ARGENTINE UPDATE – Mar 25, 2015


 
 
 
 
 
 
 
 
9. NEVER THE NEXT GREAT POWER: ARGENTINA’S FUTURE IS ALWAYS STUCK IN THE PAST (Reuters Blog)
 
10. JUDGE MAKES RULING BUT ARGENTINA DEBT FIGHT RAGES ON (Reuters News)
 
11. U.S. COURT AUTHORIZES CITIGROUP TO PROCESS ARGENTINE BOND PAYMENTS (Reuters News)
 
12. SOVEREIGN ISSUERS SEEK TO THWART ARGENTINA-STYLE ATTACKS BY FUNDS (Reuters News)
 
13. ELLIOTT EMITS RAY OF PRAGMATISM IN ARGENTINA FEUD (Reuters News)
 
14. BRITAIN SAYS TO BOOST DEFENCE OF DISPUTED FALKLAND ISLANDS (Reuters News)
 
15. HERE’S WHY U.K.-ARGENTINA TENSIONS ARE RISING AGAIN OVER THE FALKLANDS (Time)
 
16. BRITAIN MODERNIZES FALKLANDS FORCES IN VIEW OF ARGENTINE THREAT (Bloomberg News)
 
17. ARGENTINA’S PROSPECTS AFTER FERNANDEZ BRIGHTEN, DEVELOPER SAYS (Bloomberg News)
 
18. ARGENTINA’S ECONOMY GROWS AT SLOWEST FULL-YEAR PACE SINCE 2009 (Bloomberg News)
 
19. CITIGROUP SAYS JUDGE ALLOWING TWO ARGENTINA BOND PAYMENTS (Bloomberg News)
 
20. ARGENTINA ECONOMY: QUICK VIEW – OFFICIAL DATA SHOW GDP GROWING SLIGHTLY IN (Economist Intelligence Unit – ViewsWire)
 
21. ARGENTINA: COUNTRY OUTLOOK (Economist Intelligence Unit – ViewsWire)
 
22. CITIGROUP ALLOWED TO PROCESS ARGENTINE BOND PAYMENTS (Business News Americas)
 
23. COMPROMISE AGREEMENT BETWEEN PAYING AGENT AND “HOLD-OUT” PLAINTIFF REMOVES RISK OF END-MARCH ARGENTINE DEFAULT OR EXPROPRIATION (IHS Global Insight Daily Analysis)
 
24. ARGENTINA SAYS ECONOMY EXPANDED 0.5% LAST YEAR (Dow Jones Institutional News)
 
25. ARGENTINA’S ECONOMY STAGNATES AGAIN IN Q4 AMID INCREASED POLICY DEBATE FOR FUTURE GOVERNMENT (IHS Global Insight Daily Analysis)
 
26. FUEL FOR THOUGHT: PREMIER, NOBLE START DRILLING AGAIN OFF FALKLAND ISLANDS (Platts Commodity News)
 
27. SECRET NAZI HIDEOUT BELIEVED FOUND IN REMOTE ARGENTINE JUNGLE (The Washington Post)
 
28. NAZI LAIR FROM WORLD WAR II FOUND HIDDEN IN ARGENTINA JUNGLE (The Huffington Post)
 
29. AT GEORGETOWN, SOCCER ROYALTY ARRIVES (The Washington Post)
 
30. ELECTIONS IN ARGENTINA (Open Democarcy)
 
 
1. IRAN AND ARGENTINA: THE DEFECTORS’ TALE (The Wall Street Journal)
By Mary Anastasia O’Grady
March 22, 2015
Three former Venezuelan insiders say Hugo Chávez brokered a cash-for-nuclear-technology deal.
March 22, 2015 7:00 p.m. ET
Did Hugo Chávez act as a bagman for Iran in its effort to get nuclear technology from Argentina? That’s the claim made by three former members of the Venezuelan dictatorship’s inner circle cited anonymously in a March 14 story in the Brazilian magazine Veja.
The magazine says it didn’t name the defectors, interviewed in Washington, to protect their family members back in Venezuela. But it reported that they were questioned separately and each said there was a deal in January 2007 between Chávez and Iranian President Mahmoud Ahmadinejad in Caracas. Venezuela would deliver Iranian money to Argentine officials in exchange for two favors for Tehran.
The first favor they described, according to Veja, was that Argentina would cover up Iran’s role in the 1994 terrorist attack on a Jewish community center (known by its Spanish initials as AMIA) in Buenos Aires. The second favor was that Argentina would “share their long experience in [a] heavy-water nuclear reactor, an old-fashioned, expensive and complicated system but one that allows plutonium to be obtained from natural uranium.”
Unnamed sources raise doubts in any news story. But Veja is one of Brazil’s most important and reputable news outlets, and a third party that I have reason to trust has confirmed to me that the interviews took place.
A greater reason for skepticism is that, according to Veja, the defectors are talking to U.S. law enforcement about Venezuela’s “participation in international drugs trafficking and supporting terrorism.” This suggests they may be looking for protection in exchange for what they say about the inner workings of the dictatorship. In other words, they have motivation to tell tales that impress.
Yet nothing that Veja reported contradicts what is already known about Venezuela’s relationship with Iran, and much of it fits with what Argentine federal prosecutor Alberto Nisman reported in a 2006 indictment of seven high-ranking Iranian clerics, government officials and military officers for the AMIA bombing. Nisman was found dead in his apartment in January, the day before he was to give testimony about what he said was a coverup hatched by President Cristina Kirchner and Tehran to let the indicted Iranians off the hook.
Washington-based regional security analyst Joseph Humire considers the Veja story credible. He cited it in testimony before a House joint subcommittee on the Western Hemisphere and the Middle East on Wednesday.
Buenos Aires and Tehran had a blossoming relationship in the 1980s thanks in part to Argentina’s willingness to share nuclear technology with Iran. When President Carlos Menem took office in 1989, Argentine foreign policy shifted 180 degrees in favor of the U.S. and its allies.
Iran was sore about that according to Nisman’s 2006 indictment of the Iranians. “There is sufficient evidence to prove that the [AMIA] attack was carried out in Argentina owing to the Argentine government’s unilateral decision to terminate the nuclear materials and technology supply agreements that had been concluded some years previously between Argentina and Iran,” the Nisman report said. The same report says that “at this period the Iranian government felt that it was crucial for Iran to develop its nuclear capacities.”
The unnamed defectors claim that among other means to manipulate Argentina in favor of Iran, Venezuela arranged direct cash transfers. In August 2007, when Argentine customs officials discovered a suitcase containing an undeclared $800,000 in a plane from Venezuela, most observers chalked it up to Chávez’s efforts to spread his influence around the region. But one of the defectors told Veja that the loot was a gift from Iran for Mrs. Kirchner’s presidential campaign.
The claim in the Veja story that the cash originated in Iran and that a twice monthly Caracas-Damascus-Tehran flight between 2007 and 2010 facilitated its transfer to Venezuela is interesting. Veja notes that Venezuela’s then-foreign minister Tareck Zaidan El Aissami Maddah, now the governor of Aragua and a bigwig in the United Socialist Party of Venezuela, played a key role in running those flights.
Veja reported that none of the three defectors could say if the nuclear technology was transferred. But one said that he does “know [Argentina] received a lot through legal means” by way of the purchase of Argentine bonds, “and illegal means—suitcases filled with cash—in exchange for something that was very valuable to the Iranians.”
Mr. Humire noted in his March 18 congressional testimony that “if this is true, then I believe we have all underestimated Latin America’s importance to the Islamic Republic. And by extension can no longer afford to divorce the continuing nuclear negotiations with the P5+1 and Iran’s activities in the region.”
The defectors may be spinning fiction. But given Argentina’s prior practice of sharing nuclear technology with Iran, and Tehran’s efforts to penetrate Latin America, it would be foolish not to take their allegations seriously.
2. CITIGROUP UNIT SAYS U.S. JUDGE ALLOWS INTEREST PAYMENTS IN ARGENTINA (The Wall Street Journal Online)
By Taos Turner
22 March 2015
Citi Argentina plans interest payments on March 31 and June 30
BUENOS AIRES—Citigroup’s Argentine unit said over the weekend that U.S. District Judge Thomas Griesa has given it a green light to make interest payments to local bondholders.
The judge’s decision, which Citi Argentina said was issued on Friday, comes after he had ruled earlier this month that the bank couldn’t make the payments. The judge’s previous decision, which stems from a yearslong lawsuit that Argentina lost against a small group of hedge funds in the U.S., put Citigroup in a legal bind by forcing it to choose between obeying U.S. and Argentine law.
Judge’s Griesa’s reversal is a relief for Citigroup. In a filing with the U.S. Securities and Exchange Commission last year, Citigroup said the failure to make its bond payments in Argentina could lead to “sanctions, confiscation of assets, criminal charges or even loss of licenses” and expose “Citi and Citi Argentina to litigation.”
In a statement on Sunday, Citi Argentina said it would make interest payments on March 31 and June 30 on dollar-denominated bonds that Argentina’s government issued under Argentine law. Earlier this month, the bank said that because of the judge’s previous ruling it would exit the custody business in Argentina.
“The custody business represents approximately 2% of Citi Argentina’s income and by its nature has no significant relationship with the rest of its banking activities,” Citi Argentina said on Sunday. “Citi has played an important role in Argentina’s economy for more than 100 years and hopes to keep doing so for decades to come.”
Argentina’s Economy Minister had called Judge Griesa’s previous ruling “a shameful excess of his jurisdiction,” saying it could force Citi Argentina to violate local law and lose its banking license.
“Not complying with the law has consequences,” the minister, Axel Kicillof, said at a recent news conference.
The conflict stems from Argentina’s 2001 default on around $100 billion in debt and the subsequent restructuring of defaulted bonds in 2005 and 2010. The hedge funds, led by Elliott Management Corp.’s NML Capital Ltd. and Aurelius Capital Management LP, bought Argentine bonds after the default and sued Argentina in search of full payment.
Last year, Judge Griesa ordered the country to pay the hedge funds what amounts to more than $1.6 billion. Argentina refused to comply with the order, leading the judge to block the country’s effort to pay other bondholders.
3. US COURT OK’S CITIBANK TO PROCESS ARGENTINA BOND PAYMENTS (The Washington Post)
March 23, 2015
NEW YORK — Citibank says a U.S. court has authorized it to process two debt payments for Argentina without facing contempt charges over a long-running dispute with U.S. bondholders.
The U.S. bank acts as a custodian for some Argentine bonds and has been in the middle of a bitter court fight over the South American country’s debt obligations.
The court stipulated it will not restrict Citi from having its Argentine branch process payments on dollar-denominated Argentine bonds on March 31 and June 30.
Citibank, which issued a statement over the weekend, has said it was getting out of the business of making bond payments for Argentina due to an “unprecedented international conflict of laws.”
4. MINISTER: BRITAIN TO ADD TO FALKLANDS ISLANDS DEFENSE (The Washington Post)
March 24, 2015
LONDON — Britain plans to add two transport helicopters and an enhanced communications system to its defense systems in the disputed Falklands Islands.
Defense Secretary Michael Fallon said Tuesday that the helicopters would allow Britain to react quickly and decisively to any incidents.
He told Parliament that a regular review of the Falklands’ defenses concluded that systems in place were “broadly proportionate” to the perceived threat.
The islands are claimed by both Britain and Argentina. The two countries fought over the remote South Atlantic islands in 1982 after Argentina mounted an invasion.
Britain plans to spend roughly 180 million pounds ($268 million) in the next decade to improve defense systems and other facilities on the islands.
Fallon also told BBC Radio that press reports about a possible lease of Russian bombers to Argentina are unconfirmed but that Britain must be ready to meet any potential threat.
Late Tuesday, Argentina’s ministry of foreign affairs characterized the military buildup as unnecessary and lamented that Britain didn’t appear to be interested in negotiating a peaceful solution to the longstanding dispute.
“Besides being implausible, it is absolutely unjustifiable that the ghost of the supposed ‘Argentina threat’ is used to increase the British military budget and consolidate the growing militarization of the islands,” a statement from the ministry said.
5. ARGENTINA CONTINUES ITS DOWNWARD SPIRAL (The Miami Herald)
By Carl Meacham
22 March 2015
March 18 marked two months since the mysterious shooting death of Argentine federal prosecutor Alberto Nisman — and still we still have no answers. A few weeks ago, an Argentine federal judge dismissed the indictment that many believe led to Nisman’s death, citing a lack of evidence. That ruling is now being appealed.
Nisman was shot in the head just hours before he was set to deliver testimony before lawmakers on his indictment of numerous high-level officials, including Argentine President Cristina Fernández de Kirchner and foreign minister Héctor Timerman.
The allegation: They had conducted secret, illegal negotiations with Iran to cover up the involvement of senior Iranian officials in the 1994 bombing of a Jewish community center in Buenos Aires.
The controversial indictment was the culmination of a decade of investigation that, in the end, mapped a significant Iranian terrorist network. The deal allegedly negotiated by Fernández de Kirchner would have completed Iran’s long drive to cover up its activities, an exchange of impunity for economic benefits for Argentina.
President Fernández de Kirchner initially declared Nisman’s death a suicide, though she reversed her story in the face of public indignation. Instead, she now blames rogue officers from her own intelligence services of misdirecting Nisman’s investigation and murdering him, with the objective of framing her for his death. She has since dissolved that intelligence agency, replacing it with one of her own design. She has also accused the United States of promoting a coup d’etat and the Argentine judiciary of seeking to end her presidency prematurely.
In her March 1 speech before the National Assembly, where she spoke for nearly four hours, she aggressively attacked Nisman and her other perceived enemies — but she barely mentioned the reality on the ground: The economy is in shambles, inflation is through the roof, crime rates are on the rise, and public confidence in the government has hit rock-bottom. In a year expected to be a slow ride to the end of this administration, it is increasingly unclear if President Fernández de Kirchner will last until this fall’s presidential election.
Yet the Nisman scandal has brought little attention to what his murder could mean beyond her administration and beyond Argentina’s borders. While Fernández de Kirchner, her vice president, and other higher-ups are mired in allegations of corruption and foreign investment prospects are dubious given the country’s problematic economic policies, hope remained that a new administration could turn things around.
But Nisman’s death has quashed that hope. A new president could improve Argentina’s economy, but strengthening judicial institutions, improving the rule of law, and restoring the government’s credibility will take far longer.
Beyond Argentina’s borders, her decline is part of a broader erosion of democracy in parts of Latin American (and beyond, as in Russia). Destructive populism and authoritarianism have crippled the rule of law, ingrained corrupt patronage, tolerated massive increases in illicit activity, and siphoned billions of dollars out of national treasuries. These governments appear ever more desperate to cling to power by any means.
Those means could include repression of political opposition — a tactic that Nisman’s death could make still more attractive, providing a new tool to quell demands for accountability and transparency. If the Fernández de Kirchner administration emerges unscathed, other radical governments may look to adopt similarly repressive tactics.
This is particularly relevant for Venezuela.
Since Hugo Chávez’s death, Venezuela has descended into chaos. The economy is on the brink of collapse. The Maduro administration has increased its violent repression of anti-Chavista protests, jailing opposition leader Leopoldo López and others on trumped-up charges. A month ago, authorities arrested Caracas Mayor Antonio Ledezma, a move the opposition views as politically motivated, part and parcel to Maduro’s allegations that the opposition is conspiring with Washington to overthrow his government.
Nisman’s death, Ledezma’s arrest, and the anniversary of Lopez’s incarceration may revitalize the protest movements that could eventually help restore democracy to two countries with great weight in the hemisphere. The past year has provided abundant catalysts for change in the face of the undeniable failure of the radical populist model.
So what’s next? Will the downward spirals of Argentina and Venezuela continue, or will there be more to protest for change? Will the governments further suppress opposition voices, or could a “Latin American Spring” flower?
The challenges these countries face must be addressed sooner rather than later. Otherwise, we risk setting a dangerous precedent for autocrats and budding caudillos to increase their repression throughout the region.
Carl Meacham is the director of the Americas Program at the Center for Strategic and International Studies (CSIS). Douglas Farah is a non-resident senior associate with the Americas Program at CSIS and president of IBI Consultants.
6. CITIGROUP SAYS COURT WILL LET IT PAY ARGENTINE BOND INTEREST (The New York Times)
By Alexandra Stevenson
23 March 2015
There is a new twist in the fight between Argentina and a group of hedge funds that has been playing out in New York courts.
A United States federal court has allowed Citigroup to make interest payments to investors holding $2.3 billion of Argentine bonds due at the end of the month, the bank said on Sunday in a statement.
Citigroup also said that it had been authorized to make another interest payment on June 30.
The move, outlined in an order that is expected to be filed in court on Monday, appeared to be a reversal by Judge Thomas P. Griesa of the Federal District Court in Manhattan. As recently as March 12, Judge Griesa rejected an appeal by Citigroup to make the March 31 interest payments.
The legal back and forth in recent weeks is part of a bigger, bitter battle that traces back to 2001, when Argentina defaulted on nearly $100 billion of government bonds. Most of the investors holding those defaulted bonds exchanged them later for new and discounted bonds.
One small group of hedge funds chose not to. The hedge funds, led by Paul E. Singer’s NML Capital, instead took Argentina to court in New York, seeking full repayment on their bonds.
In a turn that culminated with a second Argentine default last summer, Judge Griesa barred the banks that are processing interest payments for Argentine bonds from making any further interest payments unless they also paid the so-called holdout hedge funds in full.
But in September, Judge Griesa appeared to soften his stance by allowing one of the banks, Citigroup, to make a one-time $5 million payment to a group of investors holding bonds issued under Argentine law. That ruling lifted hopes that it would clear the way for more leniency from the court in the future.
Those hopes were dashed a week ago when Judge Griesa rejected Citigroup’s request to lift an injunction that prevented it from making the March 31 interest payment.
His decision set in motion plans by Citigroup to close its custody business in Argentina, citing ”unprecedented international conflict of laws.”
Citigroup’s lawyers argued that the bank faced ”grave sanctions” from Argentina and could stand to lose its banking license in Argentina if it were not allowed to make interest payments on Argentine bonds.
Argentine officials have remained defiant. ”We will make sure that Argentine banks comply with Argentine legislation because that’s the way it is the world over,” President Cristina Fernández de Kirchner said in a speech on Friday.
A spokesman for NML Capital said Judge Griesa’s latest order followed negotiations between NML Capital and Citigroup: ”Judge Griesa approved this agreement, which applies only to Citibank and was specifically tailored to address the unique circumstances facing Citi Argentina after Citibank announced it was exiting the custody business in Argentina.”
7. UK PLEDGES TO BOOST FALKLANDS DEFENCES (Financial Times)
By Kiran Stacey
March 24, 2015
Michael Fallon will on Tuesday promise to boost British defences in the Falkland Islands, warning that the threat of invasion by Argentina remains “live”.
The defence secretary will tell MPs that he intends to send more troops to the disputed South Atlantic islands, which Argentina calls the Malvinas and invaded in 1982, prompting a war with Britain.
Mr Fallon would not reveal how many extra soldiers would be sent to help defend the territory. But he told the BBC: “We do need to modernise our defences there to make sure we have sufficient troops and the islands are sufficiently defended.”
He added: “The threat has not reduced. Argentina still sadly makes its claims to the islands, even 30 years after the invasion and the war.”
Argentina has stepped up its claims since 2010, when the UK-based oil explorer Rockhopper found oil in a field north of the islands.
Cristina Fernández de Kirchner, the Argentine president, in 2011 said David Cameron, her UK counterpart, was arrogant to insist the islands should remain British. Earlier this month, Argentina began issuing 50 peso notes featuring a map of the Falklands.
Mr Fallon would not comment on reports that Russia was planning to supply Argentina with 12 long-range bombers.
Britain has about 1,000 troops, including 100 infantry, stationed on the Falklands. The islands are also defended by four Typhoon combat aircraft, one large Royal Navy warship and a small patrol vessel.
But some officials have warned that the scrapping of the Royal Navy’s aircraft carriers, which are currently being replaced, would make the islands harder to defend if Argentina resorted to force.
In 1982, the UK was able to send a sizeable naval force, including two aircraft carriers, down to the South Atlantic to recapture the islands.
Mr Fallon also refused on Tuesday to guarantee that the UK would continue to spend 2 per cent of its national output on defence after the election, despite pressure from Conservative backbenchers.
“The 2 per cent figure is something we agreed at Nato. We are going to be meeting it again next year and then setting the spending totals for the following three years at the spending review later in the autumn, ” said Mr Fallon.
8. AN ARGENTINE BOND REPRIEVE — OR IS IT? (Financial Times)
By Joseph Cotterill
March 23, 2015
Could there finally be a limit to just how far around the world the pari passu saga goes?
No.
But for a longer answer, read on.
In an order released on Monday, Judge Griesa decided to let Citibank process payments on US-dollar, local-law Argentine paper for a few months while it’s busy working out how to offload the Argentine bond custodian business which is at the centre of its problem.
This problem has been a Hobson’s choice. The judge decided this month that whenever Citibank does process these payments, it’s helping Argentina to evade his injunction to pay holdouts alongside other relevant creditors. Argentina promptly decided that if Citibank doesn’t help it pay its bonds, it will be breaking its law, and that would make life very difficult for Citibank inside Argentina.
By giving the bank some room, Judge Griesa’s decision — citing “unique circumstances” — might seem like a reprieve; even something that the Argentine government (which is getting into the weirdest fights lately) could spin into a victory.
Except where it’s not.
1) First, Citibank has to turf over information to the holdouts while it’s making its retreat, which is of course also within a specific time. It feels a bit like medieval castle warfare where merchants could leave the city under the careful eyes of the besiegers.
2) There’s also the very large caveat within the permission granted by Judge Griesa.
If… Citibank Argentina receives a portion of such payment on behalf of its customers, Citibank Argentina may process that payment in the ordinary course. Such permission shall only apply to Citibank Argentina, and shall not apply to any other party or participant in the payment process on such bonds.
Who else might handle payments to local-law bondholders once Citibank’s released them?
According to the diagram Citibank itself once sent to Griesa trying to explain the difference between foreign-law and local-law bonds, Euroclear and Clearstream potentially handle them next for international holders.
http://ftalphaville.ft.com/files/2015/03/Citi_paymentchain-590x473.png
Under the terms of Judge Griesa’s order on Monday, “In connection with the Citibank Withdrawal, Euroclear and Clearstream are permitted, but not required, to transfer their holdings of U.S. Dollar Argentine Law Exchange Bonds to Caja de Valores”. That doesn’t seem to solve this ambiguity in the payment chain.
The shadow of the pari passu litigation hasn’t yet passed over Euroclear and Clearstream’s particular role here. But they have already been named in Judge Griesa’s original injunction — back when it seemed to apply only to foreign-law restructured bonds, rather than extending to local-law ones which have any connection to the world outside Argentina.
The point being, that distinction isn’t what it used to be.
3) This was the bombshell in Judge Griesa’s earlier ruling this month: local-law bonds could be “external indebtedness” for the purposes of the pari passu clause which started this whole mess.
http://ftalphaville.ft.com/files/2015/03/FAA_paripassu.png
http://ftalphaville.ft.com/files/2015/03/FAA_externalindebtedness.png
Citibank incidentally agreed not to appeal this decision, so it looks like it’s sticking.
That could matter well beyond Citibank’s predicament. As Anna Gelpern notes, expanding “external indebtedness” effectively shuts down new foreign-currency debt issuance by Argentina, given the deterrent effect on any bank handling the sale abroad. (It’s also going to annoy any other sovereign which has been busy Elliott-proofing the pari passu clauses in any newly-issued debt, but which probably wasn’t watching the “external indebtedness” definition as carefully.)
 
The holdouts don’t really need to push to broaden the injunction at this point given the strength of the deterrence. They’ve even had an interest in the past in letting some new issuance out — like the Repsol settlement which involved $5bn of newly-minted Argentine paper — because that agreement might provide a blueprint for the government to eventually sit down and negotiate with its pari passu claimants.
On the other hand, Argentina’s Bonar 2024 and Boden 2015 bonds are both trading above par in the current market. Holders of both are probably watching the clock on the Kirchner government leaving office in October (just after the Boden matures). Whether that confidence is justifiable is another matter. Still, both issues are local-law bonds but not restructured debt, which has so far kept them away from the pari passu saga.
Given the terms of Citibank’s ‘reprieve’ — and the fact Argentina hasn’t been forced to the table yet — we’d question how long they’ll stay that way.
9. NEVER THE NEXT GREAT POWER: ARGENTINA’S FUTURE IS ALWAYS STUCK IN THE PAST (Reuters Blog)
By Daniela Blei
March 23, 2015
Argentina, mired in corruption and ineptitude, has swallowed Alberto Nisman – and the truth.
The stunning death of the federal prosecutor, the day before he was to testify before the Argentine congress about his allegations against the country’s president and a more than decade-old unsolved bombing, has confirmed — as if more proof were needed — that Argentina is its own worst enemy.
Argentina entered the modern world with great expectations. Its European genealogy and natural resources were taken as virtual guarantees of prosperity and progress. Visitors to Buenos Aires produced a literary genre of their own, fawning over the “sumptuous boulevards” of a cosmopolitan city that was heralded as “the capital of the continent.”
This is the starting point for just about every narrative of Argentina. Its “incomplete modernity,” its status as a “stillborn great nation” or a success story that somehow derailed makes it difficult to imagine how to set its history on another course.
Long governed by the politics of victimization and a culture of national lament, Argentines are experiencing a moment of clarity in the wake of Nisman’s death.
Questions surrounding Nisman’s demise have gripped the Argentine public. Why would a high-ranking prosecutor kill himself hours before delivering the most important presentation of his career, which implicates President Cristina Fernández in an international cover-up? Was it suicide or murder made to look like suicide? Rumors and conspiracy theories swirl through the nation.
Nisman was in charge of investigating the 1994 bombing of a Buenos Aires Jewish community center, which killed 84 people, the deadliest terror attack in Argentine history. In his presentation, which has been disclosed, he accuses the president and her foreign minister of striking a secret deal with Tehran. In exchange for cheap Iranian oil, Argentina would create a red herring to convince the world that local right-wing groups, not Iranian officials, were responsible for the blast.
Depending on whom you ask, Nisman was a hero for democracy, a casualty of internecine politics, the marked man of rogue Argentine intelligence agents, or the victim of an international terrorist conspiracy. Some on the anti-U.S. left have even painted him as an agent of the CIA advancing Washington’s agenda against Iran.
Democracy in Argentina has proved disappointing and even dangerous over the 32 years since the end of military rule. Argentina is an atomized society, riven by insecurity and mistrust, where the only collective truth is a sense of constant crisis — economic, political, even moral — that has become a defining feature of daily life.
Fernández leads without long-term policies or plans, as many have noted. She runs the country in a day-to-day mode, putting out fires and garnering support with populist tactics to achieve short-term objectives. Unlike in previous eras, when the military took control of the Casa Rosada presidential palace once a decade, her civilian government is in control. It has a “monopoly on violence,” as sociologist Max Weber said of functioning states. But today the state — ineffective, shrouded in scandal and wracked by economic crisis — does not have a hold on much else.
Argentina has indeed fallen from grace. It was once a promised land of economic opportunity and South American modernity. In the late 19th century, Argentina’s gross domestic product rivaled that of the United States. Now, however, the old saying, “To be rich as an Argentine,” has disappeared from the nation’s lexicon.
The country’s spectacular decline is, for many scholars, a source of intellectual debate. Answers to the million-dollar question of “what happened?” are often given as specific dates: 1929, when the Great Depression battered global trade and agricultural prices on which the Argentine economy was based; 1946, when Juan Perón was elected president, only to create a legacy of authoritarian populism; and 1976, when the military junta seized power, unleashing a reign of terror known as the Dirty War. Each is cited as a watershed moment — when history could have taken a different turn.
But this discourse of failure is hardly new. Throughout Argentina’s history, virtually every generation has deemed the country a failure. In the 1890s, modernizing elites declared the country too primitive and backward to succeed as “the Yankees of the South.” Rather than reform the nation from within, leaders looked to Europe for solutions to the country’s problems.
At the turn of the 20th century, the elites were fretting over the country’s unfulfilled promises after a tide of immigration — mostly peasants from impoverished Spain and southern Italy — generated new anxieties about national identity, social unrest and criminality.
In 1946, when Perón took office, promising nothing short of “a new Argentina,”  Jorge Luís Borges, the country’s celebrated teller of elusive fables, pronounced Argentine state-building a failure. “The state is an inconceivable abstraction,” Borges wrote. “The Argentine is an individual, not a citizen.”
For Borges, the idea that the state contains the moral actions of its citizens, as the philosopher Hegel suggests, was a “sinister joke” in Argentina.
Years later,  during the junta’s Dirty War against political and “moral” enemies, the generals insisted that only military rule would reverse the country’s pathological decline and elevate it to its rightful place in history.
What does it mean when every generation sees its nation as a failure? In Argentina, where there are famously more shrinks per capita than anywhere else, this question demands closer scrutiny.
Rafael di Tella, a Harvard economist from Argentina, makes the search for a usable past — a history that can help solve the problems of the present — seem an exercise in futility. “If a guy has been hit by 700,000 bullets,” he explained to The Economist, “it’s hard to work out which one of them killed him.”
The living corpse of Argentina needs a new narrative, one that dwells less in the past and more on today as a point of departure.
Stirrings of change are becoming evident. On Feb. 18, a silent march organized by lawyers to mark the one-month anniversary of Nisman’s death drew an estimated 400,000 people into the streets of cities across the country. In soggy Buenos Aires, signs of defiance flashed under a sea of umbrellas: “I am Nisman,” “Argentine justice stinks,” “You can’t suicide us all.”
Fernández’s supporters accused the protesters of judicial “coup-mongering” and “politicizing tragedy,” as if Nisman’s investigation, which has now implicated two heads of state and a number of government officials, bears no relation to the powers-that-be.
While few doubt, in Argentina or elsewhere, that the truth about Nisman will remain buried in a sham investigation, controversy over the case continues to escalate, with new developments breaking frequently.
At stake is more than solving the mystery of a slain Jewish prosecutor. Or even bringing long-awaited justice to the victims of the bombing of the Asociación Mutual Israelita Argentina, the country’s largest Jewish community center. Nisman has come to symbolize Argentina’s culture of impunity and the shaky ground on which its democracy stands.
Weeks after the  bombing, my family and I visited the crime scene in Buenos Aires. On a crowded sidewalk, I stared through the slats of a makeshift fence, built around the crater that had once been the Jewish community center. I remember seeing a group of policemen, my eye caught by the white sleeves of their uniforms, as they loitered in a corner of the rubble, eating and smoking, talking and laughing.
They seemed unbothered by the open cemetery on which they stood. Twenty years later, after Nisman has been labeled a martyr for the truth, and with the country reeling under crisis yet again, Argentines are abandoning apathy and illusions of failed grandeur.
To set history on a new course, they must remember Nisman at the ballot box during this October’s presidential election.
10. JUDGE MAKES RULING BUT ARGENTINA DEBT FIGHT RAGES ON (Reuters News)
By Davide Scigliuzzo
Tue, Mar 24 2015
NEW YORK, March 24 (IFR) – Citigroup may have narrowly avoided losing its operating license in Argentina, but bondholders are still between a rock and a hard place after the latest court ruling on Argentina’s debt.
The US bank won a victory of sorts last week in New York, where a US judge is overseeing the decade-long legal battle between the sovereign and a group of holdout creditors.
The judge gave Citi the green light to facilitate two debt payments even as the US bank works to pull out of its role as local custodian of the Argentine-law bonds in question.
Judge Thomas Griesa had previously blocked any such payments unless Argentina also paid holdout creditors who refused to accept previous debt restructurings on the bonds they own.
Citi’s choice had been: make the payments and fall afoul of US justice, or block the payments and risk losing the right to operate in Argentina.
While Griesa’s ruling gets the bank off the hook for now, other entities – not to mention the investors themselves – remain stuck in a story that never seems even close to ending.
“Unlike prior similar orders, this order expressly excludes other institutions in the chain of payment,” said one lawyer briefed on the matter.
“It seems that its purpose is more to get Citibank out of the middle than to facilitate payment to bondholders.”
MIDDLE OF NOWHERE
Intermediaries such as Euroclear and Clearstream, which would process any payments to international debt-holders, are still in theory bound by Griesa’s initial ruling.
So even if Citi were to process the payments – coupons come due on March 31 and June 30 – the intermediaries would run the risk of violating a US court order.
If the local holders of the bonds are paid and the international creditors are not, then the local-law bonds could also go into default.
“Local holders will probably get paid,” a lawyer familiar with the situation told IFR.
“As for the off-shore holders, the question becomes what will Euroclear and Clearstream do? This could really put pressure on them.”
Euroclear and Citigroup declined to comment, while an attorney for Clearstream did not reply to requests for comment.
Argentina descended into its second default in a little over a decade last year, when Griesa blocked coupon payments on nearly US$30bn of restructured bonds.
Holdouts led by Elliott Management’s NML Capital unit have won a series of legal rulings against Argentina and claim they are owed US$1.33bn plus interest from the 2001 default.
While yet another default would likely have little impact in the secondary markets, it would make it still more difficult to work out the true values of the bonds that have already been defaulted on.
“The Argentine-law exchange bonds are important,” said Siobhan Morden, head of Latin America strategy at Jefferies.
“They are performing bonds and offer a better barometer of risk than New York and English law bonds, which trade with accrued and past due interest,” she said.
“If these local-law bonds also enter default it will become more complicated to analyze valuations in Argentina.”
11. U.S. COURT AUTHORIZES CITIGROUP TO PROCESS ARGENTINE BOND PAYMENTS (Reuters News)
23 March 2015
BUENOS AIRES, March 22 (Reuters) – Citigroup Inc said it has been authorized by a U.S. judge to process two Argentine debt payments, which could ease tensions between the bank and the default-hit nation.
The U.S. bank, which acts as custodian of some Argentine bonds, has been embroiled in a court battle between the South American country and a group of New York-based hedge funds seeking full payment on their defaulted sovereign bonds.
A potential resolution may have moved closer after a ruling by the U.S. District Court for the Southern District of New York on Friday.
The court has stipulated that it will not restrict Citi from meeting its payment-processing obligations relating to dollar-denominated Argentine bond payments under local law due on March 31 and June 30, the bank said in a statement.
The court also said it will not impede the bank from exiting the Argentine custody business, as it has said it wants to do.
Leftist President Cristina Fernandez’s government had threatened to cancel CitibankArgentina’s operating license if it refused to process payments to other bond holders.
U.S. District Judge Thomas Griesa in New York ruled that Argentina must settle with the hedge funds seeking full payment on their defaulted sovereign bonds before it continues paying interest to the large majority of investors who accepted significant writedowns on the debt holdings after the country’s record default on $100 billion in 2002.
Most investors holding Argentina bonds exchanged them for bonds worth much less, but a group of bondholders rejected the swaps.
These holdouts, including billionaire Paul Singer’s Elliott Management LP hedge fund and its NML Capital affiliate, as well as the Aurelius Capital Management hedge fund, have insisted they be paid in full if holders of exchanged bonds are paid.
Commenting on the agreement, a spokesman for NML said, “NML and other creditors reached an agreement with Citibank, according to which Citibank agreed not to appeal the court’s determination that the pari passu injunction covers all of Argentina’s exchange bonds.
The spokesman added that Griesa had approved the agreement that was “specifically tailored to address the unique circumstances facing Citi Argentina after Citibank announced it was exiting the custody business in Argentina.”
12. SOVEREIGN ISSUERS SEEK TO THWART ARGENTINA-STYLE ATTACKS BY FUNDS (Reuters News)
By Daniel Bases
23 March 2015
NEW YORK, March 22 (Reuters) – Government bond issuers are adopting new standards intended to thwart a strategy that’s plagued Argentina for 13 years, in which buyers snap up distressed debt for pennies on the dollar and then hold out for full payment after other investors have agreed to restructure.
Since August, as many as 12 of 22 recent emerging market issuers including Kazakhstan and Mexico have inserted language in their bond prospectuses that makes it prohibitively expensive for a single holdout to block a restructuring settlement that the majority of creditors may have accepted. This week Ecuador, which defaulted in 2009, issued new bonds that incorporate the language, developed by the International Capital Markets Association.
Driving the move to change is the situation in Argentina, lawyers and bankers said. After Argentina sought to refinance almost $100 billion in debt and gained the agreement of 93 percent of the holders, investors led by Elliot Management and Aurelius Capital Management rejected the restructurings and demanded full payment. Argentina responded by calling the holdouts “vultures” and refused to pay.
The new mechanism being adopted, known as the aggregated collective action clause (CAC), is aimed at preventing future implementation of the Elliot and Aurelius playbook.
“The new CACs crush the business model of holdouts,” said Gregory Makoff, a senior fellow at Centre for International Governance Innovation in Waterloo, Ontario.
“Holdouts thrive on buying small amounts of bonds that can’t be forced into a transaction,” said Makoff, who’s based in New York and formerly advised nations including Jamaica, South Africa and the Philippines on debt transactions during a career at Citigroup. “Now there is nowhere to hide since a supermajority can now sweep all bondholders into a transaction.”
To be sure, it may take decades for the holdout business model to completely wither away as old-style bonds mature, since the new language applies only to newly issued bonds. Trying to retrofit such language onto old bond covenants would be cumbersome and costly, lawyers said.
Both Elliot and Aurelius declined to comment on the new standards. Holdouts have argued that they play an important role in the credit markets by offering liquidity during distressed times. The new standards diminish their incentive to hold out on a deal.
In a nutshell, an aggregated CAC means all of a sovereign’s bondholders’ votes in a restructuring are counted in a single pool and if it passes the results are binding on all the bonds. That means if the supermajority of those votes agrees to a deal, then even those who don’t like the terms have no choice but to accept them.
“Neither the sell-side, meaning the issuers, nor the hard money buy-side likes the result in Argentina,” said Antonia Stolper, a sovereign securities lawyer at Shearman & Sterling in New York. “For them it is a practical matter.”
Stolper said adoption of the new language by sovereign issuers for their international bonds, typically adapted to either English or New York courts, has been “spectacularly fast.”
JUDGE GRIESA
The new covenants also include language written specifically to counteract the disputed opinion of U.S. District Judge Thomas Griesa in Manhattan. His view of the so-called pari passu clause, or equal treatment clause, is what the holdout hedge funds have used to win $1.33 billion plus accrued interest.
“The modification to the pari passu clause diminishes investors’ ability to litigate,” said Moody’s Investors Service analyst Elena Duggar, who on March 13 published a study on the new language.
Griesa’s opinion has been upheld on appeal and Argentina has exhausted its legal recourses. Until Argentina agrees to a settlement with the holdouts, its ability to reenter the international capital markets is severely restricted at a time when its shaky economy needs fresh investment.
In October 2014 Kazakhstan adopted the new English law versions nearly verbatim, while Mexico led the way for bonds governed by New York law with an issue in November.
A simpler form of sovereign CACs were first used by Mexico in 2003, a milestone in the sovereign debt investment community. Those bonds matured earlier in this month.
In fact, it was the Mexican peso crisis in December 1994 and subsequent international bailout that launched an effort to design bond covenants that would lessen the burden on the official sector and shift it to private bondholders.
Belgian deputy central bank governor Jean-Jacques Rey headed a report issued to the G10 in 1996 that laid the groundwork for changes while the Argentine default in 2002 accelerated the effort to Mexico’s historic move in February 2003.
“It took about eight years for the initial CACs to go from the drawing board to the marketplace. The new CACs made the leap in less than two years – record speed in the arcane world of sovereign bond documentation,” said Makoff.
RATINGS AND PRICES
Still, while the adoption of the new language has been fast, its effect on ratings, a key element on the pricing of deals, has been nil.
“From a credit point of view, we don’t think it will make a material impact on ratings. That decision is driven by the ability to pay,” said Moody’s Duggar.
A unresolved question in the event of a default is over which equal treatment covenant will take precedent, as the new ICMA-inspired pari passu clause is considered weaker in its protection of creditors than the existing clause underpinning the holdouts case against Argentina, Duggar said.
When CACs were introduced by Mexico in 2003 the effect on market prices was negligible, say veteran bankers. That remains the case.
“Regarding CACs, I don’t think new issue bond pricing has been materially impacted by the inclusion of the new language to date,” Clayton Pope, head of emerging market bond syndicate at Credit Suisse in New York, told Reuters.
13. ELLIOTT EMITS RAY OF PRAGMATISM IN ARGENTINA FEUD (Reuters News)
By Reynolds Holding
March 23, 2015
Elliott Management has emitted the merest glimmer of pragmatism in its feud with Argentina. The hedge fund, with a U.S. judge’s approval, will allow Citigroup to process two of the country’s bond payments, despite an earlier court-ordered block. It’s a concession to cover the bank’s back, not a broader shift in the intractable spat between holdout creditors and Argentina. But it may qualify as progress.
The saga started in 2012, when District Judge Thomas Griesa ruled that the nation couldn’t pay creditors who had exchanged defaulted debt for discounted bonds in 2005 and 2010 unless it also paid Elliott and other investors who had refused the swaps. Argentina protested mightily, even appealing to the U.S. Supreme Court, but Griesa – and the holdouts – wouldn’t budge.
A possible crack in the standoff appeared when Griesa said last September that Citi could transmit a $5 million installment on bonds issued under Argentine law. But in March, the judge refused the bank’s request to process additional payouts.
That put Citi – and its thousands of Argentina-based employees – in a bind. With the nation’s government threatening to pull its license and worse, the bank decided to close its custody business there. It couldn’t act quickly enough, though, to ensure its workers’ well-being.
Elliott, heretofore deaf to all appeals, softened ever so slightly. It agreed the bank could process payments due on March 31 and, under certain conditions, June 30 payments. But no one else – including Argentina – would be let off the hook for making those payments, unless they coughed up amounts owed to Elliott as well.
It is a testament to the parties’ mulish attitudes that this could be considered progress. Argentina has schemed to swap the exchange bonds for debt outside Griesa’s jurisdiction and even chose default last summer rather than accede to Elliott’s wishes. The hedge fund has, at least publicly, shown little desire to compromise.
It’s unlikely that further movement is in the offing. The judge’s order approving the payment makes clear it’s a one-time, tightly limited concession. The only sliver of hope is that Elliott has shown a capacity to be somewhat reasonable. It’s now up to Argentina to consider doing the same.
14. BRITAIN SAYS TO BOOST DEFENCE OF DISPUTED FALKLAND ISLANDS (Reuters News)
By Kylie MacLellan
24 March 2015
LONDON, March 24 (Reuters) – Britain will reinforce its military presence on the disputed Falkland Islands to ensure they are properly protected, Defence Secretary Michael Fallon said on Tuesday, a move rejected as unnecessary by Argentina which lays claim to the archipelago.
Tensions over the Falklands still crackle more than 30 years after Argentine forces seized the islands in 1982 and Britain sent a task force to retake them in a brief war which saw more than 600 Argentine and 255 British servicemen killed.
“We are reinforcing our guard,” Fallon told parliament.
“We will continue to defend the right of the islanders to determine their future and to maintain their way of life against whatever threats may arise.”
Britain would deploy two Chinook helicopters to the Falklands from mid-2016, upgrade communications at the Royal Air Force base there, and renew the surface-to-air missile defence system which is due to come out of service around 2020, he said.
It would also invest 180 million pounds ($268 million) over the next decade on modernising infrastructure and continue to provide a maritime patrol vessel there, he added.
The number of British military and civilian personnel will be kept at around 1,200.
The Argentine government claims the islands, which are 300 miles off the Argentine coast and 8,000 miles from Britain, as its own and has stepped up a campaign to get what it calls Las Malvinas back as exploration by oil and gas firms nearby has raised diplomatic tensions.
Argentina’s ambassador to Britain, Alicia Castro, criticised the British move as unnecessary, saying an invasion was “never going to happen”.
“Argentina isn’t a threat to the United Kingdom, nor to the people of the Islas Malvinas,” she told Argentinian radio station Radio Del Plata. “There will never be another war in Las Malvinas.”
Fallon said he would not speculate about a report in the Sun newspaper on Tuesday that Russia was working on a deal to lease 12 long range bombers to Argentina.
“The principle threat to the Islands remains the quite unjustified claim of Argentina to ownership,” he said.
15. HERE’S WHY U.K.-ARGENTINA TENSIONS ARE RISING AGAIN OVER THE FALKLANDS (Time)
By Harvey Morris
March 24, 2015
U.K increases defense spending on islands in response to Argentina’s military investmentArgentina still poses a “very live threat” to the British-ruled Falkland Islands, Britain’s defense minister warned on Tuesday as he announced plans to increase security spending on the South Atlantic islands to counter Argentina’s attempts to improve its military.
Michael Fallon told Parliament the government planned to spend £180 million ($268 million) over the next 10 years to boost the security of the islands as part of a defense review, although the level of military and civilian personnel involved would remain at around 1,200.
“The principle threat to the islands remains,” he told legislators. “I am confident that, following this review, we have the right deployment.”
The minister’s announcement comes as Argentina has been trying to upgrade its military capabilities. It has looked at buying new warplanes and has signed a co-operation deal with Russia that could result in it leasing Russian bombers in return for beef exports.
Argentina has always claimed sovereignty over the islands, which it calls Las Malvinas. Britain has ruled there for almost two centuries and the overwhelming majority of the 3,000 inhabitants are of British descent. Successive governments in London have insisted that it is up to the Falklanders to decide who governs them.
Tension has periodically surfaced between London and Buenos Aires in the three decades since British troops hoisted the Union flag over the island capital of Port Stanley barely 10 weeks after the invasion.
The revival of the Falklands question comes just six weeks ahead of a U.K. general election in which defense spending has latterly emerged as a campaign issue.
Fallon’s Conservative Party is traditionally viewed as soundest on defense. However, indications that the government’s austerity policies may soon start to gnaw into the hallowed defense budget have alarmed domestic military chiefs and Britain’s key ally, the United States.
General Raymond Odierno, the U.S. Chief of Staff, said this month that he was “very concerned” about falling U.K. defense spending amid fears it could drop below a Nato target of two percent of national income.
Just this week, Fallon tried to reassure the Americans when he wrote in a newspaper article: “When the chips are down, the U.K. will always be at their side. Our American friends know that the U.K. is not about to let down its guard.
The latest warning on the Falklands may in part be a reminder to voters that the Conservatives can continue to be trusted on defense.
That is not to say that the government has invented the Argentine threat. The cash-strapped government of President Cristina Fernández de Kirchner has announced a boost in military spending for 2015.
Argentina has also been scouting around to upgrade its ageing fleet of military jets, focusing on Israel, China and Russia among potential suppliers. Just last week, Russian and Argentine officials agreed to upgrade military cooperation at a meeting in Moscow.
That came amid unconfirmed reports that Russia is offering to lease long-range bombers in exchange for Argentine beef. Vladimir Putin, the Russian President was in Buenos Aires last year as part of policy of strengthening ties in Latin America at a time when Moscow faced Western sanctions over its annexation of Crimea and its stance on Ukraine.
Alexei Pushkov, head of the Russian parliament’s Foreign Affairs Committee, linked the Ukraine and Falklands issues when he posted on Twitter at the weekend: “Attention London: Crimea has far more reason to be in Russia than the Falklands have to be part of Great Britain.”
Aligning with Argentina over the Falklands would be one way for Moscow to retaliate for Britain’s support of sanctions.
In Argentina, the sovereignty question is one that is guaranteed to unite public opinion. Successive governments have opted to press the Malvinas button as a way of diverting attention from more divisive domestic issues. Among the headaches currently confronting President Fernández de Kirchner is the continuing fallout from the mysterious fatal shooting of Argentine federal prosecutor Alberto Nisman in January.
The ruling Argentine junta that ordered the 1982 invasion was at the time floundering economically and facing growing civilian opposition to six years of military rule. Seizing the islands was hugely popular and temporarily quelled the internal unrest.
The generals were spurred to their military adventure by their assessment that Britain had lost interest in the islands and would not act to recover them.
It turned out to be a bad bet. The junta’s confidence stemmed in part from defence cuts by Prime Minister Margaret Thatcher’s government that included suspending periodic submarine patrols of South Atlantic waters. These were never publicised but London always made sure the Argentines knew about them.
When the islands were seized, however, Thatcher responded by dispatching a task force of more than 120 warships and merchant vessels and thousands of soldiers and special forces. U.S. President Ronald Reagan risked alienating his Latin American partners by giving back-up support to his British ally.
The two sides lost more than 900 men between them in a 74-day conflict that saw ships sunk on both sides.
The war spelled the end of the junta, soon to be replaced by a democratic government, and sealed Thatcher’s domestic popularity as “the Iron Lady”.
Britain and the junta’s successors agreed that the issue would not be resolved by force. However, diplomatic efforts to resolve it have come to nothing, particularly after all but three Falklands voters opted to retain the link with Britain in a 2013 referendum.
Recently, however, Argentine leaders have ramped up the rhetoric. President Fernández de Kirchner has referred to the islanders as “squatters”, while according to her foreign minister, Héctor Timerman, they are “non-people”.
Britain has also been accused of maintaining its control of the islands in order to exploit disputed oil reserves and extend its strategic hold on the South Atlantic and Antartica.
What remains an open question is whether Argentina would actually be tempted to mount a second invasion and how Britain would respond.
If Argentina managed to upgrade its air force, with help from the Russians or others, it would have a theoretical window of opportunity to strike before a new British carrier force enters operation in 2020. In the meantime, Britain is relying on improved missile and air defences to deter any aggression.
Lawrence Freedman, a war studies professor and Britain’s official historian of the Falklands War, doubts Argentina’s ability to mount a new invasion. “President Kirchner plays the nationalist card, but basically the country is broke,” he says.
Any Russian bombers that the Argentines acquired could in theory be used to bomb the runway at the Mount Pleasant military base south of Port Stanley. “The only way to neutralize that would be a surprise attack. It’s not easy and you’d need a skilled operation.” says Freedman.
If, against the odds, Argentina managed to follow up with a troop invasion, “then there would be a problem.” But he believed the modern air defences available would deter any such aggression “It would be quite a gamble for Argentina and their forces have not been particularly updated over the years.”
Military rhetoric aside, it appears neither side has an interest in a re-run of 1982 and diplomacy remains the preferred option to settle the long-running dispute for good.
16. BRITAIN MODERNIZES FALKLANDS FORCES IN VIEW OF ARGENTINE THREAT (Bloomberg News)
By Benjamin Katz
March 24, 2015
(Bloomberg) — The U.K. will modernize its military forces in the Falkland Islands after a defense review found there’s a continuing threat from Argentina to the territory.
Britain will spend 180 million pounds ($270 million) over the next 10 years to refurbish defenses in the Falklands, including the renovation of a harbor, fuel infrastructure and the renewal of the Rapier ground-based air-defense system, Defence Secretary Michael Fallon said Tuesday. Chinook military helicopters will return to the South Atlantic archipelago after being removed in 2006 to support operations in Afghanistan.
The military review found Britain’s “current military presence is broadly proportionate to the risks” faced from Argentina, Fallon said in the House of Commons in London. Britain’s Sun newspaper reported Tuesday that Argentina was working on a deal to lease 12 long-range bomber aircraft from Russia, raising the threat to the islands. The two countries went to war in 1982 after Argentine forces invaded the territory.
“We should not drop our guard, we are not dropping our guard,” Fallon told lawmakers. “This is a defensive arrangement, this is not threatening anybody else.”
A referendum in 2013 reasserted the status of the Falklands, known in Argentina as the Malvinas, after 1,513 of 1,517 islanders opted to remain as a British territory. The Argentine government dismissed the referendum at the time as “irrelevant.”
“We will always be there for them, we will always defend them,” U.K. Prime Minister David Cameron said at an election-campaign event in London. “We believe in the Falkland Islanders’ rights of self-determination.”
17. ARGENTINA’S PROSPECTS AFTER FERNANDEZ BRIGHTEN, DEVELOPER SAYS (Bloomberg News)
By Daniel Cancel
March 20, 2015
(Bloomberg) — Scott Mathis, a former Oppenheimer & Co. partner, says his luxury real-estate development company stands to benefit as Argentine President Cristina Fernandez de Kirchner’s second term ends later this year.
Sentiment toward Argentina is improving before the Oct. 25 elections, Mathis, the 52-year-old chairman of Algodon Wines & Luxury Development Group Inc., said in a phone interview from New York.
Suspicions surrounding the death of prosecutor Alberto Nisman, inflation of about 20 percent and capital controls had made it hard to change perceptions, he said.
“People are looking at this election as a potential time for change,’ Mathis said.
Algodon owns a 10-room hotel in Buenos Aires’s Recoleta neighborhood, where rooms go for as much as $980 a night, as well as 2,050 acres in Mendoza province with an 18-hole golf course and winery. Algodon has sold about 40 percent of lots on that property, which range from about $150,000 to $200,000, in a first phase of the development, according to Mathis. Lots with vineyards allow homeowners to bottle their own wine.
With Morgan Stanley predicting Argentina’s stock market will gain 45 percent in U.S. dollars this year, Mathis isn’t alone in seeing increased optimism.
‘‘Valuations are up, but it’s risen from such a low base since Argentine assets were trading at a 60 to 70 percent discount to the rest of the world,” Mathis said. “We’re long-term believers in Argentina, and we think the time is now coming for opportunities and growth over the next decade.”
18. ARGENTINA’S ECONOMY GROWS AT SLOWEST FULL-YEAR PACE SINCE 2009 (Bloomberg News)
By Charlie Devereux
March 20, 2015
(Bloomberg) — Argentina’s economy expanded 0.4 percent in the fourth quarter from the year earlier, bringing full-year growth to its slowest pace in five years as dwindling foreign reserves led the government to restrict dollars for imports.
Fourth-quarter growth compared with the 0.3 percent median estimate of seven economists surveyed by Bloomberg. In the full year, gross domestic product expanded 0.5 percent, the national statistics agency said Friday.
The government has restricted licenses for imports, making it harder for manufacturers to obtain raw materials and crimping production, according to industry groups. Imports fell 15 percent to $17.6 billion in the fourth quarter from a year earlier. Sluggish growth will probably continue into this year, with imports dropping 19 percent in January from a year ago.
“Argentina has lots of problems in economic management that generated these difficulties,” said Maximiliano Castillo, director of Buenos Aires-based research firm ACM SA. “What we’re seeing is the result of policies that have led to stagnant growth with elevated inflation.”
Private economists say the economy is faring even worse than official figures show. GDP contracted 1.5 percent in the fourth quarter from the year earlier, according to the median estimate of 23 analysts in a Bloomberg survey.
In February 2013, Argentina became the first nation to be censured by the International Monetary Fund for allegedly misreporting economic data. The government last year introduced a new consumer price index and changed the base year for calculation of its GDP index in response to IMF demands.
ACM’s Castillo, who predicted the government would report growth of 0.5 percent in the fourth quarter, estimates the economy shrank 2.2 percent last year.
Hard Hit
The auto industry has been particularly hard hit, with new taxes, falling imports and declining demand from Brazil, the country’s biggest trade partner. Production fell 22 percent in 2014 to 617,329 units, according to the Association of Automobile Manufacturers.
The shortage of dollars intensified in July of last year when the government defaulted on its debt following a protracted legal battle with creditors who declined to join restructurings on a record $95 billion credit event in 2001. The default restricted the government’s access to capital markets.
Argentina posted a current account deficit of $1.7 billion in the fourth quarter and a deficit of $5.1 billion for 2014, the statistics agency said Friday.
19. CITIGROUP SAYS JUDGE ALLOWING TWO ARGENTINA BOND PAYMENTS (Bloomberg News)
By Dakin Campbell
March 22, 2015
(Bloomberg) — Citigroup Inc. said a U.S. judge is letting it process two bond payments in Argentina, giving it time to exit a custody business there that got stuck in the government’s legal battle with hedge funds.
Citigroup’s Argentine branch can fulfill its duty to process interest payments March 31 and June 30 on bonds issued under local law in U.S. dollars, the bank said Sunday. A judge in Manhattan signed the order March 20, allowing the payments “to the extent certain conditions are satisfied,” the bank said. The filing couldn’t immediately be confirmed in court records.
The ruling helps Citigroup extricate itself from a dispute over the country’s bond payments that was threatening to cripple one of the bank’s oldest overseas units. In 2012, the U.S. court barred Argentina from paying restructured bondholders unless it pays a group led by Paul Singer’s NML Capital that claims $1.7 billion in defaulted debt. Citigroup said last week it’s quitting the custody business in Argentina after the nation threatened to revoke the bank’s license if it didn’t handle the payments.
Citigroup told U.S. District Judge Thomas Griesa in a March 13 letter that it faced “catastrophic consequences if it doesn’t process the very small payment” of $3.7 million for clients on March 31. Last week, the bank said it “has been repeatedly subjected to the imminent threat of loss of its license in Argentina and criminal, civil and administrative sanctions by the republic, its regulators and its customers.”
‘Largely Unconnected’
The Citibank NA subsidiary had argued that the 2012 ruling blocking Argentina from paying holders of its performing debt didn’t apply to it. Griesa rejected the assertion, ruling March 12 that U.S. dollar-denominated bonds issued in Argentina under that country’s law are covered by the 2012 ban.
NML Capital and creditors reached an agreement with Citibank NA last week that heads off the bank’s appeal of the March 12 ruling, NML said in an e-mailed statement.
“Judge Griesa approved this agreement, which applies only to Citibank and was specifically tailored to address the unique circumstances facing Citi Argentina after Citibank announced it was exiting the custody business,” it said.
Citibank opened the Argentine unit, its first non-U.S. branch, in 1914, according to its website. It has 2,700 employees in the country and 70 branches, according to central bank data. Custody business accounts for about 2 percent of its net income, the firm said Sunday in a statement.
The business “by its very nature, is largely unconnected to the rest of Citi Argentina’s banking activities,” it said. “Citi has been an important contributor to the Argentine economy for more than 100 years and looks forward to continuing to play this vital role in the decades to come.”
The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).
20. ARGENTINA ECONOMY: QUICK VIEW – OFFICIAL DATA SHOW GDP GROWING SLIGHTLY IN (Economist Intelligence Unit – ViewsWire)
23 March 2015
Event
According to the latest data from the Instituto Nacional de Estadística y Censos (INDEC, the national statistics institute), GDP grew by 0.4% year on year in the fourth quarter of 2014, producing full-year GDP growth of 0.5%. This relatively positive result is at odds with other available economic indicators and with most private estimates for the year, adding to existing concerns over the quality of GDP data published by Argentina
Analysis
Argentina was officially censured by the IMF in 2013 for failing to produce reliable GDP and inflation statistics (one of the commitments made by IMF member-countries under the Fund’s articles of agreement). In response, the authorities devised a new GDP series at the start of 2014, which revised down growth data for past years. However, as with a revised inflation series, there have been fresh questions over the accuracy of the new GDP series, which appears to overstate the level of activity. Private local estimates show GDP contracting by around 1-2% in 2014; our own estimate was for a contraction in GDP of 0.3%. This was based on the official data, but did not take into account data revisions undertaken with the latest data release. Based on other available indicators of activity and business and consumer confidence, we had also expected a much weaker fourth-quarter performance than that reported by INDEC.
Seasonally adjusted data are still not available for the fourth quarter, complicating an analysis of GDP trends in the period, but the year-on-year data suggest that private consumption and fixed investment continued to contract (fixed investment was down by a steep 9.7% year on year in the fourth quarter, while consumption was down by 1.2%). This was offset by by an acceleration of government consumption growth and positive net export growth. Trends in domestic demand appear logical; however, INDEC data shows exports falling by only 1.9% and imports falling by 19.1%. This is at odds with a trade volumes index also produced by INDEC, which showed export volumes falling by 12.4% in the fourth quarter and import volumes falling by 15.9%.
21. ARGENTINA: COUNTRY OUTLOOK (Economist Intelligence Unit – ViewsWire)
23 March 2015
FROM THE ECONOMIST INTELLIGENCE UNIT
POLITICAL STABILITY: The president, Cristina Fernández de Kirchner, is struggling to shake off a political scandal that threatens to tarnish her last year in office. The death in January of Alberto Nisman, a federal prosecutor, shocked the political establishment. Mr Nisman died in mysterious circumstances days after formally accusing the president of conspiring with Iran to cover up the latter’s involvement in the 1994 bombing of a Jewish centre in the capital, Buenos Aires–the country’s largest ever terrorist attack. It remains unclear whether Mr Nisman committed suicide or was murdered. However, opinion polls suggest that a majority of the public believes that the latter is the case, highlighting a clear lack of faith in government and state institutions. The president, whose opinion poll ratings have fallen sharply, has asserted that Mr Nisman’s death is linked to rogue intelligence agents, and has put forward a reform to curtail the powers of the Secretaría de Inteligencia (SI, the intelligence services). The government will be hoping that public attention now shifts to deficiencies in the SI. However, The Economist Intelligence Unit expects the death of Mr Nisman to have damaging, long-lasting consequences for the administration as public frustration over the investigation–and over a continued failure to bring the perpetrators of the 1994 bombing to justice–continues to heighten the risk of social unrest.
ELECTION WATCH: Opinion polls suggest that there are three main contenders in the October 2015 presidential race. These include two members of the Partido Justicialista (PJ, the Peronist party): Sergio Massa, a congressman who founded an anti-government Peronist faction to contest the October 2013 mid-term elections and has emerged as a leading figure in the opposition movement; and the governor of Buenos Aires province, Daniel Scioli, a popular politician who has managed to remain a part of the president’s Frente para la Victoria (FV) Peronist faction despite tricky relations with Ms Fernández. Mauricio Macri, mayor of the capital city, Buenos Aires, and leader of the right-wing Propuesta Republicana (Pro) party, appears the most promising presidential candidate outside the Peronist party. All these candidates espouse more liberal, business-friendly policies than the current government, and our forecasts are based on the assumption of a more market-friendly administration from end-2015.
INTERNATIONAL RELATIONS: The Fernández government is looking to strengthen ties with China as it seeks new sources of foreign direct investment (FDI) and debt finance, and has sealed a series of investment accords with the country (particularly in infrastructure) over the course of recent months that should cement China’s position as a strategic partner. On top of these investment deals, China agreed an US$11bn three-year currency-swap arrangement in mid-2014 that has bolstered the foreign reserves and given the government a life line as it seeks to avoid a currency crisis. Meanwhile, relations with the US remain at a low ebb following last year’s sovereign default, which was the consequence of Argentina’s failure to abide by the terms of a New York court ruling. Default renders recent attempts to resolve a series of disputes in order to access external credit essentially useless. These efforts have included an agreement with the Paris Club to restructure outstanding defaulted bilateral debt; payment of US$5bn in bonds in compensation to Spain’s Repsol for the expropriation of the company’s share in an Argentinian oil company, Yacimientos Petrolíferos Fiscales (YPF); and the resolution of a series of claims involving the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID). The Fernández administration has now abandoned such efforts, but we assume that the incoming administration will work from 2016 to exit default (by coming to a deal with holdout creditors) and normalise relations with creditor countries, suggesting improved relations with the US and Europe in the medium term.
POLICY TRENDS: We have long considered a substantial tightening of macroeconomic policy as necessary to reduce inflation, improve external competitiveness and avoid an eventual balance-of-payments crisis. However, the Fernández administration is clearly reluctant to make these adjustments, which involve difficult austerity measures. With elections now approaching and the foreign reserves recovering (temporarily at least) as a result of the currency-swap deal with China, our forecasts now assume that these adjustments will have to wait until a new government takes office at the end of 2015. In the meantime, fiscal policy will remain expansionary, growth in the monetary aggregates will accelerate, the currency will appreciate in real terms (although some nominal depreciation will undoubtedly continue), and the government will remain reliant on a host of controls to prevent a run on the currency. Under our benign baseline assumption that a more market-friendly administration will take office and work quickly to tackle distortions, we expect a substantial fiscal and currency adjustment in 2016, combined with efforts to rein in nominal wage growth. In the short term, this will subdue activity. However, this will be rewarded with a boost to investor confidence, assuming that the new government works to exit default (eliminating the foreign-financing constraint) and strengthen confidence in rule of law eroded by years of ad hoc, discretionary policy interventionism under Ms Fernández. Combined with macroeconomic adjustment, and a gradual removal of foreign-exchange and import controls, these policies should set the economy on a more solid long-term footing.
ECONOMIC GROWTH: Although many available indicators suggest that economic activity has remained weak in the first quarter of 2015 (industrial production and exports have continued to fall), there has been a noticeable recovery in consumer confidence related to renewed rapid growth in nominal wages. We now also assume that expansionary fiscal policy will persist for another year as the government ramps up spending ahead of the elections. On this basis, we have revised up our forecast for real GDP growth this year to 0.8% (from 0.4% in our February report), notwithstanding headwinds from deepening recession in neighbouring Brazil. With much-needed macroeconomic adjustment delayed until 2016, we have at the same time revised down our GDP growth forecast for 2016, from 2.4% to 1.9%, as a renewed period of negative wage growth will constrain private consumption growth.
INFLATION: A new consumer price index was unveiled in February 2014, but concerns remain about the accuracy of official data: using the new index, official estimates of inflation remain substantially below private and provincial estimates. Until the official index has a better and longer track record, we will continue to use data from PriceStats, an Internet price-monitoring company, in our forecasts. According to these data, inflation came in at 29.7% in February. This is well down from a peak of over 40% in late 2014, reflecting the sharp fall of oil prices of recent months, along with base effects (inflation spiked in the immediate aftermath of the January 2014 devaluation). Inflation will be slow to come down much further in the short term, given strong nominal wage growth and loose fiscal policy, but we do expect gradual disinflation in the medium term, assuming that fiscal policy tightens, domestic demand remains subdued (relative to the boom years of 2004-11) and domestic supply strengthens on the back of improvements in microeconomic policy. Even so, annual inflation will remain in double digits in 2016-19, reflecting weak institutional underpinning of price stability and a high level of wage indexation.
EXCHANGE RATES: We assume that, after a 33% nominal depreciation in 2014, currency adjustment under the heavily managed float will continue in coming years, involving depreciation of around 15% in 2015, 25% in 2016 (as commitment to adjustment improves under a new government) and around 10% per year in 2017-19. This would reverse the accumulated real appreciation of the peso in the past five years that has eroded export competitiveness and bring the real trade-weighted exchange rate back to around 2008 levels. However, in the light of continued uncertainty over the direction of policy in the remainder of the Fernández government’s term, we continue to believe that there is a risk of a steep, uncontrolled devaluation in 2015. The black-market premium has actually narrowed in recent months, from around 80% in mid-2014 to 50% in mid-March, reflecting the temporary boost of a currency-swap agreement with China and recent issuance of US-dollar-denominated local bonds, which have helped to satisfy local dollar demand temporarily. However, the authorities have failed to address underlying fiscal and external imbalances that will eventually, if left unchecked, force some sort of steep currency adjustment. In this context, the risks to our forecasts remain high, particularly amid US-dollar strengthening that has seen most emerging-market currencies weaken quite sharply in previous months.
EXTERNAL SECTOR: Although we expect the terms of trade to continue to deteriorate for much of the forecast period (when a decline in prices for imported oil will be outweighed by weaker international prices for Argentina’s agricultural exports), currency adjustment should gradually bolster the current account as a weaker peso starts to boost goods and services exports and rein in imports. On this basis, we expect the current account to shift into surplus towards the end of the forecast period. There are substantial upside and downside risks to this forecast, depending on the pace of currency and inflation adjustment. We currently assume that capital inflows will pick up around half way through the forecast period, reflecting renewed investor confidence in a new government. For now, portfolio and FDI inflows will be deterred by a weak legal framework, continued devaluation fears and default. Meanwhile, import cover will be weakened by the use of reserves to shield the peso from currency pressures and to repay external debt. A sharp recent decline in import cover highlights the substantial risk of a major balance-of-payments crisis if capital flight does not subside and a tangible improvement is not seen in access to overseas finance.
22. CITIGROUP ALLOWED TO PROCESS ARGENTINE BOND PAYMENTS (Business News Americas)
23 March 2015
A New York federal court has allowed Citigroup to process two bond interest payments for the Argentine government.
The payments are due on March 30 and June 30, respectively.
The ruling eases tensions, at least for several months, between Citigroup and the Argentine government, which has previously threatened to withdraw the bank’s license to operate in Argentina if it did not process payments on time.
Citigroup, which has been active in Argentina since 1914, has hinted that it might exit its custody business in the country, a line of business that represents only 2% of its income in Argentina.
In Friday’s ruling, the court said that it would not block the bank’s exit from the custody business.
Legal clashes between Argentina and the so-called holdouts, or vulture funds as the Latin American nation’s government has branded them, are likely to resume in the coming months.
The holdouts, which did not enter the 2005 and 2010 agreements between the Argentine government and other bondholders, are seeking the full US$1.6bn repayment of their bonds.
Most notable among the holdouts, which represent around 7% of all the original bond debt, is NML Capital Limited, a subsidiary of Elliot Management Corp, controlled by investor Paul Singer.
23. COMPROMISE AGREEMENT BETWEEN PAYING AGENT AND “HOLD-OUT” PLAINTIFF REMOVES RISK OF END-MARCH ARGENTINE DEFAULT OR EXPROPRIATION (IHS Global Insight Daily Analysis)
By Brian Lawson
24 March 2015
On 21 March, CitibankArgentina announced it had obtained permission from New York District Court Judge Thomas Griesa to make interest payments on behalf of Argentina due on 31 March in respect of USD2.3 billion of dollar-denominated debt issued under Argentine law. Various Argentine media outlets reported Citibank’s claims that the judge had issued an order on 20 March permitting the upcoming payment, and that Citibank would also be allowed to pay a subsequent coupon due in June, subject to certain (unspecified) conditions. The new order removes the risk of a further technical default generated by non-payment at end-March, while alleviating the pressure on Citibank from the Argentine authorities, which had threatened direct personal action against the bank’s senior local officers as well as against the institution itself if payment were not made (see Argentina: 20 March 2015: Argentina takes uncompromising stance on payments to domestic law bondholders to avoid new technical default).
On 22 March, a spokesperson for NML Capital (a leading “hold-out” plaintiff) reported that the consent formed part of a deal between Citibank and NML. Under this, he claimed NML would “allow Citibank to exit the (Argentina-based custody and paying agency) business in return for their withdrawing their appeal against the 12 March judgement”. According to the Buenos Aires Herald website, Citigroup would therefore withdraw its appeals against the New York Court’s determination “that the pari passu injunction covers all of Argentina’s exchange bonds”.
Significance: Although Argentine debt barely reacted to the news, with its EMBI+ index broadly unchanged at around 6% over US Treasury bonds yesterday (23 March), the developments have positive elements for all parties involved. Argentina avoids immediate risk of a second technical default affecting domestic as well as international investors in an election year. Meanwhile, Citibank avoids being trapped between the need to obey the New York Court and the demands and threats of the Argentine authorities. In turn, Citibank’s appeal claiming that Argentina’s domestic-law dollar bonds should not be subject to prior New York court rulings favouring NML appears likely to be withdrawn. Although providing badly needed relief to Citibank, giving the bank time to arrange the orderly transfer of its Argentina-based paying agency activities to a suitable Argentine entity not subject to New York court rulings, the new developments leave unresolved the legal stand-off between Argentina and its un-exchanged hold-out investors.
24. ARGENTINA SAYS ECONOMY EXPANDED 0.5% LAST YEAR (Dow Jones Institutional News)
By Taos Turner
20 March 2015
BUENOS AIRES–Argentina’s government on Friday reported that the economy grew modestly last year, expanding 0.5%, even as many private-sector economists said gross domestic product shrank significantly in 2014.
The government’s estimate, published by the long-questioned national statistics agency, Indec, also put year-over-year growth up by 0.4% in the fourth quarter.
“I don’t take Indec’s data into consideration anymore,” said Fausto Spotorno, an economist at Orlando J Ferreres & Asociados, or OJF, whose growth estimates are widely watched by economists and companies. “I’ve found that you can’t use Indec’s growth or inflation data if you want to do any kind of serious analysis.”
In OJF’s analysis, the economy shrank 2.6% last year and is on track to shrink at least 0.6% this year–assuming Argentina reaches an agreement with hedge funds that sued it in U.S. courts. The U.S. legal dispute has prevented Argentina from borrowing money abroad at reasonably low rates. If the government doesn’t make peace with the hedge funds, the economy could contract by as much as 1.9% this year, said Mr. Spotorno.
“The economy is not creating jobs, it’s not increasing productivity and it faces many restrictions on the importation of inputs used in manufacturing,” he said. “There is also a lack of energy because of insufficient investment in the energy sector. Companies had to buy their own power generators, so their operating costs have risen and they’re not using that money to increase productivity.”
On Thursday, a group of economists whose estimates are published by opposition members of Congress concluded that the economy shrank 2% in 2014 and 2.6% in the fourth quarter.
Argentina’s economy came under pressure from a host of domestic and international challenges last year, some of which have worsened this year. Argentina’s automotive industry has struggled amid double-digit inflation and weak demand from Brazil, which typically buys more than 80% of Argentina’s car exports.
Brazil has let its currency depreciate rapidly this year, reaching a 12-year low of 3.30 reais to the dollar on Thursday. That makes Argentine exports more expensive for Brazilians. On top of that, a scarcity of dollars has made it hard for Argentine firms to obtain the funds needed to import key goods.
“The big restriction that’s limiting the economy is the lack of dollars and a related crackdown on imports,” said Mr. Spotorno.
One bright spot for Argentina has been good weather, which has benefited farmers and increased crops sizes from a year ago. Farm output directly accounts for around 8% of gross domestic production, according to OJF. Related food products make up around 30% of overall industrial output and about half of all exports.
For some analysts, October’s presidential election is also improving economic expectations as people assume that a new president would begin fixing some of the problems afflicting the economy.
President Cristina Kirchner will step down at the end of her term in December, and each of the candidates hoping to succeed her is expected to bring a more market friendly approach to economic policy.
Additionally, Argentina faces almost $4 billion less in bond payments this year, taking some fiscal pressure off the government, according to Estudio Bein, an economic-consulting firm.
Estudio Bein sees the economy expanding by around 1.5% this year accompanied by an annual inflation rate of around 25%.
The consulting firm estimates that Argentina’s economy shrank by about 1.8% last year.
25. ARGENTINA’S ECONOMY STAGNATES AGAIN IN Q4 AMID INCREASED POLICY DEBATE FOR FUTURE GOVERNMENT (IHS Global Insight Daily Analysis)
By Paula Diosquez-Rice, Mario Guillen
24 March 2015
Economic activity seems to be in a holding pattern, waiting for a possible change in policy direction after the October 2015 presidential election.
IHS perspective
Significance
Argentina’s official data point to a downward trend that could become negative in the coming months, placing the country’s economy in a recession.
Implications
Despite the current economic challenges, major policy changes are not expected while the current administration is still in power.
Outlook
The Argentine economy is expected to shrink in the next few quarters. If pressures on the exchange rate continue to increase, the government will be unable to continue its aggressive intervention in the foreign-exchange market and move away from micro-devaluations, worsening the current levels of inflation and internal demand.
According to the latest release by Argentina’s National Institute of Statistics and Census (Instituto Nacional de Estadística y Censos: INDEC), GDP increased by 0.5% year on year (y/y) in 2014, while the figure for the fourth quarter pointed to 0.4% y/y growth. Correcting for seasonality, GDP during the fourth quarter stagnated at 0% quarter on quarter (q/q). Preliminary estimates for 2014 and its last quarter indicate a fall in supply of 1.9% y/y and 3.0% q/q, respectively. Values were influenced by weak GDP growth during all quarters, but especially through the stark reduction of real imports of goods and services, which were down by 12.6% y/y and 19.1% q/q.
Demand in the economy in 2014 posted a contraction of 8.1% y/y in real exports of goods and services, as well as a fall in gross fixed-capital formation and household consumption, down by 5.6% y/y and 0.5% y/y, respectively. Public-sector consumption, on the other hand, rose by 2.8% y/y. Regarding the 5.6% y/y contraction in gross fixed-capital formation, a key indicator of investment, the results were influenced by the research and development sector, up by 15.1% y/y, as well as construction and cultivated biological resources, both up by 1% y/y. The only negative observation belonged to the durable production equipment category, down by 21.6% y/y.
By sector, GDP recorded a sluggish growth rate in the fourth quarter due to significant drops in the retail and wholesale sector, down 4.0% y/y, in manufacturing activity, down 1.9% y/y, in real estate and business services, down 0.8% y/y, and in the utilities sector, down 0.2% y/y – these sectors accounted for 51% of GDP. On the other hand, activity in the financial intermediation sector expanded 5.0% y/y, the construction sector rose 1.3% y/y, and public-sector services increased by 1.2% y/y. Meanwhile, there was an almost 5.0% increase in the primary sector in the last quarter of 2014.
Outlook and implications
The fall in internal demand does not come as a surprise, while the increase in public consumption – with results still indicating economic stagnation – point to the mainly state-driven economic model that the country has adopted, where public spending serves as the main stimulus for economic growth. Despite some growth in the sub-categories of investment, a general fall in the value suggests persistent mistrust in a short-term economic recovery. In fact, after a recessionary first quarter in 2014, Argentina posted GDP growth of 0.5% q/q in the second quarter, followed by a still positive 0.1% q/q. The last quarter’s result of 0% q/q confirms further contraction in economic activity, a trend that is unlikely to be reversed in the short term, given the current conditions of the economy and political unwillingness to change the main framework of economic policies before the presidential election in October 2015.
As current debate is already focusing on the economic path to be taken by the next government, it is clear that bringing the economy back to healthy growth will prove a complicated task. Indeed, in order to successfully change policy direction the new government will need to build trust and reputation. For example, one of the main issues being discussed by the presidential candidates is the “cepo cambiario” (foreign-exchange controls/capital controls). The electoral rhetoric, such as the “promise” of immediately eliminating foreign-exchange controls, is rather optimistic. Argentina is still dealing with low foreign-exchange reserves, external debt servicing issues derived from the dispute with the “hold-outs”, while soft commodity prices are not expected to rebound in the next couple of years, which implies lower export revenues. We therefore expect foreign-exchange controls and capital controls to end with the new administration but that may take some time.
26. FUEL FOR THOUGHT: PREMIER, NOBLE START DRILLING AGAIN OFF FALKLAND ISLANDS (Platts Commodity News)
By Robert Perkins
22 March 2015
London (Platts)–22Mar2015/934 pm EDT/134 GMT   New drilling off the Falkland Islands in the South Atlantic got underway this month marking the start of a highly-anticipated push to find more oil off the disputed archipelago.
The Falkland Islands, a UK self-governing territory over which Argentina claims sovereignty, has seen no drilling in its waters since a multi-well campaign in 2010 turned up the island’s only commercial oil find, the Sea Lion oilfield in the North Falkland Basin.
But with just a handful exploration wells to date, the explorers are keen for more and a new shared rig has started to drill.
Defying long-running political controversy, and now low oil prices, Premier Oil and Noble Energy are leading a six-well drilling campaign off the remote islands this year. Over 1.4 billion barrels of oil equivalent is being targeted under the program over the coming months.
Premier and partners Rockhopper began drilling the Zebedee prospect on March 6, near the proven Sea Lion fan play.
The well is targeting about 281 million boe with chances of success ranging from 10%-50% across multiple zones. It is expected to complete within 30 days.
Zebedee is the first of four well programs in the Northern Basin aimed at significantly boosting the reserves of the Sea Lion field complex, currently pegged at around 400 million barrels. During the drilling campaign, the rig will go off to the much deeper southern and eastern Falkland Basins to test two bigger prospects for Noble and Falkland Oil and Gas, or FOGL.
Noble Energy’s initial operated prospect has been named Humpback which forms one of a group of targets in the area believed to hold combined gross resources of 1 billion boe.
Each well on the license will cost around $50 million to drill, the partners have estimated. The rig, Ocean Rig’s Eirik Raude, is estimated to be charging day rates of around $635,000.
With benefit of new seismic and previous well data, some are more upbeat over prospects for the latest drilling. And the prize could be substantial. The islands have offered generous terms to attract explorers to the remote waters. The local Falkland Islands Government is planning to collect just a 9% royalty on oil production in addition to a 26% corporation tax.
But major hurdles remain.
Investors have been wary of all but large oil finds in the remote region, given the logistical and political challenges associated with any future Falklands development.
In 2012, FOGL saw its stock halve in value after its highly anticipated Scotia prospect found only gas shows.
Argentina has also stepped up its diplomatic offensive over the islands in recent years in a bid to put the sovereignty dispute firmly back on the international political agenda. With legal threats from Buenos Aires over oil companies and individuals involved in exploration in the Falklands, producers either working or planning to work in Argentina will likely stay away.
In the meantime, Premier Oil is battling the specter of low oil prices and still buoyant offshore costs to turn the Sea Lion find into the island’s maiden oil producer.
The Sea Lion project was suffering from price-related push backs even before the oil price slide from mid-2014.
Last August, Premier was planning to develop the two northern blocks covering Sea Lion with a tension leg platform to recover around 300 million barrels.
But tumbling oil prices forced a rapid rethink on the project in late 2014 and the company settled on a scaled-back, phased development to save cash.
“In August of last year … things were looking very rosy,” Premier’s Operations Director Neil Hawkings told investors last month. “In November of 2014, we said ‘no, enough of that’, we need to downscale this development and we changed the development plan,” he said.
Premier scrapped plans for a tension-leg platform in favor of an FPSO to produce Sea Lion’s waxy crude. At the time it expected the costs of first oil being around $1.8 billion, split roughly half between the subsea kit and the installation of the FPSO and half drilling costs.
But Premier hopes to lock in lower costs as the oil price slump has seen a rapid slide a industry costs, particularly for offshore drilling. It now expects save a further 25% on drilling costs for the project by end of the year.
Despite targeting more cost savings, Premier is still taking a big gamble on the remote project which could face serious delays if oil prices remain around $50/barrel into next year.
In mid-January, when Brent was trading around $47/b, Premier’s CEO Tony Durrant said that the company would simply hold off approving Sea Lion “below $50.”
Project sanction on Sea Lion is scheduled for the first half of 2016, but first oil won’t flow until at least 2019. When it does, the FPSO will see production plateau at 50,000-60,000 b/d.
Until then, the Falklands’ 3,000 inhabitants will have to wait a little longer for their pot of gold from the Antarctic outpost.
27. SECRET NAZI HIDEOUT BELIEVED FOUND IN REMOTE ARGENTINE JUNGLE (The Washington Post)
By Terrence McCoy
March 23, 2015
They called them “ratlines.”
In the final days of the Third Reich, when its demise was imminent, adherents realized that if they didn’t escape they would go down with it. So they devised a system of escape — ratlines — that funneled thousands of war criminals through Spain to points west and south. Abetted by Third Reich sympathizers, many swarmed into South America, beginning new lives from Brazil to Argentina.
Argentina is now where myths, rumors and historical facts of that time collide. The stories say Nazis arrived by rubber dinghies off the coast of Patagonia, bedraggled from the long journey. The stories say crates of Nazi gold hit the beaches, then vanished into the foggy Andes Mountains. The stories say Hitler himself found new life in an Argentine idyll, “doddering peacefully in the Andean foothills attended by faithful Nazi servants.”
Some stories are more true than others. It’s true that the Argentine government, under the command of Nazi sympathizer Juan Domingo Perón, did bring in hundreds, if not thousands, of Nazis. “In those days, Argentina was a kind of paradise to us,” Nazi Erich Priebke remembered in 1991. And it’s true that some major Nazi operators escaped there, including Adolf Eichmann, a Holocaust mastermind arrested in 1960 in Buenos Aires and later executed in Israel.
According to a fresh findings announced over the weekend, it’s also true the Nazis made it deeper into the Argentine jungle in search of refuge than anyone imagined. Hundreds of miles north, along the border with Paraguay, rises the Parque Teyú Cuare. A path winds into the nature preserve, opening to a trove of “mysterious buildings” that are “battered by time,” reported the Argentine newspaper Clarin. “What were these buildings? Who built them? For what?”
It now appears there may be an answer. According to a team of Argentine researchers led by Daniel Schavelzon of the University of Buenos Aires, the three buildings were built by Nazis. The signs are everywhere. The team found several German coins with dates between 1938 and 1944. They found some German porcelain engraved with “Made in Germany.” And perhaps most telling, they found Nazi symbols, including a swastika, were etched into the buildings.
“We can find no other explanation as to why anyone would build these structures, at such great effort and expense, in a site which at that time was totally inaccessible, away from the local community, with material which is not typical of the regional architecture,” Schavelzon told Clarin, taking a team of journalists to see the site and capture remarkable images of buildings atrophying in the jungle humidity.
There are three of them, Schavelzon said. One was used for housing. Another was for storage. And the final was intended as something of a lookout. The site, Schavelzon contended, was built as a jungle hideaway for Third Reich leaders. Less than 10 minutes from the Paraguayan border, it had various escape points — a “protected, dependable site where they could live quietly,” Schavelzon said.
“Apparently, halfway through the Second World War, the Nazis had a secret project of building shelters for top leaders in the event of defeat — inaccessible sites, in the middle of deserts, in the mountains, on a cliff or in the middle of the jungle like this,” Schavelzon argued.
It isn’t likely the site, which hints at one of Argentina’s darkest chapters, got much use. That’s because at the end of the war, it turned out Nazis didn’t need to hide. “Nazis who found refuge in Argentina after the war … lived without incident,” the New York Times said, attributing the country’s “open-door” immigration policy that forged what it later called a “haven for Nazis.”
The best-selling British novel “The Odessa File,” published in 1972, illustrated some of the suspicions swirling about Nazis and the Argentine administration at that time. It told of a secret society of Nazis who did everything they could to facilitate the escape of their brethren, culminating in the pursuit of one Nazi leader to Argentina. The account was “not only believable, but also contained many elements of the truth,” according to author Uki Goni, who uncovered links between the administration and Nazis.
“It was [President] Perón’s intention to rescue as many Nazis as possible from the war crimes trials in Europe,” Goni wrote.
Eichmann was one of the most notorious escapees. He made it to Argentina in 1950 and lived there for the next 1o years. Argentina was known for turning down extradition requests for those accused of war crimes. So the Mossad, Israel’s intelligence service, launched a daring capture mission, got their man — and in the process shined an international spotlight on Argentina’s cooperation with the Nazis.
And now, a lifetime later, that same spotlight has again fallen on Argentina. This time, it’s trained on the northern jungles, where a deteriorating structure pays homage to a dark history.
28. NAZI LAIR FROM WORLD WAR II FOUND HIDDEN IN ARGENTINA JUNGLE (The Huffington Post)
By Ed Mazza
March 23, 3015
Archaeologists have found the ruins of what appears to have been a lair designed for Nazi fugitives hidden deep within the jungle of Argentina.
The three ruined buildings were discovered in Teyu Cuare Park in Misiones province, in the country’s northeast, by researchers from the urban archaeology center at the University of Buenos Aires.
Team leader Daniel Schavelzon said the buildings appear to be part of a secret project to create hidden shelters for Nazi leaders in remote locations. He told the BBC that the jungle ruins are “completely inaccessible.”
“You’d never be able to find them if you didn’t know their exact location,” Schavelzon was quoted as saying.
The lair is located a few minutes from the Paraguayan border, allowing for a quick getaway if necessary.
“It is a defensible site, a protected site, an inaccessible place, a place to live in peace, a place of refuge,” Schavelzon told the Clarin newspaper, according to a Google translation. “And I think what we find is a place of refuge for the Nazi hierarchy.”
The Washington Post reports that one building appears to have been intended to be a dwelling, one for storage and a third as a lookout.
At least one swastika was found amid the ruins, along with a number of Nazi coins dated from 1938 to1944 and German-made MEISSEN porcelain from the same timeframe.
Schavelzon said there may be more Nazi artifacts hidden in the jungle.
“Analyzing the material could take many months,” he told AFP. “It’s even possible there are other buildings we still haven’t found. It’s a complicated area to work in, with lots of vegetation, impenetrable.”
Despite the great effort to build the hideout, it appears as if no one has ever lived there. That’s because Nazis never needed to hide in the jungle, with many using what was known as “rat lines” to escape Europe and resettle in South American cities.
Argentina, in particular, became a refuge under the sympathetic regime of President Juan Peron, who helped protect Nazi war criminals.
In 1960, Mossad agents found Adolf Eichmann, the “architect” of the Holocaust, living in Buenos Aires under the name of Ricardo Klement. Eichmann was abducted, brought to Israel, put on trial and hanged in 1962.
Joseph Mengele, the Nazi doctor responsible for barbarous medical experiments on the prisoners of Auschwitz, is also believed to have lived for a time in Argentina.
29. AT GEORGETOWN, SOCCER ROYALTY ARRIVES (The Washington Post)
By Steven Goff
25 March 2015
They pressed against the black metal fence hugging Shaw Field, hundreds of soccer fans drawn to Georgetown’s campus in the middle of a Tuesday afternoon to see the most famous athlete on the planet (Lionel Messi) and the sport’s second-best national team (Argentina).
They were on the roof and in the windows of Leavey Center overlooking the modest venue. From the hospital buildings, staff and patients watched La Albiceleste (The Sky Blues) practice for about 90 minutes, the first formal training session ahead of Saturday afternoon’s friendly against El Salvador at FedEx Field.
About 350 invited guests, primarily from the university and Argentine diplomatic corps, had been allowed inside the gates. But as word spread on social media and through word of mouth that Messi and the squad were planning an afternoon session, several hundred fans descended on the Northwest Washington campus.
Argentine flags snapped in the breeze. Barcelona jackets provided warmth. Children in Messi “10” jerseys sat atop fathers’ shoulders.
“We’re going to shatter all of our attendance records,” Georgetown men’s soccer Coach Brian Wiese deadpanned.
Argentina will practice at Georgetown all week, play Saturday in Landover and return to campus Sunday and Monday before heading to New Jersey for Tuesday’s exhibition against Ecuador at MetLife Stadium.
Officially, the sessions are closed to the public. Unofficially, anyone who wants to steal a glimpse can probably do so. It’s just a matter of figuring out what time the team plans to practice. (Organizers are not sharing that information, but based on Tuesday’s plan, the afternoon is a good guess.)
A few hours before the squad arrived, a Messi scare ricocheted around the Internet: The four-time world player of the year had injured his right foot against Real Madrid on Sunday and might have to skip the U.S. tour, perhaps miss future Barcelona matches.
The Argentine federation had to issue a news release to set the record straight: Messi had seen a doctor in Washington and was just fine. Crisis averted.
When the team bus arrived and Messi stepped onto the field, shouts of “Leo!” erupted. There were no traces of injury; he was fully engaged in training and moved without a hitch.
Even without Messi, Argentina boasts one of the finest collections of talent in world soccer: Gonzalo Higuain (Napoli), Carlos Tevez (Juventus), Pablo Zabaleta and Sergio Aguero (Manchester City), Ezequiel Lavezzi (Paris Saint-Germain) and Javier Mascherano (Barcelona), among others.
With the U.S. tour falling in an official FIFA international match period, Coach Gerardo Martino was able to summon his finest charges from all over Europe.
According to sources familiar with the negotiations, Argentina received a $2 million appearance fee for the two matches. El Salvador will collect $150,000.
After losing to Germany in the World Cup final last summer in Rio de Janeiro, Argentina is building toward this summer’s Copa America, the continent’s biennial championship. La Albiceleste has not appeared in the Washington area since 1999, a 1-0 loss to the United States in a friendly at RFK Stadium.
Saturday’s game is not a serious matter; it’s just a friendly, and El Salvador, ranked No. 89 in the world, will be as in awe of Messi and Co. as the FedEx Field audience.
Nonetheless, with a rare opportunity to gather his top players, Martino is putting his unit through regular workouts.
Messi was part of a group doing drills at one end of the field, while others worked on two-vs.-two scenarios at the other end. So soon after the players competed for their elite clubs over the weekend, Martino did not schedule a full-field scrimmage.
If additional players are needed, for any purpose, Georgetown’s team is on call.
“We’ll carry the water if we have to,” junior defender Keegan Rosenberry said.
Sophomore defender Joshua Yaro, arguably the best player in college soccer, said he hopes the Hoyas are needed Friday; classes will prevent him from participating Wednesday and Thursday.
Also among the spectators Tuesday was D.C. United defender Chris Korb, who had practiced in the morning at RFK. “I’m a fan, too,” he said.
Along the railing next to the field stood 6-foot-9 Trey Mourning, a freshman on the Georgetown basketball team and son of Hoyas great Alonzo Mourning.
“Soccer is my favorite sport,” he said. “I watch everything. When I heard Messi and Argentina were coming, I had to be here.”
Growing up in Miami, his best friend was Nicolas Cantor, son of famed announcer Andres “Goooool!” Cantor. He took Cantor’s daughter to the prom.
Mourning borrowed a long-lensed camera to snap photos.
When the session ended and the players headed for an opening in the fence, fans on each side begged for autographs. Some players stopped, others trotted toward the bus.
Messi was among the last to leave, stopping a few times to satisfy high-pitched pleas.
One last autograph and he, too, was off. At 5-6½, he was the big man on campus.
30. ELECTIONS IN ARGENTINA (Open Democarcy)
By Fabián Rodríguez
24 March 2015
Elections in Argentina Fabián Rodríguez 24 March 2015 For the first time in more than a decade, Argentina faces a political future without a Kirchner in the presidential office. And that is already news…
With more than 40 million inhabitants Argentina is South America’s second biggest economy. For many years, the country operated as a virtual laboratory for the implementation of explicit neoliberal policies, a process interrupted only at the beginning of the present century by widespread public protest. Now, after 12 uninterrupted years of progressive governments, it faces the challenge of either pursuing the current trajectory or returning to the policies advocated by the powerful.
We Argentines have a reputation for speaking our minds even about things of which we know nothing. It may not be entirely undeserved, partly because we are a society of immigrants with strong, often highly subjective opinions (in the 20th century Argentina received the largest number of Italian and Spanish immigrants), but also because for many years it was unwise “to say what you wanted.”
Of course, Politics is no exception. Notably during the last ten years, debates on current events in the country take place in almost every social context: from the street to the media, from public networks to institutions.
In October, Argentina is to elect a President who will govern until the end of 2019; and so far the only certainties are that, for the very first time in 12 years, the new incumbent will not be a Kirchner, and there will be a great deal of debate.
The Kirchners
Néstor Kirchner became president in 2003 during the worst economic crisis in the country’s history; a crisis brought about by the neoliberal policies of successive governments which, between 1989 and 2001, adhered to the strictures of the so-called “Washington Consensus”.
When Kirchner took office, a quarter of the working population was unemployed, half were living below the line of poverty, and a climate of social violence prevailed that left no room for further austerity.
The economic recovery plan initiated by the Kirchner Government was based on two pillars: foreign debt reduction, and strengthening of the domestic market. Both policies were accompanied by measures to broaden civil and social rights that were further strengthened after 2007, when the Presidency was taken by Kirchner’s wife, Cristina Fernandez, who was elected twice (2007 and 2011) with more than 50% of the votes.
The Kirchner administration also launched a gradual process of re-nationalisation of some formerly state-owned companies that had been privatised during the Presidency of Carlos Menem (1989-99), among them Aguas Argentinas (drinking water) and the Argentine Post Office. The process was expanded during Fernandez´s mandate to include Aerolíneas Argentinas, YPF (oil), Railways, and the pensions system which between 1993 and 2008 had been under the control of private companies contracted to manage the funds generated by workers’ pension contributions.
Of course, none of these policies came without political controversy. Every measure adopted by the Kirchners that damaged the interests of those who had benefited from neoliberalism was at once depicted as “radical”, and the government began making the same enemies as other Latin American administrations of progressive orientation like those of Hugo Chavez in Venezuela, Rafael Correa in Ecuador, Lula Da Silva and Dilma Roussef in Brazil, Evo Morales in Bolivia and Jose Mujica in Uruguay. Collectively, these gave the impression that a left-wing hegemony had established itself in the region.
If this were not enough, the decision to tax the extraordinary incomes of agricultural exporters, the most powerful sector of the Argentine elite which also owns the most important companies as well as the main media, became a parting of the ways between those who supported the Kirchners (the working class, part of the middle class, and the masses who had traditionally supported Peronism) and those who, despite their failure to offer a political alternative, began working to evict the Kirchners from power,.
The succession
Since the Argentine constitution only allows two consecutive presidential terms, Cristina Fernández, whose Government enjoys an approval rating of around 50% according to all the pollsters, may not run for re-election. Allied to the fact that her role as leader of the Peronist movement is unchallenged, she finds herself effectively in the position of “great elector”. Whoever she proposes as the candidate of the ruling party will probably receive the significant block of votes that Kirchnerism continues to command.
Nevertheless, the governing party has not yet settled on a candidate. Seeking the nomination are two Governors , Daniel Scioli and Sergio Uribarri, three Ministers, Florencio Randazzo, Anibal Fernández and Agustín Rossi, and the Chairman of the Lower House, Julian Domínguez.
The opposition
The Radical Civic Union (UCR), a centrist political party and the oldest in Argentina, with a historical record of opposition to Peronism, underwent a crisis similar to that experienced by a majority of the region’s middle-class parties after the rise of the populist governments that shook the representative system in South America from 1999 onwards.
Recently, the UCR has decided to contest the coming elections through an electoral coalition with one of the two candidates of the right: the Mayor of the Buenos Aires, Mauricio Macri, a businessman who is the favourite candidate of employers and of the main media.
Macri’s party, Republican Proposition (Propuesta Republicana in Spanish), includes among its most important members business entrepreneurs who have become politicians, neoliberal technocrats and heads of NGO’s. Because Propuesta Republicana lacks a national structure, the UCR’s support is critical, since the powers of finance and media acting in concert have proved ineffective in toppling the government despite their best efforts to see off Cristina Fernández. And alone, they would be equally ineffectual in attempting to secure a victory at the urns.
The other strong opposition candidate is Congressman Sergio Massa, head of a minority of conservative leaders from the Justicialist Party (Partido Justicialista) who have felt uncomfortable all through the years in which the Kirchners have led the Peronist movement.
Massa, who was an official of the Kirchner governments until to 2009 and is now a member of congress for the right-wing Renewal Front (Frente Renovador in Spanish), enjoys significant voter support in some provinces, although some of his opponents have voiced suspicions about his funding sources, and his alleged links to drug trafficking.
Seven months before the presidential elections, the electoral scenario in Argentina is fluid, and wide open, something that hasn’t happened in the country for at least a decade. And that single fact is already news.
 
 

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