gramercy at ASC Advisors LLC, declined to comment on bondholder talks or Elliott’s statement. Norma Madeo, a spokeswoman at the Economy Ministry, declined to comment on whether Argentina is willing to negotiate with holdouts or are supporting an inter-creditor plan.
Elliott said Nov. 7 it’s only willing to negotiate with the Argentine government and has no interest in holding talks with fellow bondholders.
‘Sit Down’
“We welcome the idea of good-faith negotiations with Argentina, but we don’t see the point of negotiating with other bondholders,” the New York-based fund said in an e-mail. “We have approached Argentina countless times about negotiating a resolution to this dispute. It is completely within Argentina’s power to solve this.”
Elliott money manager Jay Newman said in an Oct. 7 Financial Times editorial it’s time for Argentine President Cristina Fernandez de Kirchner’s government to “sit down and discuss a resolution” with its creditors.
Any out-of-court solution requires Argentina’s participation because it’s unlikely that Gramercy will gather the support required to make its plan work, said Diego Ferro, co-chief investment officer at Greylock, which owns Argentine exchange bonds.
“If Argentina doesn’t get involved no plan that’s originated by investors will work because they won’t pull together enough financing and participation,” he said in a telephone interview from Buenos Aires. “As soon as Argentina sits down to solve this, capital markets will open for them again.”
‘Got Personal’
Argentina hasn’t tapped international credit markets since its 2001 default on $95 billion, as it’s unwilling to pay the additional 8.14 percentage points over U.S. Treasuries that investors demand to hold the country’s dollar bonds.
Argentina offered about 30 cents on the dollar for its defaulted debt in 2005 and 2010 debt swaps, which 93 percent of creditors accepted. Fernandez has vowed never to pay the remaining 7 percent of creditors she calls “vultures” more than what was offered in the restructurings.
“It shouldn’t matter where the money comes from but another part of this is they’ve been pursuing Argentina for 10 years,” said Culverhouse at Exotix in a telephone interview from London. “Money is one thing but there’s also being proved to be right. I think things got personal a long time ago.”
Navy Ship
Elliott has tried to embargo the presidential jet Tango 01 during a fueling stop in the U.S., seize Argentine central bank funds deposited in New York and successfully grabbed a Navy ship during a stop in Ghana for two months until it was freed in an international tribunal of the sea.
Argentina may negotiate with holdouts after a clause in the exchange bond prospectus that prevents the country from offering holders of defaulted bonds better terms than those of its previous restructurings expires in December 2014, according to ACM Consultores.
“Argentina will have more flexibility after December next year to sit down and negotiate with holdouts,” Maximiliano Castillo, a former central bank manager who runs ACM, said in a telephone interview in Buenos Aires. “If the ruling hasn’t been executed by then, it may have a window of opportunity to reach a solution outside of court.”
‘Strong Position’
Argentina is trying to avoid a second default in 12 years as the court’s decision prevents third parties, including trustee Bank of New York Mellon Corp., from passing payments to bondholders unless the nation also pays holdouts. At 1,788 basis points, the nation’s debt is the most expensive in the world to protect against non-payment over five years with credit-default swaps, according to data compiled by CMA Ltd.
While a New York court on Aug. 23 rejected Argentina’s appeal, it delayed the effect of the orders until the Supreme Court decides whether or not to take the case. Bonds have rallied since then on speculation legal delays will extend into 2014.
“The only thing working in Argentina’s favor is that they’ve managed to lodge appeals to kick the process to 2014,” Henderson said. “From Elliott’s point of view, they’re in a strong position. It may take some time for them to realize payment but as it stands there’s probably no reason for them to want to negotiate with any other bondholders.”
By Charlie Devereux
November  10, 2013
The International Monetary Fund is making “positive progress” and has received “good cooperation” from Argentina since the government was accused by the lender of misreporting data on inflation and economic growth, Managing Director Christine Lagarde said.
Private economists have questioned economic data and estimated inflation at more than double the rate reported by the government since 2007 when former President Nestor Kirchner replaced senior officials at the statistics agency. Economy Minister Hernan Lorenzino met with the IMF in Washington Sept. 16 after the government said it would unveil a new nationwide consumer price index by year-end.
“We are making positive progress but it’s a matter that will be reviewed by the board in a few days’ time, and I would not want to prejudge what the outcome will be,” Lagarde said in an interview with CNN en Espanol. “I very much hope that the country continues to make progress, delivers on its commitment and comes clear on the inflation number.”
Consumer prices rose 10.5 percent in September from a year ago, according to statistics agency data that is less than half the rate estimated by private economists in a report issued by opposition lawmakers. The IMF executive board in February censured Argentina, calling on it to “address the inaccuracy” of its inflation index and gross domestic product data under a procedure that can end in expulsion from the fund.
‘Serious Reforms’
Argentina’s economy will expand 2.8 percent next year, trailing the Latin America average of 3.1 percent, the Washington-based lender said in last month’s Regional Economic Update. Brazil, which the IMF forecast in the report will climb 2.5 percent this year and next, is growing below potential, Lagarde said in the interview that is scheduled to air tonight.
Brazil requires “serious reforms,” she said without providing further details.
The real declined more than any other major currency since Brazil last month posted its widest budget deficit in almost four years, renewing investors’ concern the nation’s credit rating may be downgraded. Standard & Poor’s in June placed Brazil’s rating on negative outlook, and Moody’s Investors Service last month reduced its outlook to stable from positive.
Lagarde said U.S. officials need to ensure fiscal negotiations aimed at resolving budget disagreements are successful and don’t disrupt financial markets in Latin America and elsewhere.
‘Repeated Shutdowns’
“Repeated shutdowns or repeated uncertainties would certainly not help global growth because the U.S. is a major part of the global economy and has ramification and connections throughout the world, particularly in Latin America,” she said, according to a transcript of the interview. “So we certainly hope that the message has registered and that another threat of a shutdown, threat of a debt-ceiling debate up until the eleventh hour is not going to happen again in January.”
Lagarde said she was most optimistic about countries in Latin America that are keeping a close eye on their fiscal situation and have already restructured their economies, such as Mexico, Chile, Colombia and Peru.
Mexico’s economy also will improve next year, Lagarde said.
“There are very strong reforms under way at the moment which have had a slowing effect in 2013 but we see the forecast for 2014 as a significant pickup,” she said.
Mexico’s GDP will climb 3 percent next year after increasing 1.2 percent in 2013, according to IMF forecasts. President Enrique Pena Nieto has pledged to end the state oil producer’s 75-year monopoly on drilling as he increases spending to stimulate growth.
Venezuela’s economy is not doing well as the government drains reserves, Lagarde said. The annual inflation rate hit 54.3 percent in October, the fastest pace in 16 years as a shortage of dollars crimps imports and causes shortages of essential goods.
“It’s an economy that will really have to face difficult policy issues probably shortly,” she said.
November  11, 2013
BUENOS AIRES (Reuters) – Argentine President Cristina Fernandez, who is recovering from surgery last month to treat a head injury, should be able to resume her normal duties on November 18, a government spokesman said on Monday.
Fernandez has not made an official public appearance or speech in more than a month, since she had surgery on October 8 to remove blood that had pooled on the surface of her brain.
Exams showed “an absence of significant arrhythmia and a state of good cardiovascular fitness,” the spokesman, Alfredo Scoccimarro, said in a televised address.
Doctors gave Fernandez a provisional greenlight to return to work after tests on Friday cleared her of neurological damage, and she is scheduled to have another checkup on December 9.
After falling and knocking her head in August, doctors found blood under a membrane that covers the brain, known as a subdural hematoma. She also suffered from an irregular heartbeat and was admitted to a hospital that specializes in cardiovascular problems.
Fernandez was advised to avoid unnecessary stress and was not allowed to travel for 30 days after the surgery.
While she was recuperating, her allies faced heavy losses in midterm elections, shrinking her majority in Congress and ending chances of a constitutional change to allow her a third term when a presidential vote is held in 2015.
11 November 2013
The political reign of the Kirchners in Argentina appears to be coming to an end as President Cristina Fernández de Kirchner deals with health problems and her party faces challengers in the midterm elections. Mrs. Kirchner was elected to her second term in 2011. She followed her husband, Nestor Kirchner, who held the presidency from 2003 until 2007 and died suddenly in 2010. Last month, officials announced that President Kirchner had sustained a head injury after a fall. She underwent surgery in October and has been told to scale back her activities.
Mrs. Kirchners Front for Victory party was widely expected to lose seats in the elections held on Oct. 27. The elections have been portrayed as a dress rehearsal for 2015, when the people of Argentina will most likely elect a new president. Sergio Massa, a former member of the Kirchner cabinet who broke with the president, and Daniel Scioli, the governor of Buenos Aires Province, are seen as top contenders for the post.
Nestor Kirchner assumed office at a time of financial turmoil, and his supporters credit him with guiding the growth of the country’s economy. Critics fault him and his wife for failing to capitalize on Argentina’s recovery and for presiding over a political culture that is polarized and, in some cases, corrupt. In the coming years, Argentina will need pragmatic leaders willing to work with diverse groups in order to set the country on a more promising path. Inflation remains a problem and will need to be dealt with in order to lure foreign investment. If Argentina wishes to attain the economic prosperity and international favor enjoyed by its neighbors in Brazil and Chile, the next few years will be crucial.
11 November 2013
After 21 years in Argentina, Telecom Italia has announced the sale of its stake in Telecom Argentina.
Telecom Argentina is one of the main telecommunications companies in the country, with a presence in fixed and mobile telephony as well as Internet services. The company is majority owned by Nortel Inversora, which holds a 55% share. Its majority owner is, in turn, Sofora Telecomunicaciones, a company joint owned by Telecom Italia (which holds a 68% stake) and Grupo Werthein (an Argentinian company that has a 32% stake). Telecom Italia is apparently selling in order to focus its business on key markets of Italy and Brazil as it looks to repair its balance sheet.
Fintech, an investment fund owned by a Mexican businessman, David Martínez, has offered US$960m for Telecom Italia’s shares and could take over shortly, provided the sale is approved by Argentina’s Ministry of Communications. Fintech is already operating in Argentina. It holds a 40% share in Cablevisión, Argentina’s largest cable television company, in a joint venture with Clarín (Argentina’s largest media company). Under Argentina’s 2009 media law (which was recently declared constitutional after a long legal battle), Fintech would have to sell its stake in Cablevisión if the purchase of Telecom Italia’s stake in Telecom Argentina goes ahead, in line with regulations limiting cross-holdings by media and telecoms companies.
Fintech’s presence in Telecom Argentina will strengthen that of Mexican companies in the telecoms market. Claro, the leader in the local mobile market, is owned by Mexican billionaire Carlos Slim. The departure of Telecom Italia, meanwhile, follows the gradual departure of many European firms from the local market, after a wave of privatisations in the 1990s saw European companies acquire stakes in utility and financial services firms. This process has been in reverse since Argentina’s 2001-02 economic crisis. Although Telecom Italia’s decision to sell is related to the company’s own financial difficulties, its time in Argentina has not been smooth sailing. In early 2010 the government threatened to nationalise Telecom Argentina following an adverse court ruling.
10. ARGENTINA’S KIRCHNER SET TO RESUME DUTIES NOV. 18 (Dow Jones Top News & Commentary)
By Ken Parks
11 November 2013
Argentina’s President Cristina Kirchner will resume her duties Nov. 18 after recovering from head surgery last month, the president’s spokesman said Monday.
Mrs. Kirchner passed medical tests and is in “conditions to resume her formal activities” next Monday, said her spokesman, Alfredo Scoccimarro, in a televised address.
Mrs. Kirchner is recovering from an operation Oct.8 to drain a blood clot near her brain that was caused by a head injury. The president’s medical team has ordered Mrs. Kirchner to avoid flying for 30 days. Doctors are scheduled to perform additional tests on the 60-year-old president on Dec. 9.
Vice President Amado Boudou has run the government during her absence.
Mrs. Kirchner returns to work amid an economy hobbled by inflation and foreign currency shortages.
Inflation has been running at or at more than 20% for almost four years, according to many economists. Private-sector forecasts put annual inflation at about 25%, compared to the 10.5% reported by the government.
High inflation led to a run on Argentina’s foreign-currency reserves two years ago as Argentines and foreigners tried to pull money out of the country. The Kirchner administration has so far managed to avoid devaluating the Argentine peso by strictly rationing the hard currency it makes available to people and businesses.
The upshot is a small, but vibrant currency black market where the U.S. dollar fetches a 64% premium to the greenbacks the government sells to the public through the regulated foreign exchange market. The gap between those exchange rates has aggravated inflation as some businesses reprice goods based on the black-market rate.
Currency controls haven’t stopped reserves from approaching a seven-year low of about $33 billion as debt payments, persistent capital flight and fuel imports outweigh dollar inflows from exports.
“The most urgent matter that needs to be addressed are reserves,” said Fausto Spotorno, an economist at consulting firm Orlando J. Ferreres & Asociados. “The loss of reserves has accelerated and now we are losing almost $1 billion a month even with controls.”
The government could stanch dollar outflows by further limiting imports or making it more difficult for Argentines to shop and travel abroad if its willing to pay the economic price.
“The impact on the economy from more restrictions will probably be negative,” Mr. Spotorno said.
Mrs. Kirchner will also have her hands full shaping the succession struggle within the ruling Peronist movement during her last two years in office.
Her Peronist faction, the Victory Front, retained its majorities in both houses of Congress in midterm elections Oct. 27, but fell well short of the support needed to reform the constitution so she could run again in 2015.
Peronist moderates such as mayor Sergio Massa and Daniel Scioli, the popular governor of Buenos Aires province, have already signaled plans to run for president-offering voters an alternative to Mrs. Kirchner’s confrontational brand of left-wing Peronism. Investors have bid up Argentine stocks and bonds in hopes that Mrs. Kirchner will be succeeded by a more business-friendly leader.
Peronists are notorious for abandoning leaders who are perceived to be on their way out of power, and Mrs. Kirchner will have to guard against defections from the Victory Front to other Peronist factions seen as best positioned to win the presidency.
Juggling a deteriorating economy and a political succession would be a tough job for any leader, much less one with a long history of health problems. In recent years, low blood pressure forced Mrs. Kirchner to suspend her activities for several days and cancel international trips. In January 2012, surgeons removed a noncancerous growth on her thyroid gland.
11 November 2013
Investment fund Fintech may take control of Argentine telecoms operator Telecom Argentina (NYSE: TEO) this week, local paper La Nación reported, citing sources close to the investment fund.
Fintech may pay US$960mn for Telecom Italia’s (NYSE: TI) 22.7% stake in the Argentine telecom operator, which would give it control of the company. With this acquisition, Fintech would have a majority stake in Sofora Telecomunicaciones, the holding company which controls Telecom Argentina.
“The completion of the operation is imminent. It’s a matter of hours,” the source was quoted as saying.
On November 7, TI’s executives confirmed that the company’s board had received an unsolicited offer for Telecom Argentina and that it was negotiating the terms of a deal.
The move is part of the heavily indebted Italian firm’s 2014-16 strategic plan, which involves raising up to 4bn euros (US$5.37bn) in cash to focus on growth opportunities in Italy and Brazil.
According to the report, Fintech expects this acquisition to receive the greenlight from Argentina’s telecoms ministry SeCom and other government agencies within the next six months.
Fintech expects the government may award 4G spectrum in the near future, according to the report. In December 2012, the Argentine government issued a decree reserving spectrum bands for a future auction of 4G frequencies. Through decree 2426, the government determined that the 1710-1755MHz, 2110-2155MHz and 698-806MHz bands would be exclusively used for terrestrial mobile telephony services.
Fintech currently has a 40% stake in Cablevisión, the pay TV and broadband services provider controlled by Argentine media giant Grupo Clarín. According to the country’s media law, Fintech may be forced to sell its stake at Cablevisión as the regulation does not allow a firm which provides public services to offer pay TV. This eventual incompatibility will be analyzed by audiovisual services regulator Afsca.
11 November 2013
WASHINGTON, Nov 10 (Reuters) – Argentina has made “positive progress” in reforming the quality of its economic data, the head of the International Monetary Fund said on Sunday, adding that the IMF’s board is set to review the country’s moves in a few days.
The IMF, which requires accurate statistics to analyze the world’s economies, censured Argentina in February over failing to improve the accuracy of its inflation and gross domestic product growth data and gave the country until Sept. 29 to take action.
Analysts have accused Argentina’s government of underreporting inflation since early 2007 for political gain and to reduce payments on its inflation-indexed debt.
Inflation has been around 25 percent for several years, according to private estimates, one of the highest rates in the world. The government says inflation is less than half that.
“We are in a process with Argentina at the moment of clarifying the numbers, establishing those reliable and shared numbers with the membership,” IMF Managing Director Christine Lagarde said in an interview with CNN en Espanol.
“We are making positive progress but it’s a matter that will be reviewed by the board in a few days’ time and I would not want to prejudge what the outcome will be.”
If Argentina fails to make progress, the IMF board could choose to impose sanctions, barring Latin America’s third-largest economy from voting on IMF policies and accessing financing.
The only country the IMF has forced to leave its ranks was the former Czechoslovakia, an action that occurred in 1954. Countries like Somalia and Zimbabwe have been sanctioned by the IMF, but mainly because of a failure to repay the fund.
Argentina’s center-left government, and many ordinary citizens, blame IMF policies for precipitating the country’s devastating 2001-02 economic crisis.
Argentina has refused to participate in the IMF’s annual economic assessment for the past seven years – though it is not unique in South America. Ecuador has shunned the assessments for the past five years, and Venezuela has not participated since 2004.
In the CNN interview, Lagarde said it was difficult to figure out what was going on in Venezuela’s economy, given the lack of access and reliable data.
“I don’t think that the economy is doing well at the moment and we certainly understand that they are using reserves in a very significant amount,” she said. “And that it’s an economy that will really have to face difficult policy issues probably shortly.”
Venezuela’s 12-month inflation rate climbed to 54.3 percent, according to statistics last week, the latest blow to President Nicolas Maduro’s efforts to stabilize the economy.
Lagarde added that she was most optimistic about economic progress in Chile, Colombia, Mexico and Peru.
By Charles Newbery
8 November 2013
Argentina’s government this week could announce further measures to arrest capital flight as reserves continue dwindle and the economy worsens.
The central bank’s foreign reserves dropped 4% in October to $33.4 billion, taking the decline in the first 10 months of this year to 23%. They have dropped 37% from a record $53 billion in early 2011 despite government measures to slow the bleeding first introduced Oct. 31, 2011.
President Cristina Fernandez de Kirchner has made it virtually impossible to buy dollars at the central bank-administered exchange rate, even for foreign travel. Her administration has also imposed a 20% tax on purchases made abroad using local credit and debit cards to dissuade purchases and travels, and it has limited withdrawals from local banks via overseas ATMS.
Even so, travelers can still shop and withdraw dollars at the official exchange rate of 5.85 pesos to the dollar and return with dollars to trade on the black market at nearly 10.00 pesos. Foreign tourism has been steady this year.
Most economists expect the capital controls, which also include restrictions on companies sending profits to headquarters abroad and paying dividends outside the country, won’t end any time soon.
The government “will deepen its monetary policy with more of the same,” Martin Redrado, central bank president from 2004 to 2010, said last week. The government will “look for dollars wherever they may be.”
This could involve increasing the 20% tax on using local credit and debit cards abroad, and possibly hiking withholding taxes on exports.
If nothing is done to contain the level of reserves, they are likely to fall further, IERAL, an economic think-tank based in Cordoba warns. Since hitting a record 17.7% of GDP in 2007, the reserves have dropped to 6.7% of GDP this year and could reach 3.6% in 2015.
CFK had sought to rebuild dollar supplies through a June-September amnesty allowing companies and individuals to bring in undeclared funds without tax penalties. The amnesty, which has been extended until the end of the year, snared only $379 million in the first round, far less than the $4 billion goal.
In a new effort to bring in dollars, the government announced Friday it plans to sell up to $1 billion in 3-year, dollar-denominated bonds paying 4% annual interest. The Argentine Economic Development Savings Bonds (BAADES) initially were offered through the amnesty, but to little success.
Now they will be marketed to investors who want to bring declared funds – held locally or overseas – into the financial system. The bonds will be sold in one or more tranches, possibly from as soon as this week.
The proceeds will be used to finance energy projects to help arrest declining production. Oil output has dropped by a third and gas by 20% over the past decade.
The decrease, a response to low investment, maturing reserves and few finds, has led to a surge in energy imports which in turn is reducing the trade surplus, a main source of funds for feeding the central bank with hard currency to sustain the exchange rate and service the debt.
The trade surplus dropped 30% to $7.1 billion in the first nine months of 2013 compared with $10.2 billion in the year-earlier period, largely because energy exports dropped 22% and energy imports shot up 25%.
An automakers association will report October production, sales and exports data Monday or Tuesday.


14 noviembre, 2013


“I never changed my opinion on Bergoglio” -Adolfo Pérez Esquivel

Sunday, November 10, 2013
Born: November 26, 1931 (age 81)

Alma Mater: University of La Plata

Hobbies: Painting, Sculpting and writing

Current position: President of Serpaj human rights organization

Awards: Nobel Peace Prize winner, Pacem in Terris Award, the Pope John XXIII Peace Memorial
In an interview given to the Herald earlier this month, the 1980 Nobel Peace Prize winner Adolfo Pérez Esquivel spoke of his beginnings in the human rights movement, his opinion of the country’s current political situation and why he decided to support Pope Francis when some questioned the role he played during the dictatorship.
What do you think is the most important human rights issue in Argentina today?
Many things, such as seeking truth and justice so that state terrorism doesn’t happen again. But we need to expand our understanding beyond the crimes of the last dictatorship. We now have environmental problems, indigenous human rights problems, large companies using toxic chemicals. I think the government often confuses development with exploitation.
Do you think the Nobel Peace Prize has lost credibility because of some questionable winners?
I think it depends how it is used. The Nobel committee always changes; it is renewed every four years. If you receive a Nobel Peace Prize for your own personal advancement that’s the wrong path. It should be used for the people.
What do you think about the ongoing trials on crimes against humanity from the dictatorship era crimes?
This is the only country in the world in which the trials are conducted by normal courts. Argentina is creating a judicial precedent that is very important. Human rights crimes don’t have a statute of limitation but at some point we will have to start closing this chapter. I don’t know when that will be but I do know that as long as there is impunity there can’t ever be true democracy.
If you compare this government’s human rights policies with that of former president Raúl Alfonsín (1983-1989) and former president Carlos Saúl Menem (1989-1999), which is better?
I choose this one, without a doubt. But the problem with this government is that it equates human rights solely with the dictatorship era and not to present day. The human rights movement that we knew in the past doesn’t exist anymore. Many human rights organizations that I respect and love like the Mothers and Grandmothers (of Plaza de Mayo) have aligned themselves with the government and lost their independence.
Is there anyone you would like to see win the presidency in 2015?
I think Kirchnerism has become a very personalized party with very little dialogue and this is not good for democracy. But I also see a strong weakness in the opposition. There isn’t a clear project for the country. None of the political leaders have any real ideas. The governors are feudal lords that don’t govern for the people but for themselves. Ultimately, very few candidates propose any real alternative.
Before Jorge Mario Bergoglio became Pope Francis you made comments calling his role in the last dictatorship “ambiguous” but later you supported him and said he wasn’t complicit with the crimes of that era. What led to the change?
I never changed. (Horacio) Verbitsky accuses the Pope of being complicit with the dictatorship. I said that he wasn’t complicit but also that he wasn’t a bishop who actively spoke up against the dictatorship. Others were complicit. Bergoglio was a Jesuit leader, and very young —he didn’t have access to the government. I learned that he would go to impoverished neighbourhoods to work with the people. This is what we need to value.
But you also wrote a preface to a 1988 book (The Complicity of Church and Dictatorship in Argentina by Emilio Mignone) that calls into question Bergoglio’s complicity with the military.
Look, I said that he wasn’t complicit with the dictatorship. I don’t know exactly what Bergoglio did with (Orlando) Yorio and (Franz) Jalics (the two priests who were detained in the dictatorship and had accused Bergoglio of turning them in, although Jalics later said he reconciled with him). This issue isn’t closed, nothing is closed. When I said Bergoglio wasn’t complicit, I did it for many reasons. One is because I saw that he went to slums and other people praised him and so I thought this guy can’t be bad. Another reason was that the church named a Latin American pope for the first time, getting out of its usual Eurocentrism. If there are doubts, people should continue investigating.
What is the difference between Verbitsky’s and Mignone’s interpretation?
Look, Bergoglio could have done more, but others in the church could have done more as well. Many of us thought different things about this. We can have differences of opinion.
If you compare the accusations of Bergoglio’s complicity with General César Milani, the head of the army, they are similar because there is little evidence against them. Yet, you denounce Milani when he was promoted, and not Bergoglio. Why?
No, no, no—Milani is something else entirely. He is a military man. Bergoglio was chosen Pope in a very important moment for the Church, when people are fed up with it. We should at least wait a bit, to see what he does. But they immediately began attacking him. He cannot be accused of being complicit with the dictatorship. Maybe he committed errors like anyone else could have done, but complicity is something else. If there are accusations against Milani, they should be investigated. I don’t know his entire history just like I don’t know Bergogolio’s.
But you didn’t say that with Bergoglio.
Look, Milani was part of the military structure, Bergoglio was not. I think he was a religious man who perhaps did not act with courage and I said that.
…Bergoglio was also part of a Church structure that was complicit with dictatorship.
If they freed Yorio and Jalics after six months, then he must have done something.
Yet nothing was said about that until now, after he was named pope. It took 37 years for that to come to light.
Look there are many things that we know now. I did what I did, not only because of who Bergoglio is, a pastor of the church but also because he is fulfilling a mission. Up until now, he has changed a lot of things and is trying to reform the Church. If this man committed errors then it should be proven. But we should also try to protect the head of the Church, if not we will destroy everything.
I find it difficult to understand how someone who kept quiet while thousands of Catholics were being killed in Argentina can be named pope? Don’t you think that’s a contradiction?
It was not necessarily like that. Nobody has the absolute truth. We are in a difficult moment. Now, we have this pope and if he made a mistake then he should make amends to the best of his ability.
By Arturo C. Porzecanski
November 12, 2013
Carlos Mauleon, the former Barclays Capital investment banker who handled Argentina’s 2005 debt restructuring, recently wrote a guest post on beyondbrics justifying that infamous transaction: “Whatever you may think of Argentina, … the one good decision its leaders made was to aggressively restructure [the public] debt back in 2005” because “the question is, did [Argentina] have a better choice? Not really.”
But it did. Here’s why.
After discussing the case of Greece in 2011-12 and its supposed relevance to Argentina’s situation in 2005, Mr Mauleon concluded with a plea that while “the rhetoric and economic policies of the Argentine government post restructuring muddle the justification of their approach and provide ample ammunition for the holdouts, the courts as well as public opinion to throw the country under the bus,” we should refrain from doing that, at least in our minds.
However, it was Argentina that threw its creditors under the proverbial bus a dozen years ago – and needlessly so.
To recall, President Eduardo Duhalde stopped debt-service payments to bondholders and official bilateral creditors in January 2002, and in the sixteen months that he was in office, he never reached out to his local and international investors to explain himself – never mind to work out collaboratively on a solution to cure the default. By the time he stepped down at the end of May 2003, and his elected successor Néstor Kirchner took the reins of power, next-door Uruguay had already successfully refinanced its public debt in a creditor-friendly manner without ever missing a single payment – and despite having had to face fiscal, currency, banking, and economic shocks fully comparable to those in Argentina.
Second, President Kirchner took another twenty months until he finally presented bondholders with a punishing, take-it-or-leave-it debt exchange offer – a delay of three years since January 2002 intended to encourage creditor capitulation to whatever proposal Argentina would finally put on the table. His economy minister at the time, Roberto Lavagna, went so far as to announce that the government would regard any investor participation rate above fifty percent as having effectively cured the country’s default. The clear implication was that even if nearly half of all bondholders failed to accept the terms of the ruinous debt exchange, they would be ignored and go unpaid. To ensure that the message was heard loud and clear, the government passed a law forbidding the reopening of the debt exchange in the future – the so-called “Lock Law” which has been cited by the courts as evidence of the country’s ill will.
Third, Argentina’s economy was sufficiently recovered by early 2005, largely thanks to a commodity export boom, such that the government only needed a modest amount of debt-service relief from its creditors. For example, the country’s official international reserves had doubled from early 2003 to early 2005, from under $10bn to over $20bn, and so had government tax revenues measured in dollars between 2002 and 2004. And yet, the authorities pleaded on-going and future poverty by referencing a proprietary debt-sustainability model which failed to reflect the strong economic rebound underway, incorporated excessively pessimistic forecasts, and was never validated – never mind endorsed – by the IMF, as was customary in prior sovereign debt restructurings. During 2006-12, the economy ended up growing twice as fast as the government’s estimates as of late 2004, with actual export earnings and tax revenues outperforming official gloomy forecasts by even wider multiples.
The good news about Argentina’s economic and fiscal recovery of 2003-04 began to circulate around the international investor community, and thus the credibility of the government’s plea to be treated as if the country was still in the midst of an economic emergency started to erode. The improvement in Argentina’s capacity to pay was already so evident by early 2005, when the government put its demand for massive debt forgiveness on the table, such that one-fourth of the bondholder universe (by par value of claims) refused to enter into the debt exchange. The holdout component would surely have been larger still if the authorities had not intimidated the investor base as aggressively as they did, encouraging large-scale creditor capitulation.
Therefore, it should be crystal clear that Argentina and its financial advisors did have much better choices: they should have put forth a more reasonable and credible proposal based on consultations or negotiations along the lines of the Uruguay refinancing; better yet, they should have done so much earlier (say, in 2002) to restore their reputation and thus their access to the world’s financial markets.
By early 2005, the government had the financial wherewithal to put forth a debt exchange that would have been viewed as realistic and thus fair, because it captured the strong economic recovery and the favourable winds that were blowing in Argentina’s direction at the time. Such a proposal could have gathered the usual degree of support (around 95 per cent, as per many other sovereign debt restructurings), minimizing any holdout problems. However, for domestic political reasons, the authorities chose to default and then exhibited protracted unwillingness to pay, choosing a confrontational path which has haunted Argentina and its creditors to this day.
It has set such a bad example that no other nation has dared to follow it since.
Professor Arturo Porzecanski is Director of the International Economic Relations Programme at American University, Washington DC. During 2000-2005, he was a managing director and the head of emerging markets sovereign research at ABN Amro.
By Eliana Raszewski
November  12, 2013
Eric Francos, a French doctor on a three-week vacation with his wife and two children, was huddled off to one side of a pedestrian thoroughfare clogged with shoppers in downtown Buenos Aires, taking $100 bills out of his money belt as illegal money-changers beckoned with calls of “dollars, euros, exchange.”
“I know the risks, but so far I’ve never had problems, I try to be careful,” Francos, who plans on touring vineyards in the province of Mendoza, which lies 1,100 kilometers (680 miles) west of the Argentine capital and is renowned for its Malbec wine, said last week as he stuffed pesos into his front pants pocket. “Changing dollars in the streets is worth it.”
Tourists like Francos, who got 9.7 pesos per dollar compared with 5.9729 at the official rate, are turning to the black market to obtain local currency and shaving as much as 40 percent off their vacation costs. They’re also depriving the central bank of the foreign reserves the government uses to pay its debt, which is the most expensive to protect against non-payment anywhere in the world using credit-default swaps.
Visitors who spent $622 million during the second quarter sold only $342 million through official channels including banks, a 48 percent plunge from a year earlier, according to government data.
Last month, in an attempt to get more dollar inflows into the country, the government said Argentines who bring in foreign currency to pay taxes will be exempt from a bank deposit requirement.
Reserve Plunge
Lured by a widening gap between official and illegal exchange rates as President Cristina Fernandez de Kirchner tightens limits on foreign-currency purchases, tourists are contributing to the longest stretch of reserve declines in at least two decades and helping to reduce dollars held at the central bank to a six-year low of $33.05 billion.
“The numbers show that tourists are changing their dollars in the illegal market to take advantage of the higher rate,” Belen Olaiz, who wrote a report on the illegal market for research firm, said in a telephone interview from Buenos Aires.
An official at the central bank didn’t return phone calls seeking comment on the decline in reserves.
Reserves cover 27 percent of outstanding foreign-currency debt, the lowest in seven years, according to Orlando Ferreres y Asociados.
Arbolitos, Caves
Argentina has been unwilling to pay borrowing costs that are almost double the average rate for emerging markets to tap global credit markets since its 2001 default on $95 billion of debt. In 2010, Fernandez ordered the central bank to pay investors who received bonds in two restructurings with reserves.
Since then, the government has drawn down more than $39 billion of central bank funds to pay debt, contributing to an unprecedented streak of 12 straight months of declines in reserves.
The country is using reserves to reduce its debt levels, which have fallen in the past years, said an official at the Economy Ministry with direct knowledge of the mater who asked not to be named due to internal policies.
The country’s foreign-currency debt held by private creditors fell to 9.3 percent as of June 30, from 11.9 percent at the end of 2010, data compiled by the Economy Ministry show.
‘Blaming Tourists’
Tourists who change money illegally face the risk of receiving fake bills or being robbed. Street money-changers, known colloquially as “arbolitos,” Spanish for “little trees” because they’re like a fixed part of the landscape, often ply their trade within a few yards of policemen.
An alternative is to visit one of the small shops or back-street offices known as “caves” that use tourist agencies or dealerships in antiques, gold and coins as a front for trading currencies.
Sanctions for illegal currency trading range from a fine of 10 times the transaction if it’s the first time a person is caught to as many as eight years in prison.
Some shops and restaurants accept foreign currency as payment, giving clients more for their dollars or euros than they would get at a bank or using credit cards.
Pablo Romano, a 24-year-old employee in a clothing store on Florida Street, where Francos exchanged dollars for pesos, says he offers tourists who make purchases an exchange rate of nine pesos per dollar.
Foreign Investment
“We shouldn’t be blaming tourism for the drop in reserves rather government policies,” said Jose Luis Espert, who runs research firm Espert & Asociados in Buenos Aires. “High public spending makes the government print more pesos which Argentines don’t want.”
Foreign-direct investment in Argentina fell 32 percent in the first half of 2013 from the same period a year earlier to $5.2 billion, while investment in neighboring Brazil and Chile was $39 billion and $10.4 billion, respectively, according to the Santiago-based United Nations Economic Commission for Latin America.
“What we have in Argentina is a dollar supply problem, not demand,” Ricardo Delgado, director of Buenos Aires-based Analytica Consultora, said in an interview. “The big problem is that we’re not receiving dollars because investors don’t have confidence in the country.”
Investors demand an extra yield of 8.23 percentage points over U.S. Treasuries to hold Argentine debt, as of 5:24 p.m. in Buenos Aires, according to JPMorgan Chase & Co.’s EMBI Global Diversified index.
Tourism Deficit
With the depreciation of the peso lagging annual inflation that economists estimate has run at more than 20 percent for at least four years, Argentina has become more expensive for foreign tourists.
The rising costs have also encouraged greater numbers of Argentines to buy goods abroad while on vacation and to withdraw cash to exchange in the black market at home. While the government slapped a 20 percent charge on the transactions to discourage consumers, the implied rate of 7.176 per dollar is still cheaper than the black market.
As a result, the country will run up an $8 billion tourism account deficit, or the difference between what foreign tourists spend in Argentina and what Argentines spend abroad, according to Delgado.
Fernandez may act to cut off access to dollars further for Argentines traveling abroad, both Olaiz and Delgado said.
“The government may decide to adjust credit cards payments of foreign-currency purchases,” Delgado said. “Still, any ideas the government may have are only palliatives if it doesn’t boost confidence in the country to solve its deeper problems.”
For now, Francos, the French doctor, will continue to spend in cash to finance his trip to Patagonia in the south and Salta in the north rather than swipe his foreign bank cards at the official rate.
If it weren’t for the cheaper rate, “many items are as expensive as in Europe,” Francos said.
By Whitney McFerron
November  12, 2013
Argentina, the world’s biggest biodiesel exporter, is increasing shipments of the fuel on stronger U.S. demand, Oil World said.
Argentine exports of biodiesel made from soybean oil will climb to 450,000 metric tons in the three months through December, more than double the year-earlier 221,000 tons, the researcher said today in an e-mailed report. The U.S. may account for two-thirds of purchases from September through the end of the year, it said. Argentina’s biodiesel production this quarter may jump 57 percent from a year earlier to 670,000 tons.
“The U.S.A. has become the leading export destination for Argentine biodiesel,” Hamburg-based Oil World said. “A large part of the U.S. biodiesel imports is destined for re-export to African and Asian countries.”
U.S. biodiesel output rose to a record 128.3 million gallons in August, according to the most recent monthly data from the Department of Energy. Inventories of soybean oil used to make the biofuel fell to an eight-year low of 773,000 tons at the end of the 2012-13 season on Sept. 30, and supplies may slide further to 741,000 tons by the close of 2013-14, the U.S. Department of Agriculture estimates.
Argentina’s annual biodiesel exports still will decline in 2013 to 1.224 million tons from 1.558 million tons a year earlier, Oil World said. Shipments to the European Union tumbled as the 28-country bloc made plans to institute anti-dumping tariffs on both Argentine and Indonesian biodiesel, the researcher said last month.
Argentina’s government may raise its mandate for domestic biodiesel usage, with the Ministry of Industry calling for a 10 percent blend level in fuel by the end of the year, according to Oil World.
In Indonesia, biodiesel exports dropped 22 percent from a year earlier to 118,000 tons in August, Oil World said. Shipments in 2013’s first eight months were still a record 1.04 million tons, 12 percent more than the prior season, according to the report.
12 November 2013
The following is a press release from Standard & Poor’s:
– On July 4, 2013, we placed our global scale ratings on the four rated Argentinean local and regional governments (LRGs)–the city of Buenos Aires, and provinces of Buenos Aires, Cordoba, and Mendoza–on CreditWatch negative after lowering the institutional framework assessment score on Argentinean LRGs.
– On Sept. 13, 2013, we lowered the foreign currency global scale ratings on these entities to ‘CCC+’ from ‘B-’ after Argentina’s downgrade. We maintained the CreditWatch negative listing on the ‘B-’ local currency global scale ratings on these entities until we concluded the assessment on whether any of them could comply with the requirements to be rated above the sovereign.
– We now believe that neither the provinces of Cordoba, Buenos Aires, or Mendoza fulfills the necessary conditions to be rated above the ‘CCC+’ local currency sovereign rating. Consequently, we are lowering our local currency global scale ratings on these three provinces to ‘CCC+’ from ‘B-’. The outlooks are negative.
– On the contrary, we consider that the city of Buenos Aires presents a measurable likelihood that its credit characteristics will remain stronger than those of the sovereign in a scenario of economic and political stress. Consequently we are affirming our ‘B-’ local currency global scale rating on the city. The outlook is negative.
BUENOS AIRES (Standard & Poor’s) Nov. 12, 2013–Standard & Poor’s Ratings Services lowered its local currency global scale ratings on the provinces of Cordoba, Buenos Aires, and Mendoza to ‘CCC+’ from ‘B-’ and removed them from CreditWatch negative. The outlooks are negative. At the same time, we affirmed our ‘B-’ local currency global scale rating on the city of Buenos Aires and removed it from CreditWatch negative. The outlook is negative.
“These rating actions follow the Sept. 10, 2013, downgrade of Argentina to ‘CCC+’ from ‘B-’ and our subsequent assessment of characteristics of each LRG and their capacity to withstand a sovereign scenario of default,” said Standard & Poor’s credit analyst Delfina cavanagh.
According to our criteria, the local currency global scale ratings on Argentinean LRGs could be above the sovereign ratings if there’s a measurable likelihood that their credit characteristics will remain stronger than those of the sovereign in a scenario of economic or political stress. At the same time, given that the sovereign is rated in a low-speculative grade, we incorporate additional specific considerations, because we have more visibility on the potential sovereign default scenario at this rating level.
Conversely, the foreign currency global scale ratings on Argentinean LRGs are capped at the sovereign’s current transfer & convertibility (T&C) level of ‘CCC+’. Consequently, we cap our foreign currency global scale ratings on all Argentinean LRGs at ‘CCC+’.
12 November 2013
Argentina reached 7.3mn fixed and mobile connections at the end of the first half of the year, an increase of 1.78% compared to end-2012, according to the latest broadband barometer study released by Cisco.
The country saw a 9.9% increase in fixed broadband 2.0 connections (above 2Mbps) in the first half of the year to reach 3.4mn connections. This figure represents a penetration of 8.2%, according to Cisco’s latest Broadband Barometer study, carried out by tech consultancy IDC.
Cable modem connections expanded 5.6% during the first half of the year, while xDSL connections grew 1.7% during the same period, according to Cisco’s barometer. These two technologies represented 98.6% of total fixed broadband connections at end-June.
The report also stated that 55.4% of total fixed broadband connections in the country had access speeds of over 2Mbps.
Meanwhile, mobile broadband connections totaled 1.2mn at the end of June, or 16.2% of total broadband accesses in the country. Mobile broadband connections declined 5.3% in the first half of the year, according to the study.
Cisco’s study also forecasts a total of 9.2mn fixed and mobile broadband connections by 2017. Mobile connections will account for 11.2% of total connections.
Cisco’s country manager for Argentina, Gabriel Sakata, told BNamericas that the relatively low number of devices for fixed broadband 2.0 connections is limiting growth in this segment. According to Sakata, the number of available devices for this technology is lower than in other countries in the region.
Sakata also said that connection speeds in Argentina are still slower compared to other countries such as Brazil and Chile. The average connection speed in the country is 2.4Mpbs. Sakata said that ISPs are currently offering higher access speeds maintaining the same tariffs for subscribers.
The executive also highlighted that some provinces in the country still lack sufficient infrastructure for broadband services. However, he added that fixed, mobile and cable operators have been significantly investing in backbones.
By Pete Sepp
November 12, 2013
Amid all the recent political brawls between the White House and Congress over government funding for the current fiscal year and the federal debt ceiling, many Americans likely haven’t noticed that other nations’ financial practices can be much worse, while still impacting their wallets here at home. That’s why the National Taxpayers Union, along with 14 other groups in the limited government movement, wrote to Congress last week to draw attention to the alarming news that the World Bank is considering $3 billion in new loans to Argentina.
In the letter, which was co-organized with the Taxpayers Protection Alliance, we urged Congress to send a strong message to the administration to oppose these World Bank loans, and for the U.S. Treasury to withhold funding from the bank if it continued to underwrite “financial rogue” states like Argentina. Such a stance is especially important, given matters such as:
Argentina’s continual defiance of the U.S. judicial system: Argentina’s economic and political leaders, who have mired their nation in statist, anti-free-market policies, have expressed they would rather default than abide by U.S. court determinations. To date, the government of President Cristina Kirchner has actively ignored more than 100 such judgments, totaling billions of dollars. And in a new video clip Argentina’s counsel is seen telling the U.S. Second Circuit Court of Appeals that Argentina “would not voluntarily obey” their rulings.
Argentina’s continual defiance of its international obligations to investors and lenders: According to the Financial Times, “of a total of 439 legal disputes between countries and companies at the World Bank tribunal, no fewer than 50 involve Argentina – far more than anywhere else, with socialist Venezuela lagging some way behind in second place.” Many companies that hold International Center for Settlement of Investment Disputes claims against Argentina are American. While Argentina just settled five of its ICSID cases last month, 45 cases remain outstanding, in addition to unresolved debts with the Paris Club, various nationalizations and ongoing censure by the International Monetary Fund for failure to comply with basic obligations.
Argentina’s currency policies which, some say, have the effect of actively encouraging money laundering within its borders: During the summer, the Argentine government allowed its residents to trade in their U.S. dollars, which are running short, for a new “pseudo currency” and receive tax amnesty while doing so. International observers criticized the plan as a way to legalize dirty money. The Financial Action Task Force, the inter-governmental body developing and promoting policies to combat money laundering and terrorist financing, determined this month that Argentina will remain on its “grey list”  for the time being, alongside the countries of Afghanistan, Angola, Cuba and Sudan.
These are just some examples of how Argentina’s misconduct impacts American investors, taxpayers, and international rule-of-law. It’s therefore no wonder that advocates of limited government have long expressed concerns about our Treasury helping to prop up these bad actors.
To give just one example, NTU submitted comments in 2010 to the New York Legislature, which was holding hearings on the impact of the 2001 Argentinian default on its debts. At the time, we noted that “Argentina’s pattern of fiscal irresponsibility and economic mismanagement has left U.S. taxpayers to shoulder the burden of such recklessness, and has exacerbated the already battered and fragile state of our own economy. Repayment of Argentine debt in full is the only option to relieve the misery caused by Argentina’s negligence.” In 2012, NTU released a study authored by Alex Brill and James K. Glassman calling for a restructuring and reform of the G-20, a multi-country economic policymaking forum. Utilizing a rational set of data-driven criteria, Brill and Glassman recommended that four nations, including Argentina, be removed from G-20 and replaced with others.
The United States has a reputation to uphold in opposing future lending to Argentina. Following the adoption of a U.S. policy in 2011 to oppose all multilateral development banks’ lending to Argentina, several other nations followed suit, including the United Kingdom, Spain, Germany, Japan, the Netherlands and Canada. It remains in American taxpayers’ best interest for this policy to continue while Argentina chooses to behave like an international scofflaw in the financial sphere.
November 12, 2013
Neuquen Province in Argentina has extended the exploration period for the Roch SA-operated Coiron Amargo Sur block by 1 year until Nov. 8, 2014, said 35% working interest owner Madalena Energy Inc., Calgary.
The northern part of Coiron Amargo, known as Coiron Amargo Norte, is under a 25-year exploitation concession that the province approved in 2012.
The extension provides the four-company group time to satisfy remaining work commitments, Madalena said. After satisfying these, the partners have the ability to extend Coiron Amargo Sur through further exploration, evaluation, and exploitation phases.
Madalena said the group has reentered the CAN.XR-2(H) well and is drilling horizontally in the Sierras Blancas light oil reservoir. This is the first horizontal well drilled into one of the six Sierras Blancas conventional light oil pools discovered on the block to date.
After this well, the group plans to drill an additional Vaca Muerta shale delineation well (CAS.x-15) in the southern part of the block.
Coiron Amargo interests are Roch and Gas y Petroleo Neuquen SA 10% each, Apco Oil & Gas International Inc. 45%, and Madalena 35%.
November 12, 2013
In what is probably every divorced parent’s worst nightmare, a Colorado father has been waiting for over three years to have his abducted children returned to the United States.
Dennis Burns’ two daughters were kidnapped by their mother to Argentina after a judge denied her request to relocate to the country with their children, and now there is no immediate end to their custody battle in sight and the Supreme Court of Argentina has even been asked to weigh in.
In 2009, Burns and his ex-wife Ana Alianelli initially agreed to keep their divorce “amicable” for the sake of their two daughters when they split up after five years of marriage. But Alianelli soon claimed Burns had abused her and requested to take their children with her to Buenos Aires, Argentina.
A judge later ruled that Alianelli’s claims of abuse were unfounded and ordered that Burns be the primary residential parent. In that ruling, the judge ordered the girls — Victoria and Sophia, who were ages 3 and 1 at the time — to remain with Burns in the United States.
“I felt a sense of relief that was just beautiful,” Burns told CNN of the decision. “And I was like, ‘I’m going to be able to spend time with my daughters, finally, and live with them and be able to teach them things, and show them things, and live here with them in Colorado.”
But three weeks later, Alianelli defied the order and took the girls to Argentina.
The U.S. State Department says they receive about 1,200 new cases similar to Burns’ each year.
According to Burns’ Facebook page “Return Burns Children Fund,” Burns has already contacted the FBI, the U.S. Attorney General’s Office, the U.S. State Department and the National Center for Missing and Exploited Children.
Even though the judge signed an order for the immediate return of the Burns children to the United States, the U.S. State Department has told Burns it could take 18 months to years to get his daughters back.
From the U.S. Department of Justice’s website:
Under federal law, prosecutors may investigate and prosecute the parent who kidnapped the child. However, prosecutors generally have no control over the custodial decisions affecting the kidnapped child or if foreign authorities will order the return of the child.
The return of kidnapped children is often settled through negotiation. The U.S. Department of State handles the coordination of efforts with foreign officials and law enforcement agencies to effectuate the return of children to the United States. In some circumstances, the return may be governed by the Hague Convention on the Civil Aspects of International Parental Child Abduction (1980).
The Hague Convention only applies if both of the countries involved in the child abduction case are signatories to the Convention — the U.S. and Argentina are — but there have been significant delays to the proceedings. While an appellate court in Buenos Aires ruled in favor of Burns, Alianelli appealed it and the case is now headed to Argentina’s Supreme Court.
A study on parents who abduct their children from the UK by the National Parents Organization found that an astounding 70 percent of the abductions are committed by mothers.
“It’s such an isolated feeling. There’s nothing to soothe the pain and the hole in my heart,” he told The Aspen Times. “I’m in unchartered waters here. I’ve always had a pretty blessed life.”
Burns has been able to see his daughters since, but he’s had to travel to Argentina to do so and last time the visit was cut short by Alianelli and her lawyer.
Burns has also enlisted the help of another dad, David Goldman, who went through a similar ordeal in 2004 when his son was kidnapped by his Brazilian-born mother. He ended up spending upwards of $700,000 to get his then 8-year-old son Sean back.
In Burns’ case, his home has already been foreclosed and he claims on his website that he was forced to declare bankruptcy after accruing so many legal fees. He is now asking the public for donations to help him secure his daughters’ return.
The financial aspect is something that I hate to face and realize at times, because it almost seems secondary to the concept that the girls are the most important focal point. But it simply cannot be ignored that unfortunately, this international incident is extremely costly. I personally know other left behind parents who have given up on trying to have their children returned after being kidnapped. Each time it has been financial constraints which have left these parents facing the unthinkable. I have cried many tears speaking with these parents and have a paralyzing fear that this quest for justice in the name of the best interests of my daughters can end due to lack of financial ability.
By Ian Mount
November 12, 2013
Jess Jackson, a San Francisco lawyer, changed the face of US winemaking when he founded the Kendall-Jackson company in California in 1982. By the time he died in 2011, the man behind the slightly sweet Kendall-Jackson Vintner’s Reserve Chardonnay was a billionaire producing more than 5m cases a year.
Yet, in spite of considerable investment, Jackson was never able to repeat his success in Argentina.
In 1996, he bought 1,100 acres in Mendoza’s Uco valley, later adding 1,750 acres and a winery, led by Randy Ullom, who ran his Chile operations.
But, in 2003, after a series of business missteps and Argentina’s debt default, which caused the peso to lose almost three-quarters of its value, Jackson sold his Argentine business to a Buenos Aires couple for $2.5m – a $5.5m loss on his investment, according to Wine Spectator magazine.
Jackson was not the only foreigner to enter the Argentine wine business only to discover that it could be a minefield of hand-shake deals, erratic government policy and economic collapse.
“The growth and excitement that Argentina has produced continues to attract people. But Argentina is not an easy-to-deal-with country,” says José Manuel Ortega, the Spaniard who runs Mendoza’s O. Fournier winery.
About $1.5bn was invested in the Argentine wine industry in the 1990s, about two-thirds of which came from foreign winemakers. This led to a surge in exports from $128m in 2002 to $920m in 2012, according to the Instituto Nacional de Vitivinicultura, the Argentine wine agency.
But high inflation and import restrictions in the past two years illustrate that doing business in Argentina can be difficult. For foreign investors, it is a reminder that success requires creativity and a willingness to do things the Argentine way.
It was a shortage of that willingness that hurt Kendall-Jackson.
From the start, Kendall-Jackson had problems getting enough water to its land, which was outside Mendoza’s traditional vineyard zone, as well as difficulties importing the US plants it wanted.
“There was a way we wanted things done: how to make wine, how to grow grapes, how to do the financial records,” Mr Ullom says. “We’re very strict and have some very focused plans. It’s our way or the highway.” In the end, the rigid Kendall-Jackson chose the latter path.
Foreigners in Mendoza have since learned from Kendall-Jackson’s experience. But overseas investors are again facing tough times. Inflation has been about 25 per cent a year since 2010 and the national government has instituted import controls to stem the outflow of central bank reserves.
For Mendoza winemakers, this means higher costs, scarce supplies and squeezed margins. The cost of making wine has doubled in the past four years, says Valeria Mutis, an analyst at Rabobank.
“The biggest problem the industry is facing is a loss of competitiveness,” Ms Mutis says.
According to Caucasia Wine Thinking, a market analysis company, in the first nine months of 2013, Argentina exported 220.3m litres of wine for $640.6m, down 19.8 per cent and 5.5 per cent respectively on the same period of 2012. The entry level has been especially hard hit: exports of bottled wine under $18/case have fallen by 37 per cent.
In response, vintners have become more creative.
Argentina’s government encourages exports by refunding various taxes to exporters, but it does so slowly. To cut the wait, Pato Reich, the Chilean chief executive of Renacer, his family’s Mendoza winery, sells wine to local companies that need to export in order to get permission to import other goods (a government requirement).
They export for Mr Reich and handle the refund delay. “There are a lot of rules that change day to day, so you have to be flexible,” he says.
Mr Reich has also learned to plan. After he was unable to import label paper, making it impossible to ship exports worth about $400,000 a month, Mr Reich began to stock 10 months’ supply of corks, paper and bottles, up from a three months’ supply before. The problem, he says, is that it ties up $200,000 of working capital.
Foreign owners also have to learn that business in Argentina runs on friendship. After applications to import oak barrels were repeatedly rejected, Mr Ortega from the O. Fournier winery explained his problems to Marcelo Barg, agro-industry minister for Mendoza, at a winery dinner.
The barrels were promptly approved, just in time for the 2013 harvest. “You have to go and plead,” Mr Ortega says.
There have been some encouraging signs of late. Carlos Clément, a Mendoza shipping agent, says all but one of his barrel import requests have been approved.
And Argentina is allowing the official peso exchange rate to devalue, thus easing inflation’s bite on exporters.
In the end, foreign wine investors have to learn the lesson of Kendall-Jackson, and understand that Argentina is cheaper because life is more difficult there.
As they say: you can’t have your cake and eat it too.

ARGENTINE UPDATE – Nov 7 & 8, 2013

9 noviembre, 2013


By Carlos Mauleon
November 6, 2013
Few are willing to speak up in favour of Argentina, given a long list of questionable economic decisions made by the current government. But whatever you may think of Argentina, its leaders and its policies, you should consider that despite all of the criticism and rhetoric from the holdouts, US judges, the IMF and the IIF, the one good decision its leaders made was to aggressively restructure Argentina’s debt back in 2005.
Now even that may be thrown by the wayside if either the Supreme Court rejects hearing the case brought against them by the holdouts or accepts the case but supports the appeals court’s recent ruling. The outcome could very well turn back the clocks to December 24, 2001, a day both Argentina and 93 per cent of its creditors would rather forget; but it would also establish a poor precedent for the chances of effectively concluding any future sovereign debt restructurings.
The fundamental argument supporting Argentina’s case is simple. When the “bid – offer” gap between debtors and creditors is massive, there is no real path to a negotiated solution. When the potential losses are huge, the stakes so high and the solutions so far apart, the chances are that a forceful twist of hand is necessary to ultimately settle the issue.
Undoubtedly this was the case with Argentina. Its decision to bypass a creditors committee, the implementation of the Ley Cerrojo and the terms of the Exchange which resulted in one of the largest nominal and net present value haircuts in sovereign debt restructuring, combined to inflict significant economic pain to Argentina’s thousands of creditors both institutional and retail.
But the question is, did it have a better choice? Not really.
Looking at Greece supports this point. The Greek restructuring was ultimately as coercive, if not more so, than that of Argentina. Once again, the bid – offer gap between the country and its creditors was massive. The anticipated nominal and net present value losses to the creditors were irreconcilable assuming the end game was to truly set Greece on a challenging but ultimately sustainable economic path.
Detractors will argue that Greece entertained a negotiated solution with the IIF lead creditor group. True. But let’s look at that process and the outcome.
Left alone to its colossal debt to GDP ratio, fiscal deficit and downward spiralling economy, Greece would have had to default, leave the EU and force creditors to incur nominal and NPV losses significantly higher than Argentina or any other country in history.
Fortunately for Greece (and its creditors) the country is a member of the EU and during its meltdown the dynamics of the European crisis placed it at the centre of a potential EU implosion, given imminent contagion spill-over to Spain, Portugal and more importantly Italy. The Troika (the EU, IMF and ECB) directly or indirectly provided Greece with an infinite amount of resources (loans, guarantees, bank liquidity) to avoid default while simultaneously pushing for a not so voluntary solution to avoid European disintegration and bring suicidal markets to calm.
Nevertheless, the Troika’s support combined with bilateral negotiations with the IIF proved insufficient to avoid a coercive restructuring process. Just think how the now famous judge Griesa would react to unilaterally back-dating collective action clauses into a fiscal agency agreement that allowed the issuer to essentially cram down every creditor under new terms. This is precisely what the Greek government did with all of the bonds issued under local law (86 per cent of the total bonds outstanding). It makes Argentina’s Ley Cerrojo look like amateur hour.
For all the months of tedious tri-lateral negotiations (including a short-lived agreement in July 2011 with the IIF that severely over-estimated Greece’s capacity to pay) what triggered a final agreement was Chancellor Merkel and President Sarkozy’s ultimatum to the IIF on the weekend of October 27, 2011. The European leaders threatened a recalcitrant IIF with an exponentially higher nominal and NPV loss or it would lose their support (in the form of billions of dollars of subsidized loans to Greece) in which case creditor losses would have exceeded 95 per cent. The chancellor and the president did not negotiate. Fed up with the impasse between the parties and the potential for EU implosion, they issued this ultimatum to force an agreement that otherwise good faith negotiations would have never have achieved. A quote from Chancellor Merkel summarises the dynamics of the discussions: “We really made only one offer,” Chancellor Merkel told reporters after the summit. “The bank delegates took that back to their representatives. And this offer was specified in such a way – and we said that it’s our last word – that they took it up.”
So yes, Argentina’s restructuring was tough on creditors. But given the gap between the parties, the restructuring process was adequate and the outcome reasonable in light of Argentina’s economic circumstances. The argument that bilateral negotiations would have helped bridge the gap is not supported by the Greek experience as the events and parties involved in this yet-to-conclude restructuring saga can confirm.
Some 93 per cent of Argentina’s creditors have licked their wounds and moved on. The holdouts are threatening to unwind the one good thing Argentina achieved through means that are arguably less coercive than those used by Greece with the complicity of the EU, the IMF and the ECB.
The market is short a global legal framework for sovereign debt restructurings and unfortunately the IIF guidelines underestimate the difficulties when the parties are miles apart. In both instances (Argentina and Greece) these guidelines underestimated the reality that the losses required to truly fix the problem (versus punting it) were much greater than what creditors would have been willing to accept voluntarily.
Unfortunately, the rhetoric and economic policies of the Argentine government post restructuring muddle the justification of their approach and provide ample ammunition for the holdouts, the courts as well as public opinion to throw the country under the bus.
But be wary when the holdouts argue for the unequivocal need for good will negotiations. They may shield their motives behind this noble cause but they too know better and we should all know that they would easily throw everyone else under the bus as long as their agreement generated them exponential returns.
Carlos Mauleon was a managing director and head of Latin America investment banking and DCM at Barclays Capital from 2001 to 2011. He lead the team at Barclays that helped implement both the 2005 and 2010 Argentine exchanges.
By Charles Newbery
6 November 2013
Buenos Aires (Platts)–6Nov2013/1229 pm EST/1729 GMT  Argentina’s state-run energy company YPF said Wednesday it expects to close an agreement with Chevron by the end of 2013 for a shale development project, unleashing additional funds to boost oil and natural gas production.
“We are expecting a final closing by year end,” Chief Financial Officer Daniel Gonzalez said on a conference call with investors.
The agreement will utilize the remaining nearly $1 billion of the $1.24 billion Chevron has committed to invest in the development of a 5,000-acre tract targeting the giant Vaca Muerta shale play. Chevron has already invested $300 million in the project on the Loma Campana block in the southwestern province of Neuquen.
YPF started drilling for shale resources there more than a year ago, and ramped up production to 12,934 b/d of oil equivalent in the third quarter from 4,000 boe/d at the start of the year. Q3 output included 7,887 b/d of crude, 2,560 b/d of natural gas liquids and 0.4 million cu m/d of gas.
With Chevron’s investment as well as cash flow and new financing from the capital markets, YPF expects to drill more than 150 wells for shale resources in 2014, Gonzalez said. That would be up from the 100 wells the company expects to have drilled by the end of 2013.
Gonzalez declined to forecast shale production growth for 2014, saying the information won’t be available for another month or so when the company finalizes its 2014 budget.
He said YPF probably wouldn’t meet its “aggressive targets” of a 4% increase in overall oil output and 1% in gas this year compared with 2012, but said he expects faster growth in 2014, helping pull the company further out of a decade-long decline of 6% annually.
“We are showing solid, sustainable growth,” Gonzalez said.
The dwindling production was a main reason the government took YPF under state control in May 2012 through the seizure of 51% of the shares from Spain’s Repsol. The government said Repsol hadn’t been doing enough to turn around the decline.
Now under state control, YPF’s crude production rose 2.5% to 235,100 b/d in Q3 compared with the year-earlier period, while gas production went up 2.6% to 35.6 million cu m/d. When compared with Q2, oil production increased 3% and gas by 7.8%, it said.
Gonzalez said the increase was driven by conventional and unconventional developments. Conventional crude production rose 1% in Q3 on the year and 2% compared with Q2, while unconventional crude rose 93% on the year and 46% on the quarter, he said.
“There is still plenty to do on the conventional side as we develop the unconventional,” he said.
YPF entered another partnership deal with Dow Chemical’s Argentine unit in Q3 to develop a shale gas pilot on the El Orejano block with a combined investment of $188 million.
Gonzalez said the agreement is “another milestone in our objective to profitably develop the shale, monetize our resource base and have the country return to oil and natural gas self-sufficiency.” LIGHT CRUDE PRODUCTION
Gonzalez said Argentina is running a scarcity of light crude production and an excess of heavier crudes. This is putting strain on refineries that mostly process lighter crudes, with imports rising in recent months.
He said the situation will change as shale oil production increases because most of it so far is light crude.
YPF is not alone in the unconventional push. Apache, ExxonMobil, Pan American Energy, Shell, Total and other companies are in the first phase of drilling to test for shale and tight gas production potential, boding well for a recovery in national production.
“The companies are six to nine months behind YPF but they are heading toward a similar trend,” Gonzalez said.
Argentina’s oil production has dropped 36% to 540,000 b/d and gas has fallen 20% to 114 million cu m/d over the past decade, largely because of limited investment, few finds and maturing reserves.
Yet with the discovery of huge shale potential in 2010, investment has been returning. Argentina is estimated to hold 27 billion barrels of shale oil and 802 Tcf of shale gas, far more than its 2.5 billion barrels of proved conventional oil reserves and 12 Tcf of proved conventional gas reserves.
The government has come out with incentives to spur investment. It has raised the wellhead price of gas from new developments to $7.50/MMBtu from about $2.30/MMBtu, and it has made it possible for companies investing more than $1 billion over five years to export 20% of their production and do as they wish with the proceeds. That skirts a requirement to repatriate all foreign earnings.
“Natural gas has become a very profitable business for us given the new pricing scheme,” Gonzalez said.
YPF said its average price of gas more than doubled $3.91/MMBtu in Q3 from $1.67/MMBtu a year earlier.
The higher price of gas as well as of diesel and gasoline at the pump are helping improve cash flow, Gonzalez said.
YPF is relying on cash flow to fund 80% of a plan to invest $37.2 billion through 2017 to increase oil and gas production 32%.
Gonzalez said he expects the investment pace to be similar or higher in 2014 than the expected $5 billion-$5.5 billion this year.
He said the company has $1.2 billion in cash on hand for investment as well as the $1 billion due from Chevron, plus untapped lines of local credit and the possibility of selling bonds abroad. The company sold $150 million in notes last month at a price to yield less than 8% annually, he said.
“We will be pragmatic and opportunistic” in tapping the global credit markets, he said. GROWING RIG FLEET
Gonzalez said YPF will continue to increase its rig count, albeit at a slower pace.
YPF has ramped up its fleet to 63 from 23 a year and a half ago and expects to reach 66 by the end of the year. More rigs will be ordered at a tender to take the total to 75 by the end of 2014, Gonzalez said.
“We will continue to increase our rig count, but not so aggressively,” he said.

By Pola Oloixarac
November 7, 2013
BUENOS AIRES — After a decade in the public eye, Cristina Fernández de Kirchner has started to fade in her starring role as Argentina’s diva. With her party’s loss of key districts in the midterm Congressional elections, her dream of re-election in 2015 for a third term as president — “Eternal Cristina,” as her acolytes say — comes to an end. But she will not go away without putting up a fight.
After her party, the Front for Victory, performed poorly in the primary elections in August, Ms. Kirchner set about to recapture the public imagination, though her administration was flooded with bad news: inflation is unofficially at 20 percent to 25 percent, public debt is swelling while central bank reserves are falling, and a growing discontent has created factions inside the party, which until now had behaved under the whip of “la Señora.”
Ms. Kirchner needed to stir the lingering ashes of her romance with the people, who had rewarded her with 54 percent of the vote just two years ago.
She gave a rare interview to a celebrity journalist, a baron of the yellow tabloids. She dropped nine kilograms. She switched from skirts to black leggings, updating the widow’s uniform she adopted after her husband, Néstor, died in 2010. Internet memes featuring Ms. Kirchner as Catwoman made the rounds in social media.
Suddenly, the comeback froze. Her bespectacled face was seen, for the first time without makeup, in a dark car entering a hospital. It was as if the pop star of the movement were entering rehab.
Ms. Kirchner needed brain surgery to remove a blood clot in early October; it was reported that she had fallen and hit her head. The circumstances of the fall remained mysterious, but doctors prescribed a 30-day rest period. Without her leading the charge, her candidates seemed adrift.
The campaign was surrounded by scandal. A hidden camera showed a Congressional candidate, Juan Cabandié, trying to get out of a traffic ticket by arguing that he was a son of desaparecidos (the disappeared, victims of the 1976-1983 dictatorship, resurrected as moral bishops in the Kirchner board of virtue). A 22-year-old transit officer lost her job, but was rehired after the public outcry. The episode exposed an abusive political caste.
Protective of her political legacy, Ms. Kirchner was careful in delaying the choice of her dauphin. She overlooked high-profile candidates such as Daniel Scioli, governor of the mighty province of Buenos Aires, whose stoicism in the face of the humiliations he suffers at her whims makes him a possible 2015 loyalist successor.
As for her vice president, Amado Boudou, corruption scandals have made him persona non grata. Mr. Boudou goes every day to the presidential palace, the Pink House, but he no longer has Ms. Kirchner’s ear. “The only thing he can handle is a motorbike,” said Congressman Felipe Solá, referring to the acting president’s hobby. Mr. Solá is part of the Peronist “renewal” faction aligned with Sergio Massa, Ms. Kirchner’s former cabinet chief, an up-and-comer who has promised to pursue a market-friendly economic approach. Mr. Massa was the darling of the recent election, winning roughly 44 percent of the vote.
Argentina recently negotiated a loan with the World Bank for $3 billion, which would give Ms. Kirchner’s administration some breathing room. “Under these conditions of inflation, with no anti-inflation plan and such low reserves, it would be a miracle if she makes it to 2015,” said Pablo Schiaffino, an economist who lives in Buenos Aires. “It’s like a car running out of gas.”
When she was first elected, Ms. Kirchner told the country: “We deserve a new story for ourselves.” She delivered on that. Since 2008, she has woven a dramatic story line infused with villains, éminences grises and corporate powers seeking to dethrone her. With postmodernist swag, the narrative flew free from accountable issues: recently, after a train crashed in the Once Station, the government announced that it was taking over the railroads. The Peronist party had nationalized them in the 1940s, and privatized them in the 1990s. The party’s position swings to the left and to the right, but the train cars are the same as in the 1940s.
Ms. Kirchner aspires to go into history as Argentina’s biggest reformer, and some of the legislation passed on her watch supports her case, including the Universal Child Allowance (a stipend for poor families), gay marriage laws and more money for scientific research and university education. She could try to position herself as the leader who never cut back on welfare-state spending and propel herself to a glorious comeback in 2019, becoming the country’s populist icon of the 21st century, overshadowing Evita Perón.
But the economic clock is ticking. If Ms. Kirchner manages to sustain the bloated state spending two more years, she’ll secure the glory — and let the one who replaces her worry about paying the bills.
Pola Oloixarac is an Argentine novelist and author of “The Wild Theories.”
By Shane Romig
7 November 2013
BUENOS AIRES—With Argentina’s bondholders increasingly worried that an adverse court ruling in the U.S. might lead to a sovereign default, one creditor is proposing a novel solution: Investors should dig into their own pockets and pay the hedge funds that are suing to collect on defaulted Argentine debt.
Such an offer would be a way for Argentina to resolve a lawsuit that could force it to choose between defaulting on its current bonds or paying hedge funds the more than $1.33 billion they have been awarded by U.S. courts, something President Cristina Kirchner has sworn never to do.
The proposal, floated by leading creditor Gramercy Funds Management LLC, would pay the hedge funds and more than compensate the creditors who foot the bill because their bondholdings would likely rally once the risk of a default dissipates, a person familiar with the matter said.
Gramercy owns bonds Argentina issued under debt swaps in 2005 and 2010 that offered creditors about 33 cents on the dollar. Argentina passed legislation this year to launch another restructuring—on terms similar to those offered creditors in 2010—aimed at the hedge funds and other investors who still own defaulted bonds.
Under the Gramercy plan, bondholders would voluntarily give up a portion of the interest payments they receive to pay the hedge funds the difference between Argentina’s debt-exchange offer and the sum they have been awarded by U.S. courts, the person said.
If successful, the Gramercy proposal could push bond prices up by as much as 24%, Barclays economist Sebastian Vargas said in a report.
However, 85% of the holders of Argentina’s restructured debt would have to agree in order for the Gramercy deal to be binding on all creditors. The so-called holdout creditors—those who refused to accept the terms of the restructurings—would have to tender their defaulted bonds in Argentina’s latest restructuring offer. Current bondholders would give the holdouts 20% of their interest payments over the next five years, a total of almost $1.4 billion, according to Barclays.
Argentina defaulted on some $100 billion in debt during a deep economic crisis in 2001. Creditors exchanged about 93% of the defaulted debt for new bonds, but holdouts, led by hedge funds Aurelius Capital Management and Elliott Management Corp.’s NML Capital Ltd., have sued for full repayment. They have tried to seize Argentine government assets across the globe, including a naval training ship that was detained for months in Ghana last year until a U.N. tribunal ordered it released.
The plan has been met with skepticism by some bondholders and the hedge funds.
“The Gramercy proposal is impossible. Bondholders won’t give up future payments to pay the holdouts,” said Eugenio Bruno, an attorney at Argentine law firm Estudio Garrido, which represents several creditors that accepted the swap offers.
“We have approached Argentina countless times about negotiating a resolution to this dispute. It is completely within Argentina’s power to solve this problem and we have no idea why Argentina’s debts can, should, or need to be resolved without Argentina’s participation,” an NML spokesman said. “We welcome the idea of good-faith negotiations with Argentina, but we don’t see the point of negotiating with other bondholders,” he said.
A spokesman for Aurelius declined to comment on Gramercy’s proposal. A dozen other Argentine creditors either declined to comment or didn’t respond to requests for comment.
A spokeswoman for Argentina’s Economy Ministry also declined to comment.
Argentina has largely exhausted its legal options before a U.S. appellate court and its last hope could come down to a long-shot appeal to the Supreme Court. Lower courts have ruled that Argentina can’t make payments on its restructured bonds unless it also pays the holdouts.
Gramercy is one of several investors that have asked the courts not to block Argentina from making payments on the Argentine bonds they own.
By Paul Byrne and Michael Warren in Buenos Aires, Argentina, and Luis Andres Henao in Santiago, Chile
November 7, 2013
STANLEY, Falkland Islands — Falkland Islanders on Thursday elected a new government to manage the transition of the small British territory as oil exploration turns to development.
Five members of the Legislative Assembly were selected to represent Stanley, the capital, and three for Camp, which is everywhere else in the South Atlantic territory of mostly remote sheep farms and small settlements.
For the first time, the legislative positions will be full time. Those elected will receive a salary and must quit any other jobs.
Officials said 75 percent of Stanley voters participated and just over 85 percent of the Camp constituency cast ballots. That was 1,046 votes in Stanley and 242 for Camp.
The main issues facing the legislators are Argentina’s continuing claim to the islands and preparations for the oil wealth expected from offshore drilling. Oil exploration is already pumping millions of dollars into the economy and most islanders seem concerned about the potential for problems from rapid change brought by the new industry.
“Some now, unfortunately, are dazzled by the figures being bandied about, but until commercial oil is actually flowing and royalties being received we must proceed with caution,” Jan Cheek, who is one of the five new legislators for Stanley, said in her campaign manifesto.
Michael Poole, another Stanley lawmaker, believes Falklanders need to reach out more to Latin American countries to tell the territory’s position and offset Argentina’s campaign to get sovereignty.
While the Islands are internally self-governing, Britain is responsible for defense and foreign affairs. Argentina claims the territory it refers to as the “Islas Malvinas” despite nearly 180 years of British control and a failed occupation 30 years ago.
In a referendum in March, 99.8 percent of Falkland Island voters backed keeping their government as a British Overseas Territory.
By Daniele Lepido and Manuel Baigorri
November  8, 2013
Telecom Italia SpA (TIT) unveiled plans to sell its Argentine business, assets including wireless towers in Italy and Brazil, and a mandatory convertible bond to raise a total of about 4 billion euros ($5.4 billion) to help pare debt.
The carrier received a binding offer for its 22.7 percent holding in Telecom Argentina SA and its board voted yesterday in favor of the disposal, Telecom Italia Chief Executive Officer Marco Patuano said on a conference call. Fintech, the investment firm founded and led by Mexican billionaire David Martinez, is the bidder, said a person familiar with the matter, asking not to be named as the discussions are private.
Patuano, taking over from Franco Bernabe, who resigned last month after clashing with top shareholder Telefonica SA (TEF), is attempting to turn around Italy’s largest phone company. The carrier’s debt was cut to junk last month by Moody’s Investors Service. Standard & Poor’s, which has said it’s likely to follow suit, will complete its review this month.
“These measures show that Telecom Italia is committed to a stronger financial profile,” Patuano said on the call.
Third-quarter profit fell about 27 percent to 505 million euros, missing the 524.6 million-euro average estimate among analysts compiled by Bloomberg.
Net Debt
Adjusted net debt totaled 28.2 billion euros at the end of September. That’s more than double the company’s market value. Telecom Italia plans to trim its debt to less than 27 billion euros by the end of the year. It aims to cut the ratio of net debt to earnings before interest, taxes, depreciation and amortization to 2.1 times by 2016, compared with 2.9 times this year.
Telecom Italia fell as much as 5.6 percent and traded 4 percent lower at 69.2 cents at 9:30 a.m. in Milan, giving the carrier a market value of 12.6 billion euros.
While Telecom Italia declined to give financial details for the Argentine asset, the stake has a market value of about $1.4 billion. The board authorized negotiations to conclude the deal, according to the Milan-based company, which expects the transaction to be completed in mid-2014.
Argentina is one of Telecom Italia’s three core markets, along with Italy and Brazil, and accounted for about 13 percent of its 2012 revenue. The stake is through a holding company called Sofora, and the Italian carrier has a presence in Paraguay as well through its indirect stake in the Buenos Aires-based company.
‘Big Picture’
Still, Telefonica, which in September increased its holding in Telecom Italia, favors selling the Italian company’s Brazilian division, Tim Participacoes SA (TIMP3), people familiar with the matter have said. Tim has a market value of $11.6 billion and Telecom Italia owns a 67 percent stake.
“A sale of the Argentine asset is a small part of a bigger recovery picture that Telecom Italia needs to complete,” said Carlo Alberto Carnevale Maffe, a professor of business strategy at Milan’s Bocconi University.
Fintech has investments in Argentina’s sovereign debt as well as in many restructured companies including a stake in the country’s largest cable company, Cablevision SA. A former priest, Martinez lives half of the year in London and the other half in Manhattan.
He built his fortune by buying and helping to restructure the debt of troubled countries and companies, including Telecom Argentina, according to public filings.
Annual Coupon
Martinez has also invested beyond Argentina and Latin America. In September, Fintech bought almost 5 percent of Spanish lender Banco de Sabadell SA during a share sale.
A Fintech spokeswoman in New York declined to comment. Martinez didn’t respond to an e-mail seeking comment.
Telecom Italia said today it completed the sale of 1.3 billion euros in mandatory convertible bonds due November 2016. The securities will pay an annual coupon of 6.125 percent, according to a statement. They will be exchanged into common and savings shares.
Telecom Italia said it expects to reap more than 2 billion euros from the sale of mobile-phone towers and the TI Media Broadcasting unit.
By Alejandro Lifschitz
7 November 2013
BUENOS AIRES (Reuters)—A group of Argentine bondholders will offer creditors suing for the repayment of defaulted sovereign debt a private deal to get them to abandon their litigation, the state-run Telam news agency said.
The move is being driven by investment funds from the United States and Europe, largely from the Bondholder Exchange Group, Telam reported on Wednesday night [Nov. 6], citing unnamed sources.
They propose to exchange bonds on which payments have been frozen for other paper that Argentina normally honors, with better conditions than the country has already offered. The offer will be formalized next week, Telam said.
The Bondholder Exchange Group, led by emerging markets investment specialist fund Gramercy, has supported Argentina in its long court battle in the United States against holdout creditors seeking to recover full payment from the bonds that the South American country stopped honoring after its 2002 financial crisis and default.
The Argentine Economy Ministry could not immediately be reached for comment. No one was available to talk from Gramercy’s Greenwich, Connecticut, headquarters.
“The private debt swap proposal,” Telam said, “consists of offering an exchange to the holdouts in which they drop their demand for 100 percent repayment.”
Two restructurings in 2005 and 2010 saw creditors holding around 93 percent of Argentina’s debt agree to swap their bonds in deals giving them 25 cents to 29 cents on the dollar. Bondholders who did not participate in the swaps, led by hedge funds Elliott Management Corp.’s NML Capital Ltd. and Aurelius Capital Management LP, went to court in New York to seek full payment.
Argentine President Cristina Fernandez has pledged to keep paying the restructured debt but has vowed to never pay more than other creditors received. That has created investor concern that the country could enter a new technical default in order to avoid paying the holdouts.
The case was filed in New York under the terms of the bond documents.
By Manuela Mesco And Taos Turner
7 November 2013
MILAN — Telecom Italia SpA Thursday said it received an offer for its Argentine division as the troubled Italian telecommunications provider looks to sell assets and reduce its massive debt.
According to people familiar with the negotiations, Fintech Investments Ltd. made a $960 million offer, though that also includes various small transactions. The bulk of the deal has Fintech offering $750 million was for 68% of Telecom Italia’s shares and voting rights in Sofora Telecomunicaciones SA, a holding company that controls Telecom Argentina. The rest of the bid was for a host of smaller assets.
A sale could be a part of Telecom Italia’s broader effort to raise about €4 billion by 2016 in order to slash its hefty €28.2 billion debt. For years, the company’s domestic business has shrunk in the face of fierce competition and a protracted economic downturn throughout Europe. The poor finances prompted ratings firm Moody’s to cut Telecom Italia’s credit rating to below investment-grade status in October.
David Martinez, a Mexican investor based in New York who runs Fintech, could not be reached for comment.
The potential sale also could mark Telecom Italia’s first major move since Spanish telecom operator Telefonica SA announced plans to become Telecom Italia’s dominant shareholder.
Telecom Argentina accounted for almost €2.86 billion, or 14%, of Telecom Italia’s total revenue in the first nine months of 2013. Telecom Argentina has fixed and mobile operations in Argentina, as well as mobile services in Paraguay.
Analysts have estimated the value of Telecom Italia’s stake in Telecom Argentina at up to $1.5 billion, but operating in the South American nation poses challenges and risks. Among other things, Argentina’s government micromanages public utility prices and bans companies from sending dividends abroad—potentially making the unit less appealing.
Telecom Italia–whose third-quarter net profit fell 27% on the year to €505 million–said the sale of Telecom Argentina, if approved by Telecom Italia’s board of directors, could be completed by mid-2014.
Speaking with analysts Thursday, Chief Executive Marco Patuano ruled out selling the company’s Brazilian division, which accounted for 26% of Telecom Italia’s revenue through September. “There’s of course a price for anything, but right now Brazil is core,” Mr. Patuano said.
However, Telecom Italia’s Brazilian operations could complicate Telefonica’s efforts to take the reins of the Italian company. Telefónica agreed earlier this year to raise its stake in Telco, the holding company that owns 22.4% of Telecom Italia. As a result of the transaction, Telefónica will have effective control of the Italian giant in January.
That is likely to spark antitrust problems because of the dominant position Telefonica would hold in Brazil. Yet Mr. Patuano didn’t explain how Telecom Italia might resolve such regulatory concerns without selling its Brazilian holdings.
By Danilo Masoni and Leila Abboud
7 November 2013
* New CEO aims to strengthen balance sheet
* Investment plan to upgrade networks in Italy, Brazil
* Launches convertible bond worth up to 1.3 bln euros
* CEO does not rule out Brazil sale but says is “core asset”
* Biggest shareholder Telefonica backs the moves
* No comment on dividend plans
MILAN/PARIS, Nov 7 (Reuters) – Telecom Italia will sell its Argentina unit and other assets while issuing a convertible bond, aiming to raise around 4 billion euros ($5.3 billion) to stave off a credit rating downgrade and strengthen operations in Italy and Brazil.
Italy’s biggest telecoms operator, which is in the middle of a strategy shift under new Chief Executive Marco Patuano, said it had received an unsolicited offer for its 22.7 percent stake in Telecom Argentina and planned to sell.
Argentine newspapers Clarin and La Nacion said late on Thursday that the buyer would be investment fund Fintech, which already holds shares in Telecom Italia’s Argentine unit. Fintech could not be reached for comment after office hours.
Telecom Italia also plans to sell and lease back more than 17,000 mobile towers it owns in Italy and Brazil, and unload an Italian digital broadcasting unit, aiming to reap more than 2 billion euros from these deals.
The moves represent a major change for the debt-laden former Italian telecom monopoly and show the influence that its largest shareholder, Spain’s Telefonica, is having after it agreed to raise its ownership of the holding company that owns 22.4 percent of Telecom Italia.
Patuano’s new strategy, which has been backed by Telefonica, aims to chart a course out of Telecom Italia’s high debts and deteriorating business in its home market by ploughing money into upgrading its creaky Italian network.
The asset sales could help stave off further credit downgrades. Moody’s already cut Telecom Italia’s rating to junk last month, while Fitch and Standard and Poors have it one notch above. Further downgrades will be costly because the company has to roll over large amounts of debt next year.
Moody’s credit analyst Carlos Winzer said the agency would not count the convertible bond as equity until it converts to shares in 2016, so it would not help its rating for now.
“From our perspective as a rating agency, this is an immediately neutral move, and will be credit positive and strengthen the balance sheet only in year three when the bonds convert to equity.”
The plan also puts a renewed emphasis on the group’s Brazilian business, which sources have told Reuters that Telefonica is aiming to sell from the second half of 2014 onwards. TIM Brazil is the second-biggest mobile operator behind Telefonica’s own Brazilian unit in the growing emerging market.
Patuano did not rule out a sale but said that Brazil was important to the group as shown by a new pledge to spend 11 billion reais ($4.78 billion) on network upgrades there between 2013 and 2016.
“Brazil is a core asset. You can never say never. There is a price for everything, but the price for a core asset must be a price that can convince me and the board to change the strategy we set today in which Brazil is an important component.”
In Italy, the group also pledged to boost investment in high-speed fibre broadband and fourth-generation mobile technology. It will target around 9 billion euros in domestic capital expenditures from 2014 to 2016.
With the convertible bond of 1.3 billion euros, Telecom Italia avoided a straight capital increase, which sources earlier had told Reuters was an option. That may soothe shareholders because straight capital increases tend to be issued at a discount to the current share price, unlike the convertible bond.
Robin Bienenstock, analyst at Bernstein Research, said equity investors had been expecting a cash call of up to 2 billion euros, so the fact that Telecom Italia was undertaking asset sales and a convertible bond would likely be viewed positively.
“Since the mandatory convertible is at a premium to today’s share price, it is arguably a better way to raise capital than a capital increase done at a discount,” she said.
Telecom Italia declined to say anything about its dividend policy in the coming years.
Books for the November 2016 bond, convertible into ordinary and saving shares, will close by Friday, it said in a statement, adding that the coupon was expected to be of 5.75-6.5 percent. A source briefed on Thursday’s meeting of the Telecom Italia board said Telefonica planned to take up its share.
In a separate statement, the company reiterated its financial targets for 2013, but added that “actual results may differ, even significantly, from those forecast for the whole 2013″.
Telecom Italia said nine month revenues fell 7.6 percent to 20.38 billion euros, dragged lower by weakness in its recession-hit domestic business, while core profits fell 10.5 percent to 7.93 billion euros. Both were broadly in line with market expectations. Adjusted net debt stood at 28.23 billion euros at the end of September, also in line with analysts’ expectations.
Telecom Italia shares closed down 4.3 percent at 0.72 euros before the announcements. They have risen 5.4 percent since January, underperforming the European telecom index, which is up nearly 30 percent.
By Charles Newbery
7 November 2013
Buenos Aires (Platts)–7Nov2013/445 pm EST/2145 GMT   Argentina plans to increase the ethanol blend in gasoline to meet rising demand and stem surging imports of the fossil fuel as car sales surge, a government official said Thursday.
“We will gradually increase the blend,” Manuel Herrero Rosas, head of biofuels at the Energy Secretariat’s Department of Fuels, said on the sidelines of an ethanol conference in Buenos Aires.
He said the first step is to raise the ethanol blend to 10% in 2014 from an average of 6% this year, and then take it to 12% in 2015 before gradually increasing it to a target range between E18 and E26.
“We have the raw materials for the blend, we just need to make changes in the automotive manufacturing chain,” he said.
Argentina launched an E5 blend in 2010, generating domestic demand for about 282,000 cu m/year, or nearly the installed cane-ethanol production capacity of 300,000 cu m/year at that time. Corn growers started producing ethanol in 2012, helping to increase total production to an expected 480,000 cu m/year in 2013 from 200,000 cu m/year in 2012.
More corn- and sugarcane-ethanol plants are due to come on line to nearly double production to 820,000 cu m/year in 2014 and then to 1.08 million cu m/year in 2015 and 1.27 million cu m/year in 2016, according to government estimates. That would be enough for a 13.5% blend in gasoline in 2016, Javier De Urquiza, the national director of promotion at the Planning Ministry, which oversees energy affairs, said at the event.
Herrero Rosas said that the holdback for increasing the blend more quickly is the automotive industry, which must modify its manufacturing process to produce motors that can handle higher ethanol blends. He said the government is in talks with the sector, and that an E12 blend will be tested in motors next year after implementing the E10 blend.
A source at the Argentine Automakers Association said the sector doesn’t object to E10 as long as the international standard of 3.7% oxygen is enforced.
The push to use more ethanol comes as rising gasoline consumption leads to increased imports. Car sales rose 19% in the first nine months of this year compared with the year-earlier level.
This is pushing up gasoline consumption, which is on track to rise 3.4% to 46.2 million b/year in 2013 from 44.7 million b/year in 2012, and then rise another 7.6% to 49.7 b/year in 2014 and continue going up to 59.1 million b/year in 2016, according to government forecasts.
The increase in demand is putting strain on refiners, which are processing crude at 90% run rates to keep pace. Oil refining capacity has remained largely unchanged since the 1990s, as price controls, regulatory uncertainty and dwindling crude production discourage investment to build the 150,000 to 200,000 b/d of additional crude processing capacity the country needs to keep up with demand.
Herrero Rosas said that oil refiners could expand processing capacity to reduce gasoline imports by instead importing crude. But he said refiners find it cheaper to import gasoline under a government tax-free program than to invest in new capacity.
Ethanol producers are keen to increase the blend so they can boost operating capacity and build new plants.
Manuel Ron, president of Bioetanol Rio Cuarto (BIO4), said that without an increase in the ethanol blend, he is only able to operate his 82,000 cu m/year corn-ethanol plant in Rio Cuarto, Cordoba, at 75% to 80% of installed capacity.
“With a higher blend, I could increase capacity,” he said on the sidelines of the event. “And this would help the country to reduce gasoline imports.”
By Maximilian Heath
7 November 2013
BUENOS AIRES, Nov 7 (Reuters) – As Argentina gets closer to a 2015 presidential election that might usher in policy reforms making the key agriculture sector more profitable, investors are taking a new look at the country’s farmland.
Argentine President Cristina Fernandez’s allies took a beating in October’s mid-term elections, shrinking her majority in Congress, ending chances of a constitutional change to allow her to run for a third term and kicking off the contest to succeed her.
Most of the opposition figures known to be interested in running for the top job in 2015 are considered more market-friendly than Fernandez.
She has feuded for years with the farm sector over her interventionist policies, which growers say kill profits and scare off investment in the agriculture sector.
“With the mid-term election, investors’ reading of the 2015 presidential race has changed significantly … in the sense that now might be the right time to make a long-term investment because government policies might change,” said Roberto Frenkel Santillan, head of the CAIR Rural Real Estate Chamber.
“We are getting more inquiries. More people are coming in to visit and look at land,” he added. “It looks like the market might slowly firm up.”
Argentina is the world’s top exporter of soyoil and soymeal as well as the No. 3 supplier of corn and soybeans. But growers complain that the country is not reaching its potential as a food exporter due to constant friction with Fernandez’s government.
A 35 percent export tax is levied on soybeans and limits are enforced on corn and wheat shipments to ensure ample domestic food supplies. Argentina nonetheless suffers from galloping inflation, pegged by private analysts at 25 percent.
Land prices have been driven down over the last two years, in part due to government farm policies that provide little incentive for investment.
“The mid-term election that followed in October confirmed the impression left by the primary, and gave a little oxygen to the land market,” said Emir Carrillo, head of the rural real estate firm Emir Carrillo and Associates. “We are getting more calls and the market is starting to move.”
Carrillo said the price of prime land in the Pampas grains belt has fallen up to 15 percent over the last two years while the price tag on marginal tracts has slumped by up to 35 percent.
The U.S. Department of Agriculture forecasts Argentina’s 2013-14 soy crop at 53.5 million tonnes, with the South American country’s wheat harvest pegged at 12 million tonnes and corn seen at 26 million tonnes. (Writing by Hugh Bronstein, editing by G Crosse)
10. MALBEC: A TASTE TO TANGO WITH (The Wall Street Journal Online)
By Will Lyons
7 November 2013
IN ARGENTINA THEY PLANT their vineyards high. In some areas, like the Andean foothills, the altitude can be a dizzying 2,000 meters, and sometimes higher. To put that into a more easily graspable European context, that is more than six times the height of the Eiffel Tower. It’s the altitude that explains the unique flavor and character of Argentinian wines. In short, the higher the vineyards the more intense the sunlight, hence the thicker the skins grow and the more acidity the grapes acquire.
I have only ever seen this light from above, flying over the Andes on my way to Santiago. But speak with any Argentinian winemaker and they will wax lyrical about it. When I mentioned Argentina to wine consultant Michel Rolland, his eyes lit up as he talked about the purity of the mountain air and the intensity of the light.
Malbec is the grape variety that thrives in Argentina. In the past decade its renaissance in the vineyards to the west of the country, in and around the area of Mendoza, has seen its popularity soar. Indeed, such is its ubiquity in the U.S. and Europe that if you are reading this column I have no doubt you will have sampled its glorious, floral flavors.
This wasn’t always the case. A thirsty domestic market in Argentina meant that as recently as 15 years ago very few examples were exported. In Europe, Malbec is mainly limited to France. Although grown in Bordeaux, where it has been prized for its dark color, it is in the Cahors region of southwest France that one generally finds it today. There, it produces deep, black-red wines that are unapproachable and tannic when young, but then mature into luscious, spicy reds.
In Argentina, I find Malbec has a smoother edge. The wines are generally softer and very generous. They give immediate pleasure: one sniff, one sip and it feels as if the inside of your mouth has been lined with velvet. I always admire their consistency; the makers have mastered the idea of a uniform, reliable taste profile and achieve a pleasant, smooth ripeness. Why Malbec performs better in Argentina can be partly explained by the climate, but Hugh Johnson, writing in his “Wine Companion,” says it could also be down to the fact that the grape was introduced from France in the mid-19th century, before France’s vineyards were devastated by phylloxera.
On the flip side, however, I do struggle with the high alcohol level of these wines, and I would be lying if I said they were among my favorite reds. Too often I find them a little overpowering. But there is no doubt that when blended with either Cabernet Franc or Cabernet Sauvignon, Malbec experiences a refreshing lift.
To reacquaint myself with this popular grape variety, I have recently tasted a number of examples from some of Argentina’s top estates. Mendoza is an obvious standout region, but for a little more refinement and floral flavor look for the Valle de Uco and the Upper Mendoza River, also known as the “Luján de Cuyo y Maipú.” Further north (where the temperature rises), the vineyards are planted even higher. In Salta, I found the Malbec to have a more intense, savory character. A pretty good match with Argentina’s tender, grass-fed beef or a mouthful of carbonada—a spicy stew of lamb or beef served in a large, hollowed-out pumpkin.


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