ARGENTINE UPDATE – Oct 15, 2015


1. BELLO: THE PERSISTENCE OF PERONISM (The Economist)

2. ARGENTINA REJECTS FINTECH’S BID TO BUY TELECOM ITALIA UNIT (Bloomberg News)

3. ARGENTINA’S SCIOLI CHOOSES `GOOD GREEK’ AS ECONOMY MINISTER (Bloomberg News)

4. ARGENTINA REGULATOR BLOCKS SALE OF TELECOM ITALIA UNIT (Reuters News)

5. ARGENTINA’S CARMAKERS MUST CONQUER NEW MARKETS: FIAT UNIT’S CHIEF (Reuters News)

6. ARGENTINA CANDIDATE SCIOLI TOUTS BATAKIS AS ECONOMY MINISTER (Reuters News)

7. ARGENTINA SAYS SEPT INFLATION 1.2 PCT, IN LINE WITH EXPECTATIONS (Reuters News)

8. ARGENTINA’S TELECOM REGULATOR DENIES TELECOM ITALIA’S DEAL TO SELL SOFORA (Nasdaq)

9. FINTECH TO APPEAL REGULATOR’S REJECTION OF TELECOM ARGENTINA DEAL, SAYS TELECOM ITALIA (Dow Jones Institutional News)

10. ARGENTINA REJECTS FINTECH’S ATTEMPT TO BUY TELECOM ARGENTINA (Dow Jones Institutional News)

11. CHINA’S SINOPEC SAYS LABOR CONFLICT HITS ARGENTINA OUTPUT (Platts Commodity News)

1. BELLO: THE PERSISTENCE OF PERONISM (The Economist)
17 October 2015

Argentina’s dominant political brand is defined by power, not ideology

IF YOU can’t beat them, join them. That seems to be the thinking of Mauricio Macri. On October 8th he unveiled a statue of Juan Perón, the army colonel who gave his name to what remains, more than four decades after his death, Argentina’s dominant political movement. What made this ceremony remarkable was that, of the three main presidential candidates in the election on October 25th, Mr Macri is the only one who is not a Peronist.

Argentina finds it hard to live without Peronism. Of the presidential elections since 1946 in which Peronists were permitted to run, they won nine, losing only two. They have governed for the past 12 years, under Cristina Fernández de Kirchner since 2007 and before that under Néstor Kirchner, her late husband. Ms Fernández’s candidate, Daniel Scioli, leads the opinion polls; Mr Macri trails by about ten percentage points.

Peronism is a brand rather than a party. Its official vehicle is called the Justicialist Party (PJ). To the extent that it has an ideology it is a vague blend of nationalism and labourism, expressed in the PJ’s founding “three banners” of political sovereignty, economic independence and social justice.

This has not prevented Peronist presidents swerving between radically opposed policies. Perón himself, when in power from 1946 to 1955, gained the lasting gratitude of Argentine workers by granting wage rises and paid holidays. But he also helped industrialists. He forged a coalition of labour unions, conservative provincial political bosses and nationalist army officers. It was the closest to fascism–of the corporatist, Mediterranean variety rather than the German version–that Latin America ever saw. Re-elected in 1973 after exile in Franco’s Spain, Perón tolerated violence as a political tactic, which contributed to a renewed breakdown of democracy and a bloodier military dictatorship in 1976.

In the 1990s Carlos Menem, another Peronist, pursued a very different course, opening the economy, privatising state companies and aligning Argentina with the United States. The Kirchners returned to economic nationalism and near-autarky, and extended welfare benefits to those thrown out of work by Argentina’s economic collapse in 2001.

Rather than ideas, Peronism embodies a consistent set of political emotions and practices. Perón declared in 1951: “The masses don’t think, the masses feel and they have more or less intuitive and organised reactions. Who produces those reactions? Their leader.” His second wife, Eva Duarte, touched the hearts of the masses. Ms Fernández has proved to be an accomplished disciple: she has ruthlessly pursued popularity by postponing inevitable economic belt-tightening, by exploiting her widowhood and by associating herself with Pope Francis, an Argentine who has Peronist roots.

Sergio Berensztein, a political scientist, says that today Peronism is “a conception of politics–the idea of power as an end in itself”. That makes it like Mexico’s PRI or Brazil’s PMDB, the permanent holder of the balance of power in Brasília. Its exercise of power is characterised by the strong leader and by control of the Argentine street. Almost all Peronist presidents have concentrated power in their own hands, brooking no internal rivals. Mr Scioli, the governor of Buenos Aires province, has often had to bite his tongue to keep the backing of Ms Fernández. But nobody will be surprised if he breaks with her and many of her policies if he reaches the Casa Rosada, the presidential palace.

This exclusionary leadership, together with the ideological shifts, has contributed to Argentina’s notorious political and economic instability. It has also meant that Peronism itself has become increasingly fragmented. This is the fourth consecutive election that has seen two or three Peronist candidates. If that has not mattered, it is partly because the Peronists’ historical rivals, the Radicals, have all but disappeared, but mainly because the Kirchners had the good fortune to exercise power when high world prices for Argentina’s farm exports led to rapid economic growth, rising wages and a boom in middle-class consumption.

But now the economy has stalled. Whoever wins will have to devalue and cut subsidies. Mr Scioli seems tantalisingly close to the 40% and ten-point lead he needs to avoid a run-off. He is the favourite. But he is finding it hard to woo the middle class, which has fallen out of love with Ms Fernández. Mr Macri may have a chance, if he can only poach votes from the third candidate, Sergio Massa, a dissident Peronist. The Casa Rosada, it seems, is worth a statue to the founder of the most protean of political movements.

2. ARGENTINA REJECTS FINTECH’S BID TO BUY TELECOM ITALIA UNIT (Bloomberg News)
By Pablo Rosendo Gonzalez and Daniele Lepido
October 16, 2015

*Regulators rejected deal in unanimous decision by board
*Telecom Italia says it has `wide time margin, guarantees’

Argentine regulators rejected a bid by Mexican financier David Martinez to buy a controlling stake in Telecom Argentina SA from Telecom Italia SpA, arguing that his Fintech Group isn’t qualified to run a telecommunications business in the South American nation.

The Aftic regulator unanimously rejected the proposal for Fintech to buy a 68 percent holding in Sofora Telecomunicaciones, the company Telecom Italia uses to control Telecom Argentina. Fintech, an investment fund, couldn’t guarantee the normal functioning of a telecommunications company, according to the regulator.

“Fintech Telecom LLC was incorporated in Delaware less than a month before Telecom Italia accepted the bid,” Aftic said in its statement on Thursday. “It lacks expertise and qualifications to run the company.”

Telecom Italia struck the deal in November 2013 on the Argentine sale. After failing to win regulatory approval, Telecom Italia agreed in October 2014 to give Martinez 30 months to complete the purchase, at the same time transferring a 17 percent holding in Sofora to Fintech. The original deal was valued at about $960 million.

Martinez and a local representative of Fintech in Argentina didn’t reply to calls and e-mails seeking comment. In a statement, Telecom Italia said it has “wide time margin and guarantees” in the deal. If the sale of a controlling stake in Sofora to Fintech cannot be completed by April 29, 2017, Telecom Italia can seek another buyer, it said.

Telecom Argentina is one of the divestments sought by Telecom Italia Chief Executive Officer Marco Patuano in his strategic plan to cut debt and to restore the carrier’s investment grade. More recently, Telecom Italia is working with Deutsche Bank AG to sell its 1.6 billion-euro ($1.8 billion) stake in wireless-tower unit Inwit SpA, people familiar with the matter said last week. Telecom Italia had almost 27 billion euros in net debt at the end of June. French media company Vivendi SA this year became its largest shareholder.

Telecom Italia shares traded 0.5 percent higher at 1.06 euros as of 9:04 a.m. in Milan.

Martinez, 58, helped restructure corporate debt after Argentina’s 2001 economic crisis and currently owns a minority stake in Argentine cable television operator Cablevision SA as well as interests in the energy industry. He has also filed briefs in support of the Argentine government’s position in a battle with holdout creditors.

3. ARGENTINA’S SCIOLI CHOOSES `GOOD GREEK’ AS ECONOMY MINISTER (Bloomberg News)
By Charlie Devereux
October 15, 2015

*Batakis chosen after heading economy in Buenos Aires province
*Batakis returned province to fiscal surplus in 2013 and 2014

Daniel Scioli, the ruling party candidate and front runner ahead of presidential elections on Oct. 25, said today he would name Silvina Batakis as his economy minister if he wins.

Batakis has served as economy minister for Buenos Aires province under Scioli’s governorship since 2011, managing to post a surplus in 2013 and 2014 after several years of deficits by carrying out a tax reform. Scioli frequently lauds her achievements, calling her the “Good Greek,” in reference to her cultural roots.

“Silvina has done a formidable job because the province of Buenos Aires seemed impossible, unviable,” Scioli said in an interview alongside Batakis on local TV station Channel 13.

Batakis, 46, studied economics at La Plata university and has a master in environmental economics from the University of York in the U.K.

Scioli, of President Cristina Fernandez de Kirchner’s political alliance, leads opposition candidates Mauricio Macri and Sergio Massa in polls ahead of the Oct. 25 vote. Scioli had 38.4 percent of intended votes against 28.8 percent for Macri and 20.5 percent for Massa, according to a poll of 1,200 people carried out by OPSM Sept. 25-Oct. 8.

4. ARGENTINA REGULATOR BLOCKS SALE OF TELECOM ITALIA UNIT (Reuters News)
By Nicolas Misculin and Valentina Za
October 16, 2015

Oct 16 (Reuters) – Argentina’s telecoms regulator has blocked the sale of Telecom Italia’s local business to investment firm Fintech, halting a $960 million deal that could help the Italian phone group cut its large debt.

Regulator AFTIC said late on Thursday that Fintech was “not in a position to operate and take control” of Telecom Argentina .

“Fintech has demonstrated neither experience nor expertise,” AFTIC said.

Telecom Italia said on Friday that Fintech had indicated it planned to appeal against the decision.

Shares in Telecom Italia shrugged off the news and were up 0.6 percent by 0724 GMT in line with Italy’s blue-chip stock index.

“In our view this represents a slight setback in Telecom Italia’s efforts to sell assets and raise cash in order to reduce debt,” Haitong Research said in a note.

The former Italian telecoms monopoly had 27 billion euros ($30.7 billion) in net debt at mid-year.

Telecom Italia agreed in November 2013 to sell its controlling stake in Telecom Argentina’s holding company Sofora to Fintech, the investment vehicle of Mexican financier David Martinez, for $960 million.

A 17 percent stake in Sofora was transferred to Fintech in October last year for $216 million, while the remaining 51 percent was to be sold after a green light from the regulator.

Under the terms of the accord, Telecom Italia and Fintech have until the end of April 2017 to close the sale.

If they fail to do so, Telecom has a six-month option to buy back the 17 percent already sold and attempt to sell the remaining 51 percent to a third party. Fintech had guaranteed Telecom must pocket at least $630.6 million for the deal.

If a sale to a different investor is not completed by the end of October 2019, Fintech will have to pay Telecom Italia $175 million. Telecom will still have six months to buy back the minority stake.

“Clearly the best option would be the transaction with Fintech as initially agreed,” Haitong said.

“That seems now a tougher scenario to materialize and although we expect Telecom Italia to give Fintech more time to try to convince local authorities over its capacity to acquire the asset, one could not exclude the possibility of TI trying to find other potential bidders for the asset.”

Telecom Italia’s board meets on Friday to discuss possible investments to develop a fibre-optic network.

5. ARGENTINA’S CARMAKERS MUST CONQUER NEW MARKETS: FIAT UNIT’S CHIEF (Reuters News)
By Jorge Otaola
October 15, 2015

Argentina’s automobile industry must improve its competitiveness in the wake of Brazil’s currency devaluation and look for new markets in Europe and the Pacific, the president of Fiat Argentina Cristiano Rattazzi said on Thursday.

Argentina and Brazil have made policy agreements over bilateral car trade in the last few years but the devaluation of the real has nevertheless hurt demand for Argentine products in Brazil and made Brazilian exports cheaper in other markets.

“We are in a situation similar to the end of the 1990s when Brazil devalued violently and we ended up totally lacking competitiveness with respect not only to Brazil but also to other countries,” Rattazzi told Reuters on the sidelines of a conference hosted by IDEA, Argentina’s Business Development Institute.

“Clearly we need to re-examine our competitiveness, because we likely cannot live with it as it is. We need to return to the world, and strike a deal with the Pacific area or Europe or both,” he said.

Argentine car production dropped 8.3 percent in September compared with the same month a year ago due to a 27.3 percent plunge in exports, the ADEFA automobile association said.

Brazilian demand for Argentine cars is down more than 30 percent in 2015 compared with the previous year, ADEFA said.

Rattazzi said Argentina’s car industry was also struggling with high inflation. Economists estimate that consumer prices are rising about 25 percent annually.

“Inflation is a drug in the system and we have to battle it hard to end it,” he said.

Meanwhile, a drop in production means car factories are likely to continue to suspend workers, Rattazzi said.

“The suspensions at carmakers will depend on the relationship with Brazil but there will certainly be some (new) suspensions,” he said.

Argentina holds a presidential election on Oct. 25, after eight years of interventionist policies by incumbent Cristina Fernandez that have sparked rampant inflation.

6. ARGENTINA CANDIDATE SCIOLI TOUTS BATAKIS AS ECONOMY MINISTER (Reuters News)
By Richard Lough
October 15, 2015

Argentina’s ruling party candidate Daniel Scioli said on Thursday he would appoint his trusted economy minister in the province of Buenos Aires to take the same role on a national level if he wins the Oct. 25 presidential election.

The next government will inherit a sovereign debt default, an acute dollar shortage, double-digit inflation and a gaping fiscal deficit. Analysts said Scioli’s comments would be viewed positively by financial markets.

Silvina Batakis, largely unknown outside of Argentina, took the helm of Buenos Aires province economy ministry in December 2011 and last year turned its chronic fiscal deficit into surplus, partly via tax reform.

“Silvina has done wonderful job,” Scioli said in an interview on local TV station Channel 13.

At stake in this month’s vote is the pace and depth of reforms to liberalize Latin America’s No. 3 economy and smooth its return to global credit markets after President Cristina Fernandez’s government defaulted last year.

Scioli, a moderate from the broad Peronist movement, talks of “gradual change”, promising pro-business policies to spur growth. But he rejects dismantling social welfare policies and worker rights measures that are popular with Fernandez’s core supporters.

Macri says investment and foreign financing will not flow into Argentina until currency and trade controls are dismantled, and promises swift reforms.

“We know there are things to correct,” Batakis said on a local television show on Wednesday night, adding it was clear Argentina needed to undertake structural reforms.

Echoing Scioli, she stressed that shock measures like devaluing the peso were not the solution. She said she would allow the central bank to continue managing the exchange rate rather than letting it float.

“We want competitiveness, and for this we need to resolve the structural problems, thinking in the medium and long term.”

Argentina’s fiscal deficit will widen sharply to 4.2 percent of gross domestic product this year from 2.5 percent in 2014 as spending outpaces revenue during the election year, according to a forecast by Jefferies.

“The fact she conducted a fiscal adjustment in the province so that it now has a surplus should be a positive from a market perspective,” said Ignacio Labaqui at consultancy Medley Global Advisors.

7. ARGENTINA SAYS SEPT INFLATION 1.2 PCT, IN LINE WITH EXPECTATIONS (Reuters News)
By Hugh Bronstein
October 15, 2015

Oct 15 (Reuters) – Argentine consumer prices rose 1.2 percent in September, official data showed on Thursday, a figure in line with market expectations for the report.

In the 12 months through September, Argentine inflation was 14.4 percent, the government said in a statement. So far in 2015, consumer prices are up 10.7 percent, it said.

Private economists say official inflation data is routinely underestimated. They see actual inflation running at over 25 percent annually.

8. ARGENTINA’S TELECOM REGULATOR DENIES TELECOM ITALIA’S DEAL TO SELL SOFORA (Nasdaq)
October 15, 2015

(RTTNews.com) – Telecom Italia’s ([TIAOF.PK, TI) deal to sell its Sofora Telecomunicaciones business under Telecom Argentina to Fintech Telecom LLC was blocked on Friday by Argentia’s telecom regulator saying that Fintech lacks experience and expertise.

The deal was originally signed in November 2013 for $960 million, with an expected closing in April 2017. Fintech, an investment vehicle financed by David Martinez, a Mexican businessman, was planning to acquire 68 percent of Sofora.

The regulatory board noted that Fintech was incorporated in the Delaware on October 18, 2013, less than a month before Telecom Italia accepted the offer. In its decision, the Board said if the deal is approved the control of licenses of Telecom Argentina will be in the hands of investment companies.

9. FINTECH TO APPEAL REGULATOR’S REJECTION OF TELECOM ARGENTINA DEAL, SAYS TELECOM ITALIA (Dow Jones Institutional News)
By Manuela Mesco
16 October 2015

MILAN–Investment firm Fintech Advisory will appeal the decision by Argentina’s telecommunications regulator to reject its plan to buy Telecom Argentina from Telecom Italia, the Italian operator said Friday.

The sale, worth $960 million, was first announced in 2013.

Fintech wasn’t immediately available for comment.

Telecom Italia said under the terms of its agreement with Fintech it could look for another buyer if the sale wasn’t finalized by April 2017. In such a case, according to the terms, Telecom Italia would be guaranteed to receive at least $630.6 million in proceeds from any future sale to another buyer.

If Telecom Italia is unable to find another buyer, it would get $175 million from Fintech and the agreement would be terminated, the Italian operator added. It would also have the chance to buy back a 17% stake in the holding company that controls Telecom Argentina, Sofora Telecomunicaciones SA, which it sold to Fintech earlier as part of the deal.

In November 2013, Fintech agreed to pay $859.5 million for Telecom Italia’s 68% stake in Sofora. Under the agreement, Fintech said it also would pay $100.5 million for Telecom Italia to provide technical support to Telecom Argentina and other services for up to three years, among other conditions.

The sale was part of Telecom Italia’s effort to raise about EUR4 billion ($4.57 billion) by 2016 to bring down its EUR27 billion of debt.

Argentina’s regulator said on Thursday it had rejected the deal. It said that Fintech lacked experience in the telecommunications industry and that approving the deal would have left Telecom Argentina “in the hands of a company comprised merely of investors.”

10. ARGENTINA REJECTS FINTECH’S ATTEMPT TO BUY TELECOM ARGENTINA (Dow Jones Institutional News)
By Taos Turner
15 October 2015

BUENOS AIRES–Argentina’s government on Thursday rejected plans by the investment group Fintech Advisory to buy Telecom Argentina from Telecom Italia for $960 million.

The decision comes nearly two years after the offer was made by Fintech, which is run by Mexican investor and distressed-asset specialist David Martinez.

Argentina’s federal communications agency said in a statement that Fintech lacked experience in the telecommunications industry and that approving the deal would have left Telecom Argentina “in the hands of a company comprised merely of investors.”

Neither Telecom Italia nor Mr. Martinez could be reached immediately for comment.

In an interview in 2013, Mr. Martinez described Argentina as a country of “incredible long-term growth opportunities.” He also said investing in an emerging market like Argentina entailed risk. Overcoming regulatory issues and other challenges “involves talking to the government and negotiating,” he said. “These environments are difficult and challenging but that doesn’t mean those bottlenecks can’t be overcome. I’m quite confident they will.”

Argentine officials did not respond to a request for comment and it was unclear why they took so long to reject the deal. “The fact that it took two years to make this decision raises questions,” said Enrique Carrier, a Buenos Aires-based telecommunications analyst. “This is taking place two months before a new government comes into power.”

Faced with term limits, Argentine President Cristina Kirchner is leaving office in December. Mr. Carrier said the deal could end up being litigated in court and eventually decided by an incoming administration.

Mr. Martinez holds a 40% stake in Argentine cable-TV operator Cablevision, a unit majority-owned by Grupo Clarin, Argentina’s biggest multimedia company. Mrs. Kirchner, who has longed accused the group of “coup-mongering,” approved a law in 2009 aimed at dismantling the group and reducing its influence.

11. CHINA’S SINOPEC SAYS LABOR CONFLICT HITS ARGENTINA OUTPUT (Platts Commodity News)
By Charles Newbery
15 October 2015

Buenos Aires (Platts)–15Oct2015/926 pm EDT/126 GMT China’s Sinopec has halted some of its oil and natural gas production in southern Argentina as union workers stop operations at a field.

The Sinopec Argentina Exploration unit said the workers took control of its Las Heras 3 field and related facilities in the province of Santa Cruz.

“This is affecting the production of oil and gas,” it said in a statement late Wednesday.

Sinopec said the conflict started October 8, led by Ruben Uribe, a director of the Union of Private Oil and Gas Workers in Santa Cruz.

The company said the conflict has started to cut its oil production by about 7,000 b/d and gas by 190,000 cu m/d due to a lack of storage capacity.

The union could not be reached for comment.

Sinopec produces 28,800 b/d of crude in Argentina, or 5.4% of the 536,000 b/d national total, and 2.2 million cu m/d of gas, or 1.8% of the 118 million cu m/d national total. Most of its production is in the south.

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