ARGENTINE UPDATE – Sep 8 & 9, 2015


TUESDAY, SEPTEMBER 8TH

1. DON’T BE FOOLED BY DIALOGUE — ARGENTINA ONLY WANTS ONE ANSWER TO ‘THE FALKLANDS QUESTION’ (The Huffington Post)

2. ARGENTINE OIL GOVERNORS BACK DANIEL SCIOLI IN PRESIDENTIAL BID (Bloomberg News)

3. ARGENTINA’S FERNANDEZ SHAKES UP CENTRAL BANK BEFORE LEAVING (Bloomberg News)

4. HOW DWINDLING RESERVES ARE A POSITIVE FOR ARGENTINE BONDHOLDERS (Bloomberg News)

5. ARGENTINA’S SCIOLI VOWS TO KEEP OIL INCENTIVES IF ELECTED PRESIDENT (Reuters News)

6. ARGENTINA’S SCIOLI VOWS TO SUSTAIN HIGH DOMESTIC OIL PRICES IF PRESIDENT (Platts Commodity News)

7. PETROBRAS LOSES LICENSE TO ITS SECONDLARGEST ARGENTINA OIL FIELD (Platts Commodity News)

8. ARGENTINA GOVERNORS TO DISCUSS OIL PRICES WITH PRESIDENTIAL FRONTRUNNER (Platts Commodity News)

9. REFINERY NEWS: COMODORO RIVADAVIA TO BUILD SMALL OIL REFINERY IN ARGENTINA (Platts Commodity News)

1. DON’T BE FOOLED BY DIALOGUE — ARGENTINA ONLY WANTS ONE ANSWER TO ‘THE FALKLANDS QUESTION’ (The Huffington Post)
By Jan Cheek ,Chair of the Legislative Assembly of the Falkland Islands
September 8, 2015

On Friday 4th, Ms Cecilia Nahón, Argentina Ambassador to the United States, wrote an article for the Huffington Post, titled ‘Malvinas: All Argentina Is Saying Is Give Dialogue A Chance.’

In the article, Ambassador Nahón described how old political disputes in the United States were being solved as a result of ‘a willingness to engage in dialogue and diplomatic negotiations.’ Amb. Nahón went on to detail how the Question of the Falkland Islands was an ‘182-year old sovereignty dispute with the United Kingdom’, in reference to the reassertion of British sovereignty of the Islands in 1833. Argentina refers to this as the ‘usurpation’ of the Islands, and claims that the entire Argentina population was forcibly ejected from the Islands, although records within the Argentine National Archives show this was not the case.

The Government of Argentina states regularly that its claim to the Falkland Islands runs continuously from the 1820s. It does not. The Argentine claim to Spanish succession, which was never accepted by the United Kingdom, was ended by the ‘Convention of Peace’, ratified in 1850, and for 34 years Argentina was silent over the Falklands, during which time several Argentine leaders stated that Argentina had no dispute with Britain. There was a brief flurry of letters in the 1880s but after that, the ‘claim’ to the Islands was dropped by the Government of Argentina until the 1930s. José María Ruda reignited the discussion over the so-called ‘claim’ to the Islands in 1965 with his impassioned (and inaccurate) speech to the United Nations Subcommittee III.

The Falkland Islands Government has previously worked alongside the Government of Argentina, with joint accords on a range of economic issues. One by one, and largely under a Kirchner regime, the Government of Argentina has reneged on these agreements. In the decade of Kirchnerite government, Argentina has walked away from every chance of dialogue on the Falklands.

Amb. Nahón accuses Britain of ‘militarization’ of the South Atlantic, but the military presence in the Islands is a level appropriate to deter aggression by Argentina, and is proportionate to the perceived threat. The Government of Argentine, whilst denying any military designs on the Islands, has spent the past year attempting to broker deals for fighter aircraft from Spain, Sweden, Israel, Russia and China to bolster its own forces, yet bitterly complains about infrastructure upgrades (including the construction of a new school) in the Falklands.

The right of self-determination of all peoples in enshrined in the United Nations Charter, and safeguards the inalienable right to determine one’s own political future, and any allegiances therein. We, the people of the Falkland Islands, have a right to a say in our own political future, and the United Kingdom has assured us that there can be no discussions on sovereignty with Argentina unless we, the people of the Falkland Islands, so wish. And we expressed our wish in our historic referendum in March 2013. This was internationally overseen and saw 99.8% of those who voted freely choosing to retain our current relationship with the UK.

Amb. Nahón claimed that the UK refuses to enter negotiations about issues other than sovereignty. But it is untrue. The UK has simply said that Islanders need to be involved in any discussions, and we have extended numerous invitations to talk to the Government of Argentina. These go unacknowledged. In February 2013 then- British Foreign Secretary Hague agreed to meet with the Foreign Minister of Argentina in London. Timerman refused to attend because my colleague and I, as elected members of the Falkland Islands Government, were present. The empty chair at that meeting speaks volumes about the sincerity of Argentina’s call for dialogue.

Amb. Nahón claims to seek dialogue with the United Kingdom to ‘negotiate’ over the Falkland Islands, yet the Argentine Constitution (revised in 1994) plainly states ‘the recovery of said territories [Falkland Islands, South Georgia & South Sandwich Islands] and the full exercise of sovereignty […] constitutes a permanent and unrelinquishable goal of the Argentine people.’ Constitutionally, then, Argentina cannot, and will not, settle for anything less than full control of the Falklands, and therefore any conversation about the Islands isn’t a ‘negotiation’ at all – when Argentina says ‘dialogue’ it really means ‘deliver the Falklands to us.’

The Falkland Islands Government has made it perfectly clear that we are prepared to sit down and talk with Argentina about matters of mutual interest, yet it is Argentina who consistently ignores our invitations whilst crying out for conversation.

Argentina’s disingenuous call for dialogue is in reality a call to colonise our country, seize our natural resources and deny our right to self-determination.

2. ARGENTINE OIL GOVERNORS BACK DANIEL SCIOLI IN PRESIDENTIAL BID (Bloomberg News)
By Pablo Rosendo Gonzalez
September 8, 2015

*Nine out of ten provinces pledge support at meeting in Neuquen
*Candidate promises to maintain competitive domestic prices

Argentina’s ruling party candidate Daniel Scioli obtained the support of the governors of oil-producing provinces ahead of Oct. 25 elections at a summit in Neuquen province, the home of the Belgium-sized shale deposit Vaca Muerta.

Scioli, his vice presidential candidate Carlos Zannini and governors of nine out of 10 oil provinces signed a document to support the continuity of energy policies if he leads the next government starting Dec. 10. The document includes pledges to keep the benefits for shale producers, offshore drilling projects as well as conventional production in a bid to curb energy imports.

The pledge of support from governors including Neuquen and Chubut province, is a key sign of support from fellow Peronists and provincial parties in Scioli’s attempt at succeeding President Cristina Fernandez de Kirchner. Since seizing YPF from Spain’s Repsol SA in 2012, the government has set the domestic price for oil at $77 a barrel and natural gas prices well above international levels to stimulate investment and production.

“Daniel Scioli is the guarantee to sustain the current energy policies that have made Argentina the third country in rigs in the Americas,” Chubut Governor Martin Buzzi, who heads the committee of the 10 provinces, said at the event. “We must continue producing.”

YPF’s chief executive officer Miguel Galuccio, Pan American Energy LLC’s vice president for commercial development Marcos Bulgheroni, Economy Minister Axel Kicillof and Planning Minister Julio de Vido also attended the meeting. Santa Cruz province was the only energy-producing regional government to skip the conference.

Scioli, the ruling party candidate, attracted the most votes in primaries to choose presidential candidates in August. The current governor of Buenos Aires province, Scioli had 36.7 percent support against 29.2 percent for Buenos Aires city Mayor Mauricio Macri and 17.1 percent for lawmaker Sergio Massa, according to a Management & Fit poll taken late last month.

Scioli needs 45 percent of the vote on Oct. 25 to avoid a second round or more than 40 percent with a 10 percentage point advantage over the runner-up.

3. ARGENTINA’S FERNANDEZ SHAKES UP CENTRAL BANK BEFORE LEAVING (Bloomberg News)
By Charlie Devereux
September 8, 2015

*Fernandez has appointed 5 central bank directors in 6 months
*President Fernandez is due to leave office in December

Argentine President Cristina Fernandez de Kirchner replaced two central bank directors, completing a shake-up of the board just three months before she leaves office.

Waldo Jose Farias and Santiago Carnero will leave and be replaced by Juan Miguel Cuattromo and Flavia Marrodan, according to a decree published Tuesday in the Official Gazette. Farias and Carnero were asked to step down after they voted against removing HSBC executives in a tax dispute without allowing the bank to defend itself, La Nacion reported Sept. 4.

Fernandez, who cannot run for re-election after serving two consecutive terms, has appointed all eight members of the bank’s board in the past two years. The overhaul is part of a broader campaign to give her allies more power once she has left office and includes the creation of a new spy agency and reforms within the judicial system, said Sergio Berensztein, director of Berensztein, a Buenos Aires-based political consultancy.

“This isn’t an isolated incident and forms part of a strategy to retain influence beyond her mandate,” Berensztein said by phone from Washington. “We’ve never seen such a conclusive attempt to prolong an administration as we’re seeing now.”

Jesica Rey, a spokeswoman at the Economy Ministry, referred any questions to the the president’s office. Presidential spokesman Alfredo Scoccimarro wasn’t immediately available for comment.

Cuattromo is a former professor at the University of Buenos Aires who has served on the board of Grupo Galicia and also as a consultant at the World Bank. In 2013, he was appointed sub-secretary of macroeconomic programming by Economy Minister Axel Kicillof. Marrodan was named in 2013 as deputy manager of personnel at the securities regulator under Central Bank President Alejandro Vanoli.

In April, Fernandez appointed Barbara Domatto Conti, Alejandro Formento and Mariano Beltrano as directors.

Argentine bonds have returned 21.4 percent in the past year, the most in emerging markets, on speculation that a change of government in December will augur more market-friendly policies.

4. HOW DWINDLING RESERVES ARE A POSITIVE FOR ARGENTINE BONDHOLDERS (Bloomberg News)
By Charlie Devereux
September 8, 2015

*Cash shortage may pressure government to settle with holdouts
*Advisers for election front runner acknowledge need for deal

When Argentine President Cristina Fernandez de Kirchner hands over the reins in December, her successor may find a central bank running extremely low on cash. That could be good news for bondholders.

While gross reserves are $33.5 billion, after subtracting debt arrears, special drawing rights, dollars owed to importers, private deposits and a currency swap with China, the cash portion could be close to zero by year-end, according to Jefferies Group.

The silver lining for creditors is that dwindling reserves will prompt the next government to negotiate a solution to a decade-long legal battle with holdout hedge funds in order to regain access to international capital markets, said Andres Borenstein, an economist at Banco BTG Pactual. Advisers to leading presidential candidate Daniel Scioli are now publicly acknowledging the need to settle with investors led by billionaire Paul Singer’s Elliott Management Corp.

“Leaving aside whether there’s a political will to do it, we know that whoever comes along will need to negotiate because there are few reserves left,” Borenstein said in Buenos Aires. “If they had $100 billion in reserves there would be no hurry for the government to negotiate.”

Argentina’s dollar-denominated bonds due in 2033 have risen to their highest level in eight years after economist and adviser Miguel Bein appeared in an interview alongside Scioli and said a new government would have to negotiate with holdouts. The leading opposition candidate, Mauricio Macri, has also said he would talk with the hedge funds. The notes rose 0.9 cent to 106 cents on the dollar at 11:20 a.m. in New York.

Argentina defaulted for the second time in 13 years in 2014 after U.S. District Judge Thomas Griesa blocked the nation from making interest payments to holders of restructured bonds unless it pays the holdouts in full. Fernandez’s government has refused to comply with the ruling and calls the investors vultures.

The run up to the Oct. 25 presidential election is exacerbating the shortage of dollars as the government resists a devaluation of the peso to keep real wages high for voters. The peso has weakened just 8 percent this year, lagging neighbors including Brazil to Colombia where currencies have tumbled by about 30 percent.

Argentines are taking advantage of the overvalued peso to spend abroad, adding to the drain of dollars. Spending on credit cards jumped 58 percent in July from a year earlier.

The central bank, which uses a crawling peg system to control the currency, sold $1.4 billion in the currency market last month to support the peso.

Regaining access to credit markets by negotiating a settlement with holdouts won’t be enough, said Siobhan Morden, the head of Latin America fixed income strategy at Jefferies in New York. The next government will have to carry out structural reforms such as a devaluation and the elimination of utility subsidies in order to avoid a balance of payments crisis, she said.

Negotiating with the holdouts “is a given,” Morden said. “It really raises the stakes for an adjustment because to assume that the market will lend to you is a mistake. The market will not typically lend into bankruptcy.”

The government may buy itself some time by offering a debt swap ahead of a $6.3 billion maturity on Oct. 3, said Maximiliano Castillo, director of Buenos Aires-based consultancy ACM. He estimates that a new government will assume power with gross reserves of $29 billion, or $18 billion when subtracting the amount of Chinese yuan included from the currency swap.

“The fact that there’s such little wiggle room with reserve levels is generating incentives for the next government to seek rational negotiations and look for a quick solution,” Castillo said.

5. ARGENTINA’S SCIOLI VOWS TO KEEP OIL INCENTIVES IF ELECTED PRESIDENT (Reuters News)
8 September 2015

BUENOS AIRES, Sept 8 (Reuters) – Argentina’s ruling party presidential candidate, Daniel Scioli, on Tuesday promised to maintain financial incentives designed to bolster oil and gas production and help end the country’s reliance on energy imports if he wins October’s election.

Argentina’s next president will lead a country that sits atop some of the world’s largest untapped shale oil and gas resources, but which needs to attract an estimated $200 billion in investments over a decade to exploit the deposits.

“We will ensure that the stimulus in place for new gas and new oil continues,” stated the agreement signed by Scioli. Governors of Argentina’s 10 oil and gas producing regions and state-run energy firm YPF also signed the pledge.

“Given the volatility seen in oil markets in past months, we will establish a path for the price of oil used in the domestic market in a way that strengthens this key industry.”

President Cristina Fernandez’s government fixes the price for locally produced crude oil at about $77 per barrel, while oil currently trades below $50 on international markets. The high local price helps the earnings of producers and bolsters the tax revenues of oil and gas producing provinces.

Until the global rout on oil prices, Argentina’s domestic oil prices were far below the international price, a policy aimed at helping consumers. Oil and gas producing regions now want assurances the local price will remain above the market rate while prices remain in a trough.

Other incentives are in place. In January, the government unveiled a stimulus that guaranteed producers a maximum $3 per barrel subsidy when quarterly output exceeds a government-set base level. Exporters receive up to an additional $2 per barrel for every barrel of crude shipped abroad.

At stake in the Oct. 25 election is the direction Latin America’s No. 3 economy will take after eight years of interventionist policy under Fernandez.

Despite the incentives, state controls on the economy and unpredictable policymaking have deterred energy majors like Chevron Corp, Petronas and Total from making little more than foothold investments in Argentina’s nascent shale sector so far.

Scioli bills himself as the candidate of continuity, supporting gradual reforms toward more market-friendly policies rather than the wholesale change advocated by opposition frontrunner Mauricio Macri.

6. ARGENTINA’S SCIOLI VOWS TO SUSTAIN HIGH DOMESTIC OIL PRICES IF PRESIDENT (Platts Commodity News)
By Charles Newbery
8 September 2015

Buenos Aires (Platts)–8Sep2015/946 pm EDT/146 GMT Daniel Scioli, a front-runner to become the next president of Argentina, said Tuesday that if elected he would sustain high domestic oil prices and other policies to encourage exploration and production.

Scioli said he would “create conditions to ensure the profitability and sustainability of each project” in the sector, if he were to win the October 25 election.

Scioli, the governor of Buenos Aires province, spoke after signing an agreement with the governors of the Organization of Oil Producing States, or OFEPHI, to sustain the energy policies of the ruling party in power since 2003.

The governors had been calling on him to maintain domestic oil prices at between $63/b and $77/b as a way to encourage investment in rebuilding production, after more than a decade of decline. The governors also asked for assurances that he would sustain gas prices at $7.50/MMBtu for output from new developments.

Scioli, who is running on the ruling party’s ticket, vowed “continuity” in energy policies to help the country increase production at a time of global economic uncertainty.

Martin Buzzi, the governor of Chubut and presiding head of OFEPHI, said in a statement that the agreement includes keeping oil and gas production royalties at current levels of a minimum of 12% and sustaining energy prices at levels that spur investment.

“The country’s oil policy is here to stay,” Buzzi said.

He added that the pricing policy has allowed Argentina to amass a rig fleet that’s now the third largest in the Americas after the US and Canada, and ahead of Colombia, Brazil and Mexico.

In the agreement, mention is made to keeping state-run YPF, the country’s biggest energy company, as “a powerful tool for building our energy future” through the drilling for conventional and unconventional oil and gas resources. Argentina has among the largest shale resources in the world, and YPF was the first to put them into production in a partnership with Chevron.

The goal of the agreement is to achieve “energy sovereignty,” according to its wording.

After years of keeping a lid on energy prices, the ruling party reacted to a plunge in production by taking YPF under state control in 2012 and then peeling back energy price controls and offering incentives to revive drilling.

Indeed, after global oil prices plunged in the second half of 2014, the national government, which handles pricing issues, set the price at $63/b for heavier crudes and $77/b for lighter crudes in January. Oil refiners agreed to buy at these prices in exchange for rights to gradually increase pump prices. Diesel and gasoline prices are now the second highest in Latin America.

This policy has helped turn around a more than 35% decline in oil production between 1998 and 2014 and a 20% drop in gas production between 2004 and 2014.

Oil production rose 0.1% to 532,860 b/d in the first half of 2015 compared with 532,154 b/d in the year-earlier period, according to the Argentine Oil and Gas Institute, an industry group. Over the same period, gas production rose 2.8% to 116.9 million cu m/d from 113.7 million cu m/d.

7. PETROBRAS LOSES LICENSE TO ITS SECOND LARGEST ARGENTINA OIL FIELD (Platts Commodity News)
By Charles Newbery
8 September 2015

Buenos Aires (Platts)–8Sep2015/244 pm EDT/1844 GMT Petrobras Argentina Tuesday said the license for its second-biggest oil field in Argentina has expired and that legal action to secure an extension has not prospered.

The company, the seventh-biggest oil producer in Argentina, said its concession to operate Jaguel de los Machos in the south-central province of La Pampa ended Sunday, and the province declined to recognize an extension awarded by decree earlier in the year.

Petrobras Argentina said in a filing with the Buenos Aires Stock Exchange that it tired to sue the province to get the extension. But it said that the Supreme Court of Argentina said it was not within its capacities to intervene in the case. The company, a unit of Brazil’s state-led Petrobras, said while there is room to take legal action, it has had to hand over rights to develop the block to the province.

Jaguel de los Machos produces 4,600 b/d of oil and 221,000 cu m/d of gas, according to the Argentine Oil and Gas Institute, an industry group.

This means that the loss of the concession has cost Petrobras Argentina a third of its 14,000 b/d oil production and 3.5% of its 6.4 million cu m/d of gas output.

In a separate stock exchange filing, Buenos Aires-based oil producer Petroquimica Comodoro Rivadavia (PCR) said it has signed a deal to operate the block for the next year with the possibility of subsequent six-month extensions. PCR said it inked the contract with La Pampa’s state oil company Pampetrol.

Petrobras Argentina also has an operating license for the 25 de Mayo-Medanito Block in La Pampa until October 28, 2016, where it produces about 8,500 b/d of oil and 450,000 cu m/d of gas.

However, the La Pampa government has said it wants to find a new operator for that block too, probably through a tender.

In February, PCR got a 10-year extension for Medanito, its most productive block that it has been operating since 1992. As part of the deal, PCR agreed to farm in Pampetrol as a 20% partner for Medanito, starting in 2016 and to invest at least $216.25 million during the extension period.

Medanito produces around 5,300 b/d of crude and 850,000 cu m/d of gas. It is a different field than Petrobras Argentina’s 25 de Mayo-Medanito.

8. ARGENTINA GOVERNORS TO DISCUSS OIL PRICES WITH PRESIDENTIAL FRONTRUNNER (Platts Commodity News)
By Charles Newbery
8 September 2015

Buenos Aires (Platts)–8Sep2015/1019 am EDT/1419 GMT The governors of Argentina’s hydrocarbon-producing provinces will discuss oil and natural gas pricing later Tuesday with Daniel Scioli, a frontrunner to become the country’s next president, Neuquen Governor Jorge Sapag said.

“We must achieve the economic stability, increased investment and a greater flow of currency that will allow us to continue making investments in oil and gas,” Sapag said in a statement late Monday.

The governors of the Organization of Oil-Producing States (OFEPHI) will hold the meeting in Neuquen City.

They have said that they want to press on Scioli the importance of sustaining domestic oil prices at between $63/b and $77/b to encourage investment for rebuilding production after more than a decade of decline. The governors will also seek to sustain gas prices at $7.50/MMBtu for output from new developments.

“We want to ratify key points on energy for the country,” Sapag said of the meeting with Scioli.

Scioli, the governor of Buenos Aires province, is a favorite to win the October 25 presidential election for the ruling party.

After a decade of declining oil and gas production, the ruling party reacted in 2012 by taking YPF, the country’s biggest energy company, under state control and then peeling back energy price controls and offering incentives to revive drilling.

Indeed, after global oil prices plunged in the second half of 2014, the national government, which handles pricing issues, set the price at $63/b for heavier crudes and $77/b for lighter crudes in January.

Oil refiners agreed to buy at these prices in exchange for rights to gradually increase pump prices. Diesel and gasoline prices are now the second highest in Latin America.

Given that refiners get most of their crude locally, this makes it easier for the government to sustain the high prices. It also helps that the biggest refiner is YPF, with a nearly 60% share of diesel and gasoline sales. YPF is using the proceeds of the higher pump prices as a major source of funding for its $6-7 billion a year investment, the bulk of which is going on exploration and production.

A focus for YPF and other companies is on developing the country’s shale resources, estimated to be among the world’s greatest.

“We need clear rules so that we do not miss out on this opportunity for growth,” Sapag said of the unconventional resources.

He added that companies have drafted plans to invest $100 billion in gas projects over the next decade, including ExxonMobil, Shell and Total. With six unconventional gas projects, Argentina “can achieve energy self-sufficiency in the next few years,” he said.

The government’s policy of high wellhead prices has rekindled drilling activities, helping to turn around a more than 35% decline in oil production between 1998 and 2014 and a 20% drop in gas production between 2004 and 2014.

Oil production rose 0.1% to 532,860 b/d in the first half of 2015 compared with 532,154 b/d in the year-earlier period, according to the Argentine Oil and Gas Institute. Over the same period, gas production rose 2.8% to 116.9 million cu m/d from 113.7 million cu m/d.

9. REFINERY NEWS: COMODORO RIVADAVIA TO BUILD SMALL OIL REFINERY IN ARGENTINA (Platts Commodity News)
By Charles Newbery
8 September 2015

Buenos Aires (Platts)–8Sep2015/208 pm EDT/1808 GMT Refinery: Caleta Cordova, Argentina (proposed) Owner: Compania Argentina de Comodoro Rivadavia Overall capacity (b/d): 1,258 initial capacity Notes: Argentinian oil company Compania Argentina de Comodoro Rivadavia said Tuesday it plans to build a small oil refinery in southern Argentina.

The facility would have an initial crude processing capacity of 1,258 b/d, in line with other such plants in the country, the Buenos Aires-based company said in a filing with the Buenos Aires Stock Exchange.

Comodoro Rivadavia said the refinery would be built on company land in Caleta Cordova, a port city in Chubut, the country’s most productive oil province.

Instead of building from scratch, the company said it plans to purchase part of the facility from Polipetrol, a refiner in Lujan de Cuyo, in the western province of Mendoza.

Once installed, the refinery would produce diesel, fuel oil and intermediate fuel oil, as well as asphalts, the company said.

Comodoro Rivadavia declined to give the cost of the project, but said it would borrow 35% of the investment from Banco del Chubut, a bank owned by that province.

While a small refinery, it is the first such project in years in Argentina.

A number of companies built small refineries in the 2000s, encouraged by a government incentive program designed to expand refining capacity as a growing economy and rising car sales pushed up demand for diesel and gasoline. But several of the refineries ran into financial trouble as the government also put caps on product prices, making it harder to compete against imports also benefiting from tax breaks.

The situation started to change in 2014 when the government allowed refiners to raise prices in line with a policy of keeping domestic crude prices at between $63/b and $77/b, now higher than international reference prices. It also put a limit on diesel and gasoline imports in another bid to encourage oil production and refining.

As a result, Argentina went from having among the cheapest product prices in Latin America to the second highest, with gasoline prices averaging $1.36/liter, according to the latest data of GlobalPetrolPrices.com. Source: Company

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WEDNESDAY, SEPTEMBER 9TH

1. LULA THROWS WEIGHT BEHIND SCIOLI’S BID FOR ARGENTINA PRESIDENCY (Reuters News)

2. FINANCING SQUEEZE HURTS SOY SEED SALES IN ARGENTINA (Reuters News)

3. ARGENTINA’S LA PAMPA APPROVES, THEN REVOKES, PETROBRAS LICENSE EXTENSION (Business News Americas)

4. ARGENTINA: COUNTRY OUTLOOK (Economist Intelligence Unit – ViewsWire)

5. ARGENTINA FILM PORTRAYS THE CARDINAL JORGE BERGOGLIO’S LIFE BEFORE HE BECAME POPE FRANCIS
( The Washington Post)

6. THE POPE IS READY TO TRASH CAPITALISM TO MONEY-LOVING AMERICANS (Bloomberg News)

1. LULA THROWS WEIGHT BEHIND SCIOLI’S BID FOR ARGENTINA PRESIDENCY (Reuters News)
By Hugh Bronstein
September 9, 2015

Brazil’s popular but scandal-weary former leader Luiz Inacio Lula da Silva endorsed Argentina’s ruling party presidential candidate on Wednesday, shoring up Daniel Scioli’s credentials with the political left a month and a half before the election.

Scioli, governor of Buenos Aires, is from the same party as outgoing President Cristina Fernandez. He usually presents himself as more moderate than she, but Wednesday was an exception when he appeared at a rally with Fernandez and Lula.

“This is a state that is present in places where problems cannot be resolved by the markets,” Scioli said in introducing Lula, whose image has been dented this year by scandals involving his party.

Scioli normally strikes a less ideological tone while campaigning.

Fernandez, preceded as president by her late husband Nestor Kirchner, is part of a leftist Latin American bloc once led by Lula and the late Hugo Chavez of Venezuela. She is barred from seeking a third consecutive term in the Oct. 25 election.

“I hope that what started with the 2003 election of Kirchner, and that continued with the two elections that followed, can be concluded by electing once again the political program that transformed Argentina,” Lula, a gravely-voiced one-time factory worker, said.

He is credited with strengthening Brazil’s social safety net while allowing the country’s markets to flourish during his 2003 to 2011 administrations. Economic struggles under his hand-picked successor Dilma Rousseff have dulled some of Lula’s shine, but he remains the country’s most influential politician.

Even so, a corruption probe into Brazil’s state-run oil company Petroleo Brasileiro SA, or Petrobras, is straining Lula’s Workers’ Party.

Scioli promises to govern in a way reminiscent of Lula’s glory days. The governor has defended Fernandez’s interventionist economic policies and promised to continue her most popular welfare programs while he advocates gradual reforms toward more open markets.

Scioli is first in the opinion polls versus opposition leader Mauricio Macri, the business-friendly mayor of Buenos Aires. Scioli gives few details about his platform, but his aides use words like “flexibility” and “pragmatism” to say how his policies would differ from Fernandez’.

2. FINANCING SQUEEZE HURTS SOY SEED SALES IN ARGENTINA (Reuters News)
By Maximiliano Rizzi
9 September 2015

BUENOS AIRES, Sept 9 (Reuters) – Soy seed sales in Argentina are down as much as 40 percent compared with last year as tight finances prompt farmers to use up their seed stocks or buy on the cheaper black market, one of the world’s leading producers of enhanced soybeans said on Wednesday.

The decline comes even as farmers in Argentina, the world’s No. 1 exporter of soymeal, are expected to plant more soy than in last year’s record harvest as they shift away from corn.

Sagging international soy prices and high interest rates on bank loans because of rampant inflation are making it harder for farmers in Argentina to raise funds to purchase seeds.

Chicago Board of Trade November soybean futures have fallen 17 percent from their summer peaks. Prices bottomed out at the lowest September price for the new-crop soybean futures contract since 2006.

“This year, how to finance seed purchases is more important than the actual cost of the seed,” said Obdulio San Martin, regional commercial manager at Don Mario. The company says it had a 35 percent market share in South America in 2014.

Planting of the 2015/16 soy crop begins later this month.

In order to reduce outlays, San Martin said farmers were eating into seed reserves or buying on the black market, where farmers avoid paying royalties to companies like Monsanto Co , which develop genetically modified seeds.

Underscoring the financing squeeze facing farmers, nearly all wanted to pay for this year’s seeds after the crop is harvested, whereas four years ago they typically paid for half the seeds at the time of planting, San Martin said.

Corn seed sales were down by a similar figure, he said. A strong El Nino weather pattern in the final three months of 2015 is expected to start dumping torrential rains on Argentina’s grains belt from October, deterring farmers from planting the relatively high-cost grain.

Farmers are also looking ahead with uncertainty to October’s presidential election. The leading opposition candidate, Mauricio Macri, says he would abolish export quotas on corn and wheat. Ruling party candidate Daniel Scioli, who leads polls, has yet to outline his farm policy platform.

“We expect a sharp fall in corn seed sales, unless we see a change in the macro-economic environment or agricultural policy,” San Martin said.

3. ARGENTINA’S LA PAMPA APPROVES, THEN REVOKES, PETROBRAS LICENSE EXTENSION (Business News Americas)
8 September 2015

The government of Argentina’s La Pampa province forced Brazilian national oil company Petrobras to relinquish the Jagüel de los Machos E&P concession, the firm said in a securities filing.

Despite having granted Petrobras a 10-year extension for the license earlier in the year, the local legislature apparently changed its mind and voted to hand the concession over to provincial state-run energy firm Pampetrol.

The Petrobras concession expired September 6, after which the extension was supposed to have taken effect.

Instead, local oil company Petroquímica Comodoro Rivadavia (PCR) will now operate the license and pay royalties to Pampetrol, under an agreement signed by the two firms.

Pampetrol – which is to say, the provincial government – will receive three times as much in royalties under the new agreement as it did from Petrobras, which had operated the concession since 1990, according to local paper El Diario de La Pampa.

Another Petrobras-held concession in the province, 25 de Mayo-Medanito SE, will expire in October 2016.

As with Jagüel de los Machos, local authorities approved – and will now rescind – a 10-year extension of 25 de Mayo-Medanito SE once it expires.

PCR will operate Jagüel de los Machos until October 2016, when the local government will re-auction both concessions, the paper said.

The revocation of the Petrobras extensions, while good for the province’s coffers, epitomizes a common complaint among foreign operators in Argentina, which is that the so-called rules of the game are often unclear and subject to change.

The provincial governments are legally considered the owners of Argentina’s mineral resources and granted a great deal of autonomy in the awarding of hydrocarbon concessions – especially when compared to other oil-producing countries in the region, where the tender processes are more centralized and transparent.

Jagüel de los Machos accounts for half of La Pampa’s hydrocarbon royalties, according to the paper. Petrobras was Argentina’s sixth-leading oil and third-leading natural gas producer in June, according to data from the national energy department.

4. ARGENTINA: COUNTRY OUTLOOK (Economist Intelligence Unit – ViewsWire)
8 September 2015

FROM THE ECONOMIST INTELLIGENCE UNIT

POLITICAL STABILITY: With the general election scheduled for October 26th, the political outlook remains clouded by persistent economic weakness. Currency depreciation pressure has required ever-tighter foreign-exchange and import controls, and wage demands have skyrocketed amid rampant inflation. Partly reflecting ongoing economic turmoil, the election contest is shaping up to be one of the closest since the economic crisis of 2001-02. In this context–and given the country’s strong tradition of protest and powerful unions–risks to political stability will be high in the run-up to the election. This was evident in elections in Tucumán province in late August, where several dozen ballot boxes were burned and violent protests broke out amid claims of voter fraud. The Economist Intelligence Unit’s baseline forecast is that a more market-friendly administration will take office in December 2015, and that it work to reduce economic distortions. However, the adjustment process will be a difficult one, involving politically unpopular austerity measures, including a scaling back of fiscal expenditure. The risk of social unrest will therefore remain significant for much of the forecast period.

ELECTION WATCH: The presidential race ahead of the election in October is a close one, between the mayor of the capital, Buenos Aires, Mauricio Macri, and the governor of Buenos Aires province, Daniel Scioli. Mr Macri is the well-known founder and leader of the centre-right opposition Propuesta Republicana (Pro) party; Mr Scioli is a pragmatic, popular politician who has managed to remain a part of the ruling Frente para la Victoria (FV, a faction of the Peronist party), despite tricky relations with the president, Cristina Fernández de Kirchner. Mr Scioli has emerged from the August primaries as the frontrunner (and we assume he will win), but Mr Macri remains in a fairly close second place, having secured some crucial electoral alliances with centre-left parties that will give him the nationwide presence that he currently lacks (his Pro party is popular only in the capital). Mr Scioli has the backing of the president, which should help to cement his appeal among the 30% of voters that form the FV’s core support base. However, Mr Scioli earned Ms Fernández’s endorsement (and the benefits of incumbency, which are important in Argentina’s clientelist political system) by naming one of her closest allies as his vice-presidential running-mate. This could hamper Mr Scioli’s campaign, which has until now been aimed at attracting centrist voters by presenting him as a moderate consensus-seeker. Mr Macri, meanwhile, has chosen a fellow Pro member as his running-mate. This risks alienating voters outside the Pro’s Buenos Aires stronghold, but Mr Macri is betting that by refusing to ally with dissident Peronists he will be better able to present himself as a candidate of change not tainted by clientelism.

INTERNATIONAL RELATIONS: The Fernández government is looking to strengthen ties with China as it seeks new sources of foreign direct investment debt finance, and has sealed a series of investment accords with the country in recent months that should cement China’s position as a strategic partner. On top of these investment deals, in mid-2014 China agreed an US$11bn, three-year currency-swap arrangement that has bolstered the foreign reserves and given the government a lifeline 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 essentially useless recent attempts to resolve a series of disputes in order to access external credit. Among other things, these efforts included an agreement with the Paris Club to restructure defaulted bilateral debt and the resolution of a series of claims involving the World Bank’s International Centre for 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 arriving at 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 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 approaching and t
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