By Ken ParksDecember 20, 2013Government Strikes Deal To Freeze Prices of 200 Basic Goods.BUENOS AIRES-Argentina’s government has reached a preliminary agreement with supermarket chains to freeze the prices of basic goods next year as President Cristina Kirchner fine tunes price controls that have failed to tame double-digit inflation.Argentina sports the second highest rate of inflation in the Western hemisphere after Venezuela, fueled by money printing and a weakening currency.The Kirchner administration signed a deal Friday with supermarkets and suppliers that covers about 200 products, down from 500 goods that were previously subject to price controls. The new price accord that covers items ranging from soap to chicken and beef is scheduled to take effect at the start of 2014.“This is a voluntary price agreement…price controls haven’t been successful in the past,” Economy Minister Axel Kicillof said.Supermarket executives sat stone faced as Mr. Kicillof, Domestic Commerce Secretary Augusto Costa, and Mrs. Kirchner’s cabinet chief, Jorge Capitanich, extolled the virtues of the program. Young Kirchner loyalists drafted as price inspectors lined the wall of the auditorium donning their trademark deep blue T-shirts.Mr. Capitanich hinted that further state intervention might be needed if the prices accord doesn’t work.“Sometimes agreements are appropriate, other times the state needs to regulate. We need to take care of the people’s pocketbook,” he said.Price accords are a central pillar of Mrs. Kirchner’s efforts to control annual inflation that most private sector economists say was about 27% at the end of November, compared with the 10.5% reported by the government.Mrs. Kirchner relies on the central bank to finance government spending by printing money. The rate of monetary expansion has slowed this year with one closely followed measure of the money supply rising 27% on the year, down from 38% in 2012.However, the administration’s decision to speed up the depreciation of the Argentine peso to help exporters has aggravated inflation by making imported goods more expensive. After weakening about 12% against the dollar last year, the peso has lost about 24% so far this year.High inflation and a sluggish economy contributed to the setback Mrs. Kirchner’s ruling coalition suffered in midterm congressional elections Oct. 27.Less than a month after the election, Mrs. Kirchner sacked her powerful domestic commerce secretary, Guillermo Moreno. Mr. Moreno spearheaded efforts to pressure businesses to limit price increases through controversial strong-arm tactics that in the end did little to keep inflation from accelerating.Earlier this year, Mrs. Kirchner launched the “mirar para cuidar,” or “watch to take care of,” program that send thousands of people affiliated with unions, activist groups and religious organizations to monitor prices in stores.In July, Mr. Moreno’s secretariat briefly closed four supermarkets owned by companies including Wal-Mart Stores Inc and Chile’s Cencosud SA for not stocking all of the 500 goods subject to price controls.The government will continue to monitor the pricing and stocking of price controlled goods, Mr. Kiciloff said.Argentine supermarkets remain well stocked, although shortages of some price controlled goods have been noted on occasion.The government is going to put greater scrutiny on a common practice by food companies and supermarkets that skirt controls by making small price changes to controlled goods so that they can sell them as new products at higher costs, Mr. Kicilloff said.By Ken ParksDecember 20, 2013BUENOS AIRES—Argentina’s government threatened Thursday to revoke the concessions of two private electric utilities serving the capital unless they resolve power outages as a heat wave leads to soaring electricity demand.Brief power outages and major blackouts in Buenos Aires have become a fixture around the holiday season in recent years as hot weather strains an electric grid suffering from years of underinvestment.President Cristina Kirchner’s cabinet chief, Jorge Capitanich, blamed Edesur SA and Edenor SA EDN.BA +6.96% Empresa Distribuidora y Comercializadora Norte S.A. Argentina: Buenos Aires ARS2.46 +0.16 +6.96% Dec. 20, 2013 4:59 pm Volume : 2.14M P/E Ratio 4.47 Market Cap ARS1.09 Billion Dividend Yield N/A Rev. per Employee N/A 12/19/13 Argentina Threatens to Revoke … More quote details and news » EDN.BA in Your Value Your Change Short position for the sporadic blackouts that have affected tens of thousands of people.“If they aren’t able to provide the service as outlined in their concession contract then the federal government is prepared to directly provide the service. No excuses regarding the quality of service will be tolerated,” Mr. Capitanich said in a televised address.The government will fine the utilities and require them to compensate consumers harmed by the outages, he said.Edenor and Edesur serve almost 13 million people in the capital, Buenos Aires, and surrounding urban area. A spokesman for Edenor declined to comment. An Edesur spokeswoman didn’t respond to phone calls and an email seeking comment.Shares of Edenor traded in New York fell 15% to close at $5.70.The Kirchner administration has called on the public to limit electricity use as a heat wave this week pushed electricity consumption to hit record highs as Argentines turned up their air conditioners. Temperatures are expected to remain above 86 degrees Fahrenheit well into next week with the risk of further blackouts or even a repeat of the major blackout that affected a vast swath of Buenos Aires last year.The precarious state of Argentina’s utility sector has its roots in government policies aimed at encouraging consumer spending by providing the public with cheap, subsidized energy.Argentina froze utility rates in 2002 after the country defaulted on its public debt and devalued its currency. What was supposed to be a temporary measure to help consumers amid a deep economic crisis became a long-standing policy under the governments of former President Néstor Kirchner, and his wife and successor, Cristina Kirchner.Rapid economic growth in the years after Mr. Kirchner took office in 2003, coupled with low utility rates and rising wages, led to surging electricity demand that outpaced the capacity of utilities to maintain and expand their infrastructure.While utilities regulated by provincial governments have been allowed to increase rates in recent years, federally regulated electricity and natural-gas utilities have seen most of their rates frozen for more than a decade.Utilities have struggled to cover rising costs, especially salaries that for years have been increasing at or above the rate of inflation, which most private-sector economists peg around 27%. Edenor’s operating loss widened 85% on the year to 1.11 billion pesos during the first nine months of 2013.Critics of the government’s energy policies say that low utility rates have led to wasteful energy use, while at the same time giving electric companies scant resources to invest in their operations.Mrs. Kirchner’s policy of providing subsidized energy to consumers and industry has become a serious financial burden for her government. Declining oil and gas production has forced the government to spend its finite stocks of foreign currency to import growing volumes of natural gas.Government spending on energy subsidies rose almost 72% on the year to 60 billion pesos between January and September, according to estimates by ASAP, a nongovernmental organization dedicated to improving public-sector finances.The administration suspended electricity subsidies for some industries and wealthy residential users last year but has balked at taking the politically costly move of raising rates for the general population.Mr. Capitanich said that utilities’ refusal to invest, not rates, is the cause of recent power outages. Last year, the government allowed Edesur and Edenor to tack a small surcharge on electric bills to fund infrastructure investments.“We don’t want them to tell us how much they are going to invest. We want them to invest,” he said.By Benedict ManderDecember 20, 2013It’s hot in Buenos Aires. So hot, that there has been a wave of blackouts this week as melting porteños, as residents of Argentina’s capital are known, jam the electric grid by cranking their air-conditioners up to full blast.This has become an annual occurrence during heat waves in the southern summer, as continuous underinvestment in the electricity system – since utility rates were frozen over a decade ago – takes its toll. But tempers as well as temperatures have been rising – both on the streets where sporadic protests are disrupting daily life, and in the government, which has decided that the fault lies with the private companies providing the electricity, Edesur and Edenor.Jorge Capitanich, the new cabinet chief issued a stern threat yesterday: If they aren’t able to provide the service as outlined in their concession contract then the federal government is prepared to provide the service directly.If the government’s disastrous management of Aerolineas Argentinas is anything to go by, since it nationalized the state airline in 2008, it is questionable whether the government could do much better than Edesur and Edenor.Although utility rates have remained frozen since 2002 – the idea at the time was to soften the blow for consumers after Argentina’s economic collapse – everything else has risen: the economy has boomed, as has demand for electricity, and salaries have also spiralled amid runaway inflation. The result? Utilities are operating at a huge loss, and scarcely able to make essential investments to maintain and expand energy infrastructure. Now, they have been slapped with fines and will have to compensate consumers to boot.But it’s not just utilities that are having a hard time. Today the government announced price freezes on up to 200 goods, which will affect supermarkets and their suppliers, in an effort to keep a lid on inflation, with prices rising faster than last year as the government allows the currency to depreciate. (This is intended to resolve another very serious problem: its rapidly vanishing foreign exchange reserves).Remarkably, the new economy minister, Axel Kicillof, described the measures as “voluntary agreement on prices” because “we know that controls and price freezes imposed on the private sector aren’t successful.”Would the main supermarket chains operating in Argentina, including units of Chile’s Cencosud, France’s Carrefour, and the US’s Wal-Mart, really describe these agreements as “voluntary”?But more intriguingly: did Kicillof’s revelation – that one of the government’s key policies in recent years has failed – come to him when his own air-conditioning system broke down during the blackout earlier this week in the ministry he runs?By Benedict ManderDecember 20, 2013In almost the only Argentine province not to be affected in recent days by damaging police strikes, which triggered a wave of opportunistic looting, a very different headache has emerged for President Cristina Fernández de Kirchner.A series of articles published in the respected broadsheet La Nación this week which suggest that the president and her late husband, Néstor Kirchner, are linked to a series of murky property deals in Santa Cruz province have breathed new life into corruption allegations that Fernández would doubtless rather avoid.It was bad enough that indebted regional governments gave in to pay raises of as much as 100 per cent for some provincial police forces, something they can scarcely afford, and will surely lead to similar wage demands in other sectors. That’s not good news for inflation, which is already on the rampage.But although Santa Cruz was almost alone (together with Santiago del Estero and the capital Buenos Aires) in avoiding the recent disturbances, the windswept Patagonian province that was ruled by Néstor Kirchner for more than a decade almost as though it were his own fiefdom before he became president in 2003 is nevertheless front-page news.At the heart of the scandal is Lázaro Báez, an old friend and business partner of Fernández and her late husband, and whose companies have benefited from public works contracts granted over the last decade. Indeed, the declared wealth of the presidential couple itself has seen a tenfold increase over the same period.Asked last year by a Harvard student why she was so rich, a piqued Fernández retorted that it was “because I’ve worked all my life and because I have been a very successful lawyer.”But Hugo Alconada Mon, an investigative journalist at La Nación, has reported that in 2010 and 2011 Báez paid the Kirchners $14.5m in the form of “rent” for rooms at three luxury hotels they own in Santa Cruz, regardless of whether they were occupied or not.Yesterday, presidential secretary Oscar Parilli came out with guns blazing, accusing the newspaper of defamation “in the best style of fascism”, and “trying to put in doubt the legitimacy, legality and honesty of private economic acts”.Just days earlier, José María Campagnoli, a federal prosecutor who has for months been investigating Báez over allegations of money laundering, tax evasion and illicit enrichment, was removed from the case and is now awaiting impeachment, for abuse of authority.The scandal has all the ingredients of one that could stay in the headlines for some time – the injunction that Báez has requested from a Santa Cruz judge that would bar the media from reporting on his companies’ “private” business is unlikely to have the desired effect.By Phoebe SedgmanDecember 23, 2013Soybeans reached the highest price in almost two weeks in Chicago amid concern that heat and dryness in Argentina will stress crops in the world’s third-biggest producer of the oilseed.Temperatures in Argentina are forecast to rise early this week, especially in northern areas, quickening moisture losses and increasing crop stress, MDA Information Systems LLC said Dec. 20. Northern Cordoba, northern Santa Fe and northern Entre Rios provinces in particular are becoming drier, it said.“The dry weather conditions in Argentina are causing water stress for soybeans and are somewhat supporting oilseed prices,” Paris-based farm adviser Agritel wrote in a market comment today.Soybeans for delivery in March climbed 0.3 percent to $13.35 a bushel by 4:27 a.m. on the Chicago Board of Trade after touching $13.3925, the highest for a most-active future since Dec. 11. Prices slumped 5.3 percent this year as the U.S. Department of Agriculture forecast global output will climb to a record 284.9 million metric tons in the 2013-14 season.There’s “some concern about evolving heat and dryness across Argentina’s soybean-producing region,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, wrote in a note. The South American country’s harvest will increase 11 percent to 54.5 million tons in 2013-2014, the USDA predicts.Corn for delivery in March slipped 0.1 percent to $4.33 a bushel and wheat for the same delivery month declined 0.2 percent to $6.1225 a bushel, poised for a seventh drop in eight sessions. Milling wheat for delivery in March traded on NYSE Liffe in Paris rose 0.2 percent to 206 euros ($281) a ton.By Daniel CancelDecember 20, 2013Argentina reached an agreement with supermarkets and food producers to set price limits on a basket of about 200 consumer goods in a bid to slow inflation that accelerated to the fastest in at least two years last month.The government will electronically monitor prices in supermarkets and determine the fair value of goods, which will be periodically revised, Economy Minister Axel Kicillof said today in Buenos Aires. The agreement will last for 12 months beginning Jan. 1. The initial basket of goods includes rice, flour, milk, yogurt, beef, chicken, fruits, vegetables, soda, beer, perfume and personal hygiene goods, Trade Secretary Augusto Costa said.“This isn’t a price freeze, it’s a voluntary price agreement between the state and private companies,” Kicillof told a room full of supermarket executives, according to images broadcast on CN23. “This gives Argentine households more predictability for their expenses.”President Cristina Fernandez de Kirchner tried to freeze the prices of 500 goods earlier this year in agreements with companies including Wal-Mart Stores Inc., Carrefour SA and Cencosud SA to contain the second-highest inflation rate in the Western Hemisphere. Still, consumer prices surged 26.8 percent in November from a year earlier, the highest since at least May 2011, according to private estimates. Inflation may quicken to more than 30 percent next year as the government weakens the peso and fails to curb spending, Bank of America Merrill Lynch economist Marcos Buscaglia wrote in a Dec. 13 report.‘Help Monitor’Fernandez replaced the central bank president, cabinet chief and economy minister on Nov. 18 and accepted the resignation of former Trade Secretary Guillermo Moreno a day later. Moreno, who once brought boxing gloves to a shareholder meeting, was in charge of imports and the agency that publishes official economic data.“The new administration of prices will identify variations in costs that are justified and not based on expectations that prices will rise,” Costa said. “We’ll publish price changes so that consumers are aware of the changes and can help monitor and ensure the compliance of the agreement.”The government is also trying to keep salary demands in check by curbing consumer prices. Earlier this month looting broke out in cities across the country after police officers went on strike to demand higher pay. The violence left at least eight people dead.Pricing PhilosophyConsumer prices have increased by at least 20 percent a year for five years, according to independent estimates.The number of pesos in the economy has jumped 23 percent in the past year, and government spending has increased 36 percent. While Argentina maintains that the official inflation rate is 10.5 percent, wage negotiations for public employees usually begin with the government proposing increases of more than 20 percent.Argentines expect consumer prices to rise 30 percent over the next 12 months, according to a poll of 1,200 people taken by Torcuato Di Tella University and published yesterday.“A lot of people probably don’t share the philosophy of connecting prices with morals,” Cabinet Chief Jorge Capitanich said today at the event with business owners. “But this is to benefit all Argentines.”By Charlie Devereux and Silvia MartinezDecember 20, 2013Argentina’s economy grew more than expected in the third quarter, boosting the chances that holders of securities linked to the country’s growth will be paid as much as $3 billion next year.Gross domestic product expanded 5.5 percent from a year earlier, according to a report released today by the national statistics institute, compared with a 4.9 percent median estimate of nine economists in a Bloomberg survey.President Cristina Fernandez de Kirchner is fueling growth after boosting spending by 36 percent this year and increasing subsidies to boost consumer spending. Argentina’s economy needs to grow more than 3.22 percent to trigger an annual payment to holders of the country’s GDP warrants. GDP expanded 5.7 percent through September.The warrants rose 0.6 percent to 8.50 cents at 4:13 p.m. in Buenos Aires, according to data compiled by Bloomberg. Payment for GDP warrants based on this year’s growth will be made in December 2014, according to the bond prospectus.Argentina posted a current account deficit of $1.27 billion in the third quarter, the statistics institute, known as Indec, said. The deficit helped push central bank reserves down 29 percent this year to $30.6 billion as the country increases fuel imports.The International Monetary Fund in February censured Argentina for failing to report accurate data on inflation and GDP, prompting the government to announce a new consumer price index to be unveiled in February and growth figures in March.The peso, whose rate is managed by the central bank, has weakened 23 percent against the dollar this year.Argentina, the world’s biggest exporter of soybean derivatives, produced 49.3 million tons during the 2012-2013 soybean season, the second largest ever harvest, according to preliminary estimates by the Agriculture Ministry.December 20, 2013Dec 20 (Reuters) – The Argentine government on Friday announced price freezes on up to 200 goods to offset an uptick in already steep inflation, in a move that for the first time affects suppliers, in addition to supermarkets.Private economists say Argentine inflation is running at more than 25 percent annually. Official figures, widely disputed as manipulated, put inflation in the 12 months through November at 10.5 percent.The price freezes affect products that represent roughly two-thirds of typical low-income household purchases, the government said.Unlike this year’s two previous price freezes, this new measure affects suppliers as well as supermarkets. The year-long freeze will take effect on Jan. 1, and prices may be revised during the course of 2014.“It’s basically a voluntary price agreement between the national government and the sector’s main actors,” Economy Minister Axel Kicillof said. “It’s a voluntary agreement on prices because we know that controls imposed on the private sector and price freezes imposed on the private sectors aren’t successful.”Most of the goods affected by previous price-freezes were not sold in supermarkets.The main supermarkets operating in Argentina, Latin America’s No. 3 economy, include units of Chile’s Cencosud , France’s Carrefour and the United States’ Wal-Mart Stores Inc.INFLATION WEIGHSAllies of President Cristina Fernandez took a beating in October’s mid-term elections, in part because of the soaring inflation.Since then, officials have started to publicly acknowledge steep price increases.Argentine inflation, Latin America’s second-highest after Venezuela’s, has picked up in recent months due to a weaker peso currency.The central bank has allowed the currency to lose roughly 18 percent since the beginning of June. The bank had previously artificially kept it strong to avoid stronger inflation pressures.But the policy in turn hurt the grains powerhouse’s key exports, putting Argentina’s trade surplus at risk. Maintaining a trade surplus is critical because Argentina has been shut out of international capital markets since its massive debt default more than a decade ago.The 2002 default pushed millions of middle class Argentines into poverty.Generous welfare spending under Fernandez has improved the lives of many of Argentina’s poor, though the policies have also stoked inflation.Argentina’s 4.3 percent rate of poverty was by far the lowest among 11 Latin American countries surveyed in both 2011 and 2012, a United Nations body said earlier this month.December 20, 2013Dec 20 (Reuters) – Argentina’s growth slipped in the third quarter from the previous quarter, while a slew of other economic data on Friday were also weak, indicating that Latin America’s third-largest economy may be slowing.Gross domestic product in the key grains exporter expanded by 5.5 percent in the third quarter versus the same 2012 period but shrank 0.2 percent compared with the second quarter of this year, the government’s INDEC statistics office said on Friday.The South American country also reported a current account deficit of $1.27 billion for the same quarter, compared to a surplus of $692 million a year ago.The current account is the broadest measure of a country’s foreign transactions, encompassing trade, services and an array of financial flows, including interest payments.Meanwhile, industrial output shrank 4.7 percent in November from the same period a year ago, far undershooting a Reuters poll for a 0.6 percent rise.The pile of negative data puts further pressure on the government of Cristina Fernandez, which has been struggling with popular discontent over high inflation, a recent spate of supermarket looting and power cuts.Earlier on Friday the government announced price freezes on up to 200 goods to try to contain inflation estimated by analysts at over 25 percent annually.One piece of good news was a widening trade surplus , which rose 11 percent on the year in November to $901 million, beating market expectations for a $583 million rise.Maintaining a trade surplus is critical for Argentina because it has been shut out of international capital markets since a massive debt default in 2002.
December 23, 2013BUENOS AIRES, Argentina — Former Argentine President Fernando de la Rua has been found innocent of bribing senators to pass a law weakening worker protections as the country’s economy neared collapse 13 years ago.“With this verdict I have recovered my dignity,” De la Rua, 76, said outside court. “This whole thing has been a terrible disgrace, from beginning to end.”Also absolved were de la Rua’s labor minister, intelligence chief, four former senators and a former congressional worker, Mario Pontaquarto, who testified that he personally carried $5 million in bribes from the spy chief to the lawmakers.De la Rua denied any knowledge of the alleged bribes. He abandoned the presidency during Argentina’s economic and social crisis of 2001. The emergency labor law was reversed in 2004 during the presidency of Nestor Kirchner.The trial judges did not explain their verdict. In Argentina’s justice system, such written explanations usually take months to be published. But they ordered prosecutors to investigate whether witnesses gave false testimony, and the former president said his name was cleared.“This trial of nearly two years and 300 witnesses demonstrated the inexistence of all suspicion of corruption with my government,” he said.Pontaquarto, who made the bribery allegations in court in 2003, called the ruling “shameful” and said the justice system had missed an historic opportunity to do something about corruption.“Who is going to risk (coming forward) after a sentence like this?” Pontaquarto said. “There are things that I can’t understand, but this is the justice system we have.”By Shane RomigDecember 23, 2013Case Centered Around Passage of Controversial Labor Law in 2000.BUENOS AIRES—An Argentine federal court acquitted former President Fernando de la Rua and a handful of other former officials and lawmakers Monday of bribing senators to approve controversial labor legislation in 2000.Mr. de la Rua—who resigned in December 2001 amid widespread rioting and economic collapse—had faced up to six years in prison for his alleged participation in a scheme to buy votes in the Senate using $5 million from a government spy agency.Key testimony in the trial came from former senate administrative official Mario Pontaquarto, who said he delivered bribes authorized by Mr. de la Rua.Mr. Pontaquarto admitted to the charges and cooperated with prosecutors. Despite his own acquittal on Monday, Mr. Pontaquarto called the ruling “shameful.”Mr. de la Rua, 76 years old, called the trial a “political plot.”“The acquittal vindicates my dignity and that of my government,” the former president said in a statement Monday.The labor market reform bill, which loosened Argentina’s famously worker-friendly employment laws, had the backing of the International Monetary Fund. The IMF was pressuring Argentina to cut spending in exchange for loans to bolster investor confidence in the heavily-indebted South American country.Those loans didn’t prevent Argentina from defaulting on about $100 billion in public debt in 2001—at the time the largest sovereign default ever—and abandoning a currency system that pegged the Argentine peso to the U.S. dollar at a one-to-one ratio.Just days before Christmas 2001, Mr. de la Rua fled the presidential palace in a helicopter amid rioting by poor and middle-class Argentines angry over rising unemployment and a government-imposed freeze on bank deposits. The labor law was overturned just a few years later.Also acquitted were the head of Mr. de la Rua’s intelligence agency, Fernando de Santibañes, former Labor Minister Alberto Flamarique and ex-senators Remo Costanzo, Ricardo Branda, Augusto Alasino and Alberto Tell.The trial isn’t Mr. de la Rua’s first brush with the law over decisions he made during his presidency.Last year, charges were dismissed against Mr. de la Rua for ordering a crackdown on rioters in the days leading up to his resignation. Dozens were killed in clashes between police and protesters in December 2001 amid widespread looting of supermarkets and even homes in cities across the country.The chaotic end to the de la Rua administration severely weakened the center-left Radical party, which for decades competed with the national populist Peronist movement to win the hearts and minds of Argentines. The Radical party, now greatly diminished in influence, has sought alliances with socialists and other leftist parties to bolster its political relevance.