12. VOLKSWAGEN TO RECALL AROUND 17,000 VEHICLES IN BRAZIL (Dow Jones Institutional News)






By Andrés Oppenheimer
October 21, 2015

Poverty has grown under President Cristina Fernández
Argentina is among countries growing the least in Latin America
The winner of Sunday’s presidential election will have to adopt belt-tightening measures

Argentina’s President Cristina Fernández de Kirchner still enjoys relatively high popularity rates thanks to an artificially inflated economy, but she may go down in history as one of Argentina’s most disastrous presidents ever.

Fernández, who will start her final weeks in office after Sunday’s presidential elections, has performed an economic miracle in reverse: Despite inheriting the country’s biggest economic bonanza in recent history, thanks to record prices for Argentina’s commodity exports, she will leave Argentina poorer than before.

There is no economist in the world who can dispute this: When she took office in 2007, Argentina’s economy was growing at 8 percent annually, and was one of the most rapidly growing economies in the world.

This year, Argentina’s economy is stagnant at 0.4 percent, and will contract by 0.7 percent in 2016, according to International Monetary Fund (IMF) estimates. Alongside Venezuela and Brazil, it’s Latin America’s worst performing economy.

The percentage of Argentines living in poverty has risen from 27.9 percent of the population in 2007 to 28.7 percent in 2014, according to Argentina’s Catholic University’s Social Debt Observatory. The Fernández government stopped releasing poverty figures two years ago.

When it comes to inflation, Argentina changed its way of calculating inflation in 2007. Since then, the government has estimated inflation to run at about 10 percent a year, while international financial institutions and private economists calculate it at 27 percent.

But the saddest fact is that Argentina, which was one of the world’s most advanced and best educated countries early in the 20th century, is now ranking near the bottom of international education, innovation and competitiveness rankings.

Argentina now ranks 59th among the 65 countries from around the world that participated in the PISA standardized test of 15-year-old students. In science and technology, despite the country’s wealth of individual talents, Argentina registered only 81 international patents last year, compared to South Korea’s 18,200, according to the U.S. Office of Patents and Trademarks.

In the World Economic Forum’s 2014-2015 Global Competitiveness ranking of 144 countries, Argentina ranks 104 in overall competitiveness, 138 in protection of property rights, 127 in irregular payments and bribes, 142 in wastefulness of government spending, 143 in favoritism in government decisions, 135 in government transparency, 133 in reliability of police services and 138 in ethical behavior of firms.

And yet, polls show that nearly 40 percent of Argentines are supporting government-backed candidate Daniel Scioli in Sunday’s vote, which could be enough for him to win with a divided opposition.

How can one explain that more than a third of Argentines support the government candidate, despite Argentina’s dramatic involution?

Part of it is because the government is giving cash subsidies to millions of people and has increased the number of public employees by 42 percent, to 1.7 million people. Part of it is because the government controls much of the media, and its propaganda machine has fooled many into thinking that the country has been better off under Fernández.

And part of it is — as Nobel prize winner Mario Vargas Llosa told me two weeks ago — due to Argentina’s “persistence in making mistakes, which seems to be an Argentine vocation.”

My opinion: Whether Scioli wins or loses on Sunday, Argentina is nearing its hour of truth. With an economy deeply in the red, continued capital flight, and simultaneous economic downturns in China and Brazil, Argentina’s biggest export markets, whoever wins the election will have to carry out painful economic adjustments.

By then, Fernández will be out of office, fighting to avoid legal prosecution on massive government corruption charges and possible wrongdoing in cases such as the mysterious death of government prosecutor Alberto Nisman, and hoping to influence the future government through the judiciary, congress and other institutions she now controls.

But when the belt-tightening begins, many Argentines will realize that she has squandered her country’s economic bonanza in a populist fiesta, and that she has been one of her country’s worst presidents in recent memory.

By Taos Turner
October 21, 2015

Candidate endorsed by President Cristina Kirchner suggests he will take a more conciliatory stance toward U.S.

BUENOS AIRES— Daniel Scioli, the front-runner in Sunday’s Argentine presidential election, comes from a populist ruling party that revels in defying the U.S.

But while reaping the benefits that accompany President Cristina Kirchner’s endorsement, Mr. Scioli is quietly indicating he would welcome foreign investors and settle a dispute with U.S. bondholders that has kept Argentina from tapping global credit markets.

Mr. Scioli recently tweeted a photo of himself with U.S. Ambassador Noah Mamet, who has never met with Mrs. Kirchner. His aides have been conversing with the U.S. Drug Enforcement Administration, which sharply reduced its Buenos Aires staff since Mrs. Kirchner curbed her government’s cooperation.

Such evidence of a more conciliatory stance toward the U.S. has caused grumbling among Mrs. Kirchner’s top aides, who want Mr. Scioli to closely adhere to her policies should he win. Argentina’s constitution bars her from a third term.

‘Daniel wants Argentina to be a normal country—to be free of the things that make it not normal.’
—Alejandro Morales, an adviser to Mr. Scioli

Under Mrs. Kirchner, Argentina has allied itself with Venezuela, Russia and other countries challenging U.S. interests. Her government has intervened in the economy, expropriated foreign-owned firms and ignored a U.S. court order to pay what could amount to more than $1.8 billion to hedge funds.

“Clearly, he’s not one of them, but he doesn’t say it,” political analyst Federico Thomsen said in reference to Mr. Scioli’s differences with Mrs. Kirchner’s populist Peronist movement.

Throughout the campaign, Mr. Scioli has publicly remained at the president’s side, avoiding statements that would alienate the far-left part of her base, which views him with distrust.

But the potential cabinet members Mr. Scioli has revealed are considered distant from Mrs. Kirchner, said Ricardo Romano, a prominent Peronist who was deputy chief of staff for former President Carlos Menem. “The disclosure of his would-be cabinet was a pre-emptive move to avoid potential interference from Mrs. Kirchner,” he said.

So far the strategy appears to be working. Mr. Scioli, the 58-year-old governor of Buenos Aires province and home to nearly 40% of the country’s population, is the Peronists’ best hope of retaining the presidency. The scion of a once-prominent business family, he is leading a field of three major candidates ahead of a first round of voting, drawing 38% support, according to a recent poll by Management & Fit. His main challenger, Buenos Aires’s market-friendly Mayor Mauricio Macri, is in second with 29%. Sergio Massa, a dissident Peronist who broke with Mrs. Kirchner, trails at 21%. To win outright and avoid a November runoff, Mr. Scioli would need at least 40% of the vote and a minimum 10-point lead over Mr. Macri.

‘I don’t think there’s much ideology there. Look at his track record—he’s been with everybody. ’
—Political analyst Federico Thomsen

Though Mr. Scioli was a no-show at a presidential debate earlier this month and gives speeches short on details, his aides and close allies have said he is pondering a new direction for Argentina, both in economic terms and in its relations with Washington.

“Daniel wants Argentina to be a normal country—to be free of the things that make it not normal,” said Alejandro Morales, an aide, referring to rigid currency controls and Latin America’s second highest inflation rate after Venezuela’s.

An ally, Juan Manuel Urtubey, the governor of Salta province, recently told business leaders in New York that China’s economic slowdown demands a range of reforms here, including better relations with Washington. “With Daniel Scioli as president, these things are possible,” Mr. Urtubey said.

Economists say a sharp shift may be unavoidable: Foreign reserves are set to run out just as the new president takes office in December. Argentina’s closest trading partner, Brazil, is mired in its worst recession in 25 years, and the economy here is on track to contract 0.7% next year.

Mr. Scioli’s advisers say he would cut back on costly utility subsidies, incentivize exports and overhaul a statistics agency that economists accuse of doctoring inflation data. It remains unclear how fast he would move on those plans.

In brief interviews with The Wall Street Journal, Mr. Scioli wouldn’t say how his presidency might differ from Mrs. Kirchner’s. “They are phases of the same project,” he said, implying his administration would continue with her policies.

Argentina’s Presidential Candidates
Meet the top contenders in Sunday’s election

Daniel Scioli
58 years old
Coalition: Victory Front
VP: Carlos Zannini

A former speedboat racing champion and now the governor of Argentina’s biggest province, Daniel Scioli was vice president from 2003-2007. As the ruling party candidate, he has called for continuity.

Mauricio Macri
56 years old
Coalition: Cambiemos
VP: Gabriela Michetti

A former Boca Juniors soccer club president and now the mayor of Argentina’s capital city, Mauricio Macri has long led the calls for changing Argentina’s economic and foreign policies.

Sergio Massa
43 years old
Coalition: United for a New Alternative
VP: Gustavo Sáenz

A mayor and former cabinet chief for President Cristina Kirchner, Sergio Massa later turned against her policies and has called for putting corrupt politicians in jail.

Those who have closely followed his career describe him as enigmatic, or at least not given to bold policy pronouncements.

“You have to interpret him, guess what he’s saying and look at his gestures,” said Pablo Ibáñez, co-author of “Secret Scioli,” a biography highlighting his penchant for vague pronouncements that reveal little.

A former speedboat racing champion who lost his right arm in a crash, Mr. Scioli entered politics in the 1990s, serving in Congress and allying with Mr. Menem, a darling of Wall Street. From 2003 to 2007, he was vice president to Néstor Kirchner, Mrs. Kirchner’s late husband, who helped bury U.S. plans for a hemispherewide free-trade zone.

“I don’t think there’s much ideology there,” said Mr. Thomsen, the analyst. “Look at his track record—he’s been with everybody.”

Critics of Mr. Scioli say he is more interested in marketing his image than in managing the country.

“The only ministry that works in the province is the publicity ministry,” said Mr. Massa, one of his rival presidential candidates.

When heavy flooding hit the province in August, Mr. Scioli flew to Italy—returning only after photographs of him in first class hit the press while much of the province was underwater.

He dedicated just 5% of public spending to infrastructure from 2008 through 2013, far less than any other Argentine province, according to Iaraf, a think tank. Standard & Poor’s recently said in a report that the province’s financial management was weak and lacked planning.

But analysts at both S&P and Moody’s Investors Service said in interviews that Mr. Scioli’s economic team has been professional and transparent. They also noted that what one of them called Mrs. Kirchner’s “haphazard” macroeconomic policies hamstrung Mr. Scioli with rampant inflation and other hurdles.

London-based consultancy Capital Economics said in a research note that Mr. Scioli, who became governor in 2007, had “impressively” turned a substantial fiscal deficit into a surplus. His plan to appoint Silvina Batakis—currently the provincial finance chief—to run Argentina’s economy should he win is also seen as a positive sign, it said.

Gustavo Marangoni, an adviser who is president of one of Argentina’s biggest public banks, says Mr. Scioli has a solid business sense.

“Daniel understands the mentality of businessmen very well because he comes from a business family,” he said.

By Lucinda Elliott
October 22, 2015

Fund managers are sticking by their positions as country approaches a change of government.

As the Kirchner years draw to a close, many investors are convinced there is nowhere to go but up for Argentina. Ahead of the October 25 presidential election, a survey by FT Confidential Research shows those fund managers with exposure to Argentine equities are holding on to their investments or even planning to buy more.

But fund managers with no exposure are still not ready to take the plunge, the survey found.

Eight out of 20 equity fund mangers polled during the third quarter of this year have exposure to Argentina, unchanged from three months ago and up from six at the beginning of the year.

And while allocations are still shy in comparison with the other five Latin American markets surveyed, a small cadre of investors plan to step up their exposure in the final quarter of this year, regardless of the election outcome. Nine investors plan to hold Argentine shares in their portfolio in the fourth quarter.

There is increasing confidence that Daniel Scioli of the ruling Peronist party, the frontrunner in opinion polls, will win the presidency and seek a speedy solution to a long-running and bitter dispute with a group of holdout US hedge funds that has locked Argentina out of global capital markets for a decade, and that he will begin the macroeconomic reforms needed to fix Argentina’s stagnant economy.

“Scioli winning the election is priced in, and the stocks I own can’t go down much further; so I’m in,” said one portfolio manager based in Santiago who manages $500m dedicated to Latam equities.

Fund managers polled singled out what they said were attractive investments including Argentine banks, real estate companies and online retailer Mercado Libre.

Equity allocations to Argentina vs benchmark — number of respondents

Q1 2015
Q2 2015
Q3 2015
Q4 2015*
Equal weight
No investment
Source: FT Confidential Research. *planned allocations

“All the long-only guys are going into Argentina, so I’m tempted to follow,” said one New York-based manager of a leading international fund. “The hedge fund guys have sold out of Argentina recently creating some buying opportunities.”

Nevertheless, 11 of the 20 managers polled said they would continue to stay away from Argentine stocks after the election, suggesting optimism about the changes ahead is not undiluted.

October 21, 2015

First lady leaves a royal mess for the next president in Buenos Aires

Argentina is passing from an age of easy prosperity under President Cristina Fernández to more penurious years without her. Since 2004, the country has enjoyed a virtuous cycle of economic growth and social progress. The “victorious decade”, as the strident Ms Fernández likes to trumpet it, is largely thanks to a sovereign debt default, which remains unresolved, and a lucky commodity price boom, which has turned to bust. How to deal with the coming downturn, the legacy of the 2002 default, and the heightened populism Ms Fernández leaves behind are the main challenges facing the victor of Sunday’s presidential election (Ms Fernández cannot run for a third term). The universal lesson is that the adjustment Argentina needs to make is best done quickly; delays only increase costs, especially to the poor.

Two candidates lead the field. Both have stressed, albeit in deliberately vague terms, the need to address growing economic problems. These include currency restrictions and 20 per cent inflation, as well as settling with holdout creditors. These New York-based hedge funds have cloaked themselves in the theology of contract law and won a technical ruling that legally bars Argentina from international capital markets — and just when the country needs extra external financial support.

First in the running is Daniel Scioli, the “continuity candidate”, who has campaigned on a programme of gradual change. As a leading light in the ruling Peronist party, he also has Ms Fernandez’s blessing. That makes his position similar to that of Dilma Rousseff, Brazil’s president, who won power in 2010 after she also was anointed by her predecessor. Like Ms Rousseff, Mr Scioli’s biggest draw is “governability”: the notion that, as a Peronist, he can manage Congress best. Yet that is also Mr Scioli’s biggest drawback — like Ms Rousseff in neighbouring Brazil. Today, it is her Workers party that is blocking the economic measures the country needs to deal with the commodity bust.

Close behind lies Maurico Macri, the “turnround candidate”. The centre-right mayor of Buenos Aires has campaigned on a platform closer to shock treatment, and his biggest selling point, as a non-Peronist, is “credibility”. But this is also his biggest drawback: as an outsider, Mr Macri may be less able to pass reforms. Again, Brazil provides a mirror: Mr Macri’s position is similar to that of Aécio Neves, the centre-right candidate who lost the 2014 election partly because his outsider’s message of economic cold turkey alienated voters, even though Ms Rousseff later took many of its ideas.

Mr Scioli may gain enough votes on Sunday to win outright, rather than face a run-off in November. But whoever becomes president, the need for change is pressing. Government spending has doubled in just five years to 40 per cent of output. However socially progressive that may be, Argentina can no longer afford such free-spending populism — as evidenced by its widening and unfunded fiscal deficit.

Decisive economic action can be politically painful. Yet it is the best course. It would speed investment and lending into Argentina’s underinvested and under-leveraged economy. It would strengthen Buenos Aires’ hand in negotiations with the holdout creditors. And it would mean that Argentina has a better chance of avoiding Brazil’s fate, where a scandal-infested government has suffered the country to slip into a deep recession and seen its own myth of a “victorious decade” turn to ashes. Argentina can still avoid that damming historical judgment — something that all Peronists, even the heterodox Ms Fernández, would surely prefer to avoid.

By Jesica L. Santos
October 21, 2015

On October 25, Argentinians will go the polls to elect their next democratic president who, for the first time since 2003, won’t have “Kirchner” as a last name. But the choice Argentinians will really be making concerns not an individual but, rather, the type of country they want to recover.

The current populist government has been in power for 12 years if we count all the administrations of both Néstor Kirchner (deceased) and his widow and current president, Cristina Fernández de Kirchner.

Having failed to obtain the support needed to amend the Constitution in order to seek a third term, Kirchner recently single-handedly appointed as her successor Daniel Scioli, the former offshore powerboat racing champion and current, more moderate (or at least not as combative) governor of Buenos Aires, the largest province in the country. Scioli owes much of his political support, if not all, to the fact that Kirchner chose him to succeed her as opposed to having a primary, as the rest of the political parties do, to choose the nominee. But first, she made sure to impose on Scioli a running mate whose loyalty to her and her husband has been bullet-proof over the years, Carlos Zannini. And in doing so, rumor is, she has tried to secure her own continuity with decision-making power behind the scenes.

The opposition is represented by five candidates who basically run on the slogan of change, with only two really having the possibility of giving Scioli, who instead promises continuity, a run for his money. These are center-right Mauricio Macri, the current mayor of the city of Buenos Aires (the most important and influential in the country), and Sergio Massa, a Peronist centrist who defected from the Kirchner government two years ago over personal disagreements with Kirchner during the time he served as her Chief of Staff.

A lot is at stake for Argentinians, as their country faces a myriad of serious problems ranging from corruption scandals surrounding the Kirchners themselves and the currently-indicted Vice President Amado Boudou; an inflation rate of over 25% (unless you ask the government who claims it is in low single digits); unprecedented social polarization; a stagnating economy and steep deficit; isolation from global markets; rampant violent insecurity in the streets that were once safe for kids to play in; a total erosion of the public’s trust in judicial institutions; rising poverty levels in urban areas; a lack of investment that prevents growth; an unsustainable fiscal situation; and a very dangerous increase in drug-related crimes.

These are some of the few but grave problems which plague the country, to which we must add the political style of its current leader, known to have created (or imagined) enemies everywhere and infused society with class-related resentment seen fewer times before.

A mere week away from the national presidential election, (a reminder that for Argentinians between the ages of 18 and 69 voting is mandatory) little do we know with any degree of certainty about what might await the country on December 10 when the new president is to take the oath of office.

Polls are generally not to be trusted as most of them are commissioned by the political parties themselves and their results used for marketing purposes during TV ads. And then we have street polls, which give results that are as volatile as the political environment in the country.

As an example of this lack of predictability and lasting allegiances, recently, a candidate for Massa’s party, Mónica López, switched to Scioli’s party but continued to be on the ballot for Massa and appeared on national TV asking that people not vote for her. That is how politics can be in this country.

As a result, we can rely, only a little, on other sources available to get an idea of which candidates people might be leaning towards. If we go by what citizens are manifesting on social media, or to journalists and political scientists on the ground who try to gauge voting tendencies in a professional way despite the natural margin of error that exists with these exercises, we seem to have a scenario in which Scioli continues to be the front runner with approximately 40% of the vote, closely followed by Macri with approximately 30%. This, however, means nothing, particularly if we take into account that to win in this first election and avoid a run-off one, one candidate needs to obtain either 45% of votes, or 40% and a 10-point lead over the candidates who comes in second. As things stand at the moment, and noting once more than in Argentina all can change in a day especially with the high number of undecided voters that exists, it is still improbable that we will see a winner in the first round on 25 October.

The issue that is hard to understand for opponents to the Kirchners’ three administrations is that this is still the scenario even though there is clearly 60% of Argentinians who disapprove of the current government and favor change. This standing was manifested in the primary election held last August where results reflected the projections just described as the likely outcomes in the next election as well (Scioli: 38.4%, Macri 30.1%, Massa: 20.6%). But it is the fragmentation of the opposition that seems to be the cause for a potential failure to achieve a victory in the first round rather than an active support for continuity through the endorsement of Scioli.

The opposition has made the mistake of allowing personal egos to get in the way of forming alliances meant to identify what unites them rather than what separates them. A closer scrutiny of the situation also shows that little change can Massa really offer, when he was the Chief of Staff of Cristina Kirchner for two years and the mastermind of major appointments and policies. But, to the ever-growing poorest, Macri may deviate so much from the current populist agenda that these fear they could lose the welfare plans they have been granted in the last decade, although the candidate denied intending to do so if he wins the presidency. And Scioli seems to have reached a ceiling of those loyal to Kirchner so it is questionable if he will be able to expand the margin he got in his favor in the primary election.

These last weeks could have been key to swaying the undecided but, unlike his opponents, Scioli did not show up at the much-awaited first presidential debate ever on 4 October, claiming he did not want to debate when his ideas are well-known to people already. But what his rivals understood with his decision not to debate them was that either he is not prepared to answer questions, or that Kirchner did not let him, casting a doubt over his preparedness to assume the responsibilities associated with running a country.

But so, if we have no clear winner in the first election, what can happen on 22 November (date set for the second round)? This will depend on whether at that point the opposition will strike a deal to push for change and achieve it, finally. It is my assessment that if Scioli were to face a second round, he could lose if the opposition rallies support for the only candidate at that time who stands a chance. At a minimum, Scioli would be greatly debilitated politically within his party and among the opposition by the results of the election, what could put him at more risk for an actual de facto manipulation on the part of Kirchner. This situation would indeed be a terrible one for Argentina but, fortunately, we are not sure if Scioli could even win first.

What is unquestionable, however, is that regardless of the election results, 10 December 2015 will mark the end of an era for Argentina and a much hoped-for turning point for the majority of its population. Even if Scioli ends up taking office, there will be change for the country. Argentinians will no longer be subjected to a constant abuse of power, nepotism and frequent plans for swapping presidential chairs among family members, and demagogy who targets those with the least opportunities when corruption allegations abound among those in power.

Argentinians will also perhaps have better chances of seeing a restoration of the credibility of institutions, such as the judiciary, and of a significantly deteriorated diplomatic relation with, well, the world. And so Argentina will be a better country as a result. It is just a matter of how much better.

And this exactly will be decided by its citizens this week, when they will choose alternation as part of a healthy democratic government system, not the “least bad” successor of the closest the region has had to a despotic monarch.

By Carolina Millan
October 21, 2015

* Futures contracts are pricing in 25% devaluation in 3 months
* Argentina’s foreign reserves are hovering near a 9-year low

A devaluation is coming to Argentina regardless of who wins presidential elections Sunday.

That’s what traders are betting in the offshore futures market. They see the government allowing its official exchange rate to plunge 25 percent in the next three months to a record low 12.76 pesos per dollar. The central bank controls the rate through daily interventions.

Currency speculators are ratcheting up their devaluation wagers even as front-runner Daniel Scioli, who has promised to make only gradual changes to the country’s foreign-exchange policies, widens his lead in presidential polls. That’s because the central bank is burning through international reserves to prop up the official rate. To traders, that means the new president will have little choice but to allow the peso to weaken significantly or risk depleting reserves already near a nine-year low.

“The market is pricing that no matter who is in the next government, they’re going to have to devalue and fast,” Daniel Chodos, a strategist at Credit Suisse Group AG, said by telephone from New York.

The central bank declined to comment on devaluation expectations in futures markets.

Scioli says the country doesn’t need a large devaluation of the peso which would hurt the purchasing power of Argentines. Leading opposition candidate Mauricio Macri has pledged to allow the exchange rate to float freely on his first day in office if elected, with advisers saying it would likely be somewhere in between the official rate of 9.5 and the black market rate of 16.03 pesos per dollar.

President Cristina Fernandez de Kirchner, who is unable to run for a third-consecutive term, devalued the peso by 19 percent in January 2014. But policy makers have limited declines in the currency this year to 11 percent, compared with a tumble of 32 percent in Brazil, Argentina’s biggest trading partner.

Argentina’s reserves have fallen 18 percent in October to $27.4 billion in large part due to a $5.9 billion payment on its so-called Boden bonds.

“With the overvalued peso, the Brazilian real depreciating and the poor state of the foreign reserves following the Boden 15 payment, the devaluation will have to be faster and less gradual than the market had expected,” Credit Suisse’s Chodos said.

Fernandez has imposed a number of currency restrictions to prevent Argentines from pulling money out of a country where inflation is running above 20 percent, the second-highest in the Western Hemisphere. The controls have spawned a myriad of illegal currency markets where Argentines can sidestep limits on their ability to obtain dollars to better preserve the value of their savings. In the black market, the peso sank to a record 16.11 per dollar Oct. 19.

While the offshore market is signaling a large devaluation, trading in the local futures exchange market known as Rofex indicates that no such move is in the offing. That’s because the central bank also intervenes in that market daily in an effort to tamp down expectations, according to Jorge Piedrahita, Chief Executive Officer of Torino Capital.

In the Rofex market, the peso is expected to fall just 4 percent by December to 9.9 pesos per dollar.

But with Argentina’s reserves dwindling and the country’s exports becoming less competitive as the currencies of its trading partners fall further, Fernandez’s successor will find it hard to avoid a devaluation.

“Even with the uncertainty of the elections, it’s clear that there’s an expectation that the government will have to adjust the exchange rate sooner or later,” said Ezequiel Aguirre, a currency strategist at Bank of America Corp.

By Pablo Rosendo Gonzalez and Charlie Devereux
October 22, 2015

* The two leading candidates plan to cut soybean export taxes
* Macri, Scioli also pledge to eliminate wheat, corn taxes

While it remains unclear who will win Sunday’s presidential election in Argentina, one thing is already decided: farmers are poised to benefit as both leading candidates plan to eliminate wheat and corn export taxes and cut a soybean levy.

Wheat and corn taxes should be cut “immediately” while the 35 percent soybean export levy should be reduced to 20 percent, Miguel Bein, main economic adviser to leading presidential candidate Daniel Scioli, said Wednesday in a report posted on his consulting firm’s website. Mauricio Macri, Scioli’s main contender according to local polls, has previously said he would eliminate corn and wheat taxes while cutting the soybean levy by 5 percent a year.

President Cristina Fernandez de Kirchner, who can’t run for a third consecutive term, has clashed with farmers since gaining office in 2007 when she unsuccessfully tried to raise the soybean tax to 45 percent. That ignited 129 days of strikes, road blocks and food shortages across the country until July 2008 when then Vice President Julio Cobos voted against the increase. Soybeans support a third of government spending.

Stimulating Exports
Argentine farmers have exported $17 billion of grains and oilseed this year, the lowest for the period since 2007, according to exporters’ consortium data, as they wait for a change of government. In 2014, they sold a record $24.1 billion of grains and oilseed to boost central bank reserves.

“By stimulating the export of soybeans stored by farmers we would accelerate the injection of dollars into the Central Bank without issuing debt,” Bein says in the report. He estimates that farmers are hoarding as many as 22 million metric tons of soybeans, about one third of last season’s record crop, or $7.4 billion worth of oilseeds.

Argentina, the world’s third-largest grower of the oilseed after the U.S. and Brazil, is the world’s largest exporter of soybean oil and derivatives, used in soy milk, tofu and animal feed.
Rebuilding Reserves

Cutting export tariffs will help the next Argentine government rebuild its depleted foreign reserves, which at $27.4 billion are near a nine-year low, the report said. Higher reserves would allow Argentina to negotiate from a stronger position with holdouts from the 2001 default.

Argentina defaulted last year for a second time in 13 years after Fernandez defied a New York court order requiring the country to repay disgruntled creditors.

Scioli is within a fraction of winning the presidency in the first round of elections to be held Sunday. He had 39.7 percent of intended votes against 28.8 percent for Macri, according to the average of four polls viewed by Bloomberg. Scioli would need to exceed 40 percent and have a 10 percentage point lead over the second-place candidate to avoid the first run-off in Argentina’s history.

By Sarah Marsh
Oct 21, 2015

In the affluent Recoleta neighborhood of Buenos Aires, where grand 19th century buildings hark back to an era of prosperity, middle class voters fear a presidential election on Sunday will do nothing to halt Argentina’s long decline.

“We always hope things will change for the better but they just get worse. This used to be a rich country,” said Lucila Novillo, 53, who has struggled to keep her interior design business afloat over the past four years as tight capital controls virtually paralyzed the real estate market.

All the leading candidates in the race to succeed leftist President Cristina Fernandez have promised reforms to ease the interventionist policies that her opponents and investors say have choked the economy.

Yet the front-runner is ruling party candidate Daniel Scioli, who has Fernandez’s backing and is broadly supported by poorer Argentines who benefit from expanded subsidies under her government. Scioli offers the least amount and slowest pace of change.

Many middle class voters like Novillo, who will cast her ballot for opposition candidate Mauricio Macri, fear Argentina’s problems are too deep-rooted for any one president to fix and will keep dragging it down regardless who wins.

Despite vast natural resources and a well-educated workforce, the South American country has steadily declined from its perch as one of the world’s richest nations in the 1930s, lurching from one financial crisis to the next.

While Argentina remains Latin America’s third largest economy, its next government will inherit a host of woes from double digit inflation and precarious foreign reserves to last year’s debt default.

“We should be a great country. We have brilliant, well-educated and creative people,” said Novillo. “These qualities should help us grow, but corruption prevents that. The roots of corruption have reached into every corner of this country.”

Most of Fernandez’s cabinet members face corruption allegations, authorities are investigating a possible money laundering scheme at a luxury hotel her family owns, and her vice president is being tried for abuse of power.

The justice system often fails to clean up such cases, many Argentines complain, fostering a lack of confidence in the country’s institutions.


Recoleta’s middle-class and wealthy residents reminisce about Argentina’s heyday when Buenos Aires was known as the “Paris of the South” and complain about its economic decline and what they perceive as worsening crime, healthcare and education.

“Our public education used to be excellent, people came from all over Latin America to study at Argentine universities,” said Eduardo Jesus Zimmermann, 84, a former banking executive.

“Now Argentines head to the United States, England or elsewhere abroad because public universities are a disaster.”

Many put the country’s decline down to Peronism, the fragmented populist movement that has dominated politics since the first presidency in the 1940s of Juan Peron, who won hero status for his fiery nationalism and defense of workers’ rights.

“We’ve been going downhill for 70 years since Peron,” said Zimmermann, on his way to a meeting of landowners.

But Peronism remains Argentina’s most potent political force and Peronist parties have won nine of the 11 presidential elections they have contested. With Scioli, they appear primed to win another.

Zimmermann said Peronist power structures, such as its hold over trade unions and Congress, would make it hard for his preferred candidate, the pro-business Macri, to make the necessary reforms even if he won the presidency.

Macri has campaigned on a platform of change, promising to dismantle capital controls and trade restrictions from his first day in office to win investor confidence and bring hard currency into the dollar-starved economy.

While his pledges are popular among the urban middle class, voters in low income neighborhoods fear he will cut generous welfare benefits introduced by Fernandez.

Those neighborhoods, often densely populated, are ruling party strongholds and might carry Scioli to victory without even needing a second round runoff vote.

Polls show Scioli close to the 40 percent threshold that would be enough for him to win outright providing he has a lead of 10 percentage points over Macri, a strong probability.

For some, the chance of real change is just too small to wait around for.

Delfina Raffo, 30, said she was leaving Argentina next month, following in the footsteps of friends and cousins in search of a brighter future elsewhere.

High taxes and the stagnant economy forced her to close her Recoleta clothes boutique earlier this year. Two robberies at gun-point made the decision easier and she plans to move to Singapore which is safer and where she believes she can earn more.

“I feel we are just going to continue on the same path we’ve been going along … with ever more poverty, and the middle class being pulled lower,” Raffo said.

By Patrick Gillespie
22 October 2015

NEW YORK (CNNMoney) — Wall Street’s hedge funds can’t wait for Argentina’s next president.

They’ve been battling with the current president, Cristina Fernandez de Kirchner, and her predecessor and late husband, Nestor, for 12 years over huge debt payments. That could soon change.

Argentines will elect a new president on Sunday, and a major issue is whether the new leader will finally end the country’s fight against New York hedge funds.

After defaulting on $95 billion of debt in 2001, the country has been in a decade-long fight in courts with the hedge funds, also known as “vultures” in Argentina, South America’s second-largest economy.

The unresolved debt debacle has shut out Argentina from much of the global economy while it has suffered from massive inflation, declining cash reserves and meager economic growth.

There are three candidates running for president: Daniel Scioli, Mauricio Macri and Sergio Massa. Scioli is most similar to the current president and he’s leading in the polls.

But many experts say Macri, second in the polls, is Wall Street’s favorite and most likely to negotiate with the hedge funds. That’s because Macri has proposed economic and financial reforms that would undo Kirchner’s policies, which investors strongly dislike.

“Argentina’s debt problem has to be fixed quickly so that we can return to having credit,” Rogelio Frigerio, the leader of Macri’s political party, PRO, recently told CNN’s Diego Laje in Buenos Aires. “We need to finance these [economic] development policies.”

Argentina’s record-breaking default and the ‘vultures’

The hedge funds, led by billionaire Paul Singer, want about $1.5 billion from Argentina.

Argentina broke the record books when it defaulted on $95 billion of debt.

Singer’s fund, NML Capital, and others scooped up the nearly-worthless debt soon after the default, then waited while the debt gained value and now they want full repayment.

Over the years, the Kirchners renegotiated terms with 92% of its creditors so that they would accept a huge discount, or “haircut,” on debt payments.

These hedge funds are called vultures for picking up cheap, worthless debt of developing countries, then suing them afterward for much more money.

Argentina has offered to pay creditors 30% of the face value of the debt. Singer doesn’t want that, even though his fund already stands to profit from the rising value of the debt.

Singer wants full repayment. And a New York judge, Thomas Griesa, agrees with him.

In fact, Argentina tried to pay the creditors that agreed to the lower amount, but Griesa blocked the payment last year. The judge said that Argentina has to pay the holdouts and other creditors at the same time. Negotiations between Argentina and NML last year failed to reach an agreement.

Until Argentina settles with the holdouts, its economy essentially can’t grow much because it can’t get access to foreign investment.

Another problem is that Argentina, under Kirchner, has manipulated its currency, started massive spending programs and lost the trust of many independent economists inside and outside the country.

Peso problems

For years, ordinary Argentines couldn’t buy dollars from local banks because of government restrictions. Now they can, but there’s still major limits on how much they can exchange.

So many Argentines exchange pesos for dollars on the black market because they don’t want to deal with government restrictions.

Three years ago, one dollar equaled about 6 pesos on the black market. Now one dollar gets you 16 pesos. The official exchange rate is 9.50 pesos to the dollar.

“We think the Argentine currency is significantly overvalued,” Sebastian Rondeau, a Bank of America economist, wrote in a research note. He says the real value is closer to the black market exchange rate.

Change of tune: we could negotiate

For years, presidential candidates have said they would never negotiate with the hedge funds. But each of the current candidates, or their advisers, have hinted that they would consider negotiating with the holdouts.

But settling with funds would be a deeply unpopular decision. In a politically-divided nation, Argentines unite over their hatred of the hedge funds.

“The problem is — how do you package it, how do you sell it after saying you would never negotiate with them,” says Eugenio Aleman, an Argentine and senior economist at Wells Fargo. “They have to figure out how to pay.”

Investors can’t wait for a new president. Argentina’s stock index, Merval, is up 27% so far this year, and experts say it’s because of optimism that the next president will resolve the dispute and open up Argentina’s economy to foreign investment.

NML Capital declined to comment for this article, but it has repeatedly offered to negotiate with Kirchner.

“Argentina is going to pay. The question is how much it’s going to pay,” Daniel Artana, senior economist at the Foundation for Latin American Economic Investigations, told CNN in a phone interview from Buenos Aires.

22 October 2015

U.S. biodiesel producers are asking a federal appeals court to scrap EPA’s approval of imports of biodiesel from Argentina used as a qualifying renewable biomass fuel under the agency’s renewable fuel standard (RFS), claiming EPA failed to undertake necessary public comment on what they call a flawed tracking system for the biodiesel.

EPA Jan. 27 issued an approval of a tracking system designed to show that biodiesel from Argentina meets the criteria to be considered “renewable biomass” under the renewable fuel standard (RFS). The approval, in the form of a letter to the Argentine Chamber of Biofuels (CARBIO), constitutes a judicial reviewable “final agency action,” says an Oct. 8 opening brief filed in appellate court by the National Biodiesel Board (NBB). Relevant documents are available on See page 2 for details. (Doc. ID: 185601)

NBB, representing U.S. biofuel producers, says the decision approves a flawed system that allows access to the U.S. market for biodiesel produced from Argentinian soybeans, and CARBIO’s tracking system cannot ensure that the imported fuel is truly renewable.

NBB says the decision should have been open to public notice and comment, and is also asking the U.S. Court of Appeals for the District of Columbia Circuit to vacate a separate agency action — a letter from the agency refusing their request to seeking public input on the plan.

Further, NBB says EPA’s approval of what the board sees as an inadequate tracking system alters the underlying RFS regulations governing biodiesel, and reopens them to judicial review. The board therefore also asks for remand of those regulations to EPA to address the shortcomings that allow the imports at issue.

“EPA failed to provide any notice of the CARBIO proposal it purports provides sufficient quality assurance to ensure that soybean oil from Argentina, a country that has seen a rapid expansion of agricultural lands, came from lands that were in production prior to December 19, 2007. Public comments were necessary for the first plan of its kind,” says the brief.

NBB, representing U.S. biofuel producers, says that the CARBIO tracking system relies on the identification of “go areas,” which are shown by satellite imagery to have been agricultural in 2007 and not newly cultivated areas that have been recently cleared of forest. However, it is unclear how CARBIO will define such areas, and EPA lacks the means to check that they are correctly identified, the brief says.

“EPA’s review of the CARBIO proposal was arbitrary and capricious in that it did not comply with its own regulations. There was no explanation or analysis to support the identification of ‘go areas’ as ‘existing agricultural lands,’ to ensure feedstock producers, handlers or importers are in compliance, or to even understand the scope of the program,” the filing says. “Indeed, EPA appears to have handed its authority over to third parties, one of which has clear conflicts of interest,” the group says referring to CARBIO. “Thus, EPA could not have ensured that the CARBIO proposal provides the adequate level of quality assurance in clear contravention of its regulations.”

NBB further says that EPA’s actions have “ripened” the underlying RFS regulations on biodiesel for a legal challenge, and that they should be vacated and the relevant provisions on imports and alternative biomass tracking systems remanded to EPA.

The U.S. biodiesel producers say that Argentinian producers are set to “flood” the U.S. market with “biomass-based diesel subject to minimal quality assurance mechanisms,” having lost access to their previous major market, the European Union.

Meanwhile, EPA is preparing to finalize its multi-year RFS proposal setting blending targets for biodiesel and other alternative and renewable fuels. The agency under a consent decree must by Nov. 30 finalize the fuel targets for 2014 through 2016. — Stuart Parker

21 October 2015

In addition to constant policy changes that affect the rules for the insurance sector, the industry has had to come up with creative solutions to cope with Argentina’s high inflation, and the economic environment remains one of the most challenging in the continent for insurers.

Inflation in Argentina, put at around 30% annually by some private groups who disagree with the government’s figures, undermines the ability to estimate the insurable interest-value, according to law firm Kennedys.

The most serious inflation-induced distortions come when calculating the immediate value of insured property.

Once the amounts that are considered appropriate are established, there will be immediate deviations as the face value of the insured property increases due to inflation. In such cases insurance policies will not fulfill their purpose of returning the insured party to the same financial situation as before the loss, as the value of the insured property exceeds the sum insured.

Despite the fact that the most affected party seems to be the policyholder, the industry suffers from these distortions as people are put off insurance.

One solution used by insurers has been to include “adjustment clauses” in the policies extending the coverage beyond the insured sums, simulating a market value for the property. This strategy has the downside that they usually include a cap which in turn translates into an additional premium to be charged to the client.

Other solutions used have been issuing quarterly or even monthly policies, which have higher costs for clients; or US dollar-denominated policies, but these are made ineffective by government exchange controls.

In some countries such as Chile with the Unidad de Fomento and Venezuela with the Unidad Tributaria special index-linked currency units exist designed to offset the effect of inflation. In Argentina the Unidad de Cuenta de Seguro existed decades ago but was abandoned in the 1990s when the peso was pegged to the US dollar, and was never revived.

Moreover, inflation reduces clients’ purchasing power, in turn making insurance more expensive with the subsequent impact on demand.

12. VOLKSWAGEN TO RECALL AROUND 17,000 VEHICLES IN BRAZIL (Dow Jones Institutional News)
By Rogerio Jelmayer
22 October 2015

SAO PAULO–German auto maker Volkswagen AG (VOW.XE) will recall 17,057 vehicles in Brazil to fix software that manipulates emission tests.

The recall will affect Volkswagen’s Amarok pickup, produced in Argentina in 2011 and 2012. The company said it will notify owners of the vehicle from the first quarter of 2016 on details of the recall.

In September, Brazil’s federal environmental agency, Ibama, opened an investigation into Volkswagen to determine if the German auto maker committed fraud in the South American country with its diesel engines. Ibama could impose a fine of up to 50 million reais ($12.7 million) on Volkswagen if the company was found to have violated any of the country’s vehicle-emissions rules.

The U.S. Environmental Protection Agency said last month Volkswagen has admitted to using software on some of its VW and Audi diesel-powered cars to dupe U.S. emissions tests.

Volkswagen is the third-largest auto maker in Brazil in terms of sales, behind Fiat Chrysler Automobiles NV (FCA.MI) and General Motors Co. (GM).

The German auto maker sold 226,942 vehicles in Brazil in the first nine months, according to auto maker association Anfavea.

By Angelica Kershaw
21 October 2015

In similar developments, the ministers of health of Argentina and Peru (MoHs) are working separately on the implementation of electronic patient health records (EHR). According to the regional source Andina, Peru’s MoH in plan to implement (EHR) at a national level in order to make patient records available to hospitals and other healthcare establishments, and improve the efficiency of the national healthcare system by avoiding duplicate patient tests. Similarly, the Argentine Ministry of Public Health in Misiones, has launched the first stage of the province’s digital medical record system, which will initially be introduced for patients within the public healthcare sector. This phase involves the creation of a database that will be accessible throughout the province, as well as the issuance of medical cards.

Significance: With this initiative, the Peruvian government will be implementing law 30024, which establishes the creation of a national registry of EHR and the basis of the system. The regional project in Argentina aims to organise the existing patient information rather than alter the current charging system used at each hospital. However, both of the initiatives are likely to improve patients data report and accessibility by them and healthcare providers facilitating the diagnosis and prescription processes.

By Rene Rodriguez
21 October 2015

Watching The Clan, you have to keep reminding yourself this absolutely insane story really happened. The story of the Puccio family, who lived in a wealthy suburb of Buenos Aires and became infamous for a series of astonishing crimes in the 1980s, has fascinated Argentina for decades but may not be all that well-known in the U.S. This taut, polished thriller, which has been made with the energy and pop-culture savvy of a Hollywood production, should change that.

Director Pablo Trapero (White Elephant) opens the picture with a quick prologue that uses news footage to recount the 1983 appointment of the democratically elected president Raúl Alfonsín and his ensuing reprisals against crimes committed during the country’s “Dirty War,” during which government-sponsored kidnappings left a toll of more than 30,000 desaparecidos (the vanished).

As the film opens, Arquimedes Puccio (Guillermo Francella), a dead-eyed psychopath who worked as an intelligence operative for the previous regime, is continuing his nasty work of kidnapping wealthy people for ransom – and keeping them prisoner in the home he shares with his wife and five children. In an early scene, we watch Arquimedes walking through his house. He asks his middle son Alex (Peter Lanzani) to stop watching TV and checks in on his younger daughter to tell her mom has dinner ready. Everything seems normal – a quotidian routine. Except Arquimedes then makes his way down to the basement, where a hostage is being kept inside a dingy bathroom, hooded and chained and crying for help.

The juxtaposition of a happy home hiding a dungeon of horrors is the primary focus of The Clan: How did Arquimedes and his family manage to carry on as if nothing was happening, even though there were bleeding, injured captives underneath their floorboards? Trapero, who co-wrote the script with Esteban Student and Julian Loyola, turns Alex into the audience surrogate. He’s a handsome, popular young man who works at his father’s surf shop, plays rugby and has a new girlfriend. Oh, and occasionally Alex also helps his father carry out a kidnapping, even serving up one of his rich friends as a victim.

Except Alex isn’t aware – at first – that his father has no intentions of ever returning his hostages alive, even after their families have paid their ransom. The Clan can be terrifying one moment and darkly comical the next: A long sequence depicting the kidnapping of a woman is scored to David Lee Roth’s Just a Gigolo, while another kidnapping attempt goes horribly wrong, Pulp Fiction style. Trapero brings a lush style to the film that helps to heighten the overall weirdness: If it wasn’t based on a true story, you’d write the movie off as preposterous nonsense.

Francella’s performance is too one-note to give the monstrous papa any dimension – the actor’s cold eyes never register any emotion – and the other family members are relegated to the background (the movie cries out for a scene in which Arquimedes’ wife voices how she feels about her husband’s crimes). The strained, strange relationship between father and son ultimately becomes the emotional center of The Clan, culminating with an astonishing closing shot guaranteed to induce startled gasps. It’s a great, jarring moment that is the work of a filmmaker clearly in love with his craft – and a flavor for the darker side of human nature.

By Charles Dolph
October 21, 2015

National elections on October 25th present voters with sharply contrasting visions of government’s role

On October 25th Argentines go to the polls for general elections that will shape the future of Latin America’s third largest economy. In the wake of Hugo Chávez’s death and amid increasing turmoil in neighboring Brazil, developments in Argentina take on added significance in the region.

In addition to the country’s first non-Kirchner president in twelve years, voters will choose provincial governors, senators, and congressional representatives, as well as parliamentary representatives to the South American trade bloc MERCOSUR.

Recent provincial contests resulted in victories for candidates from outgoing President Cristina Fernández de Kirchner’s Front for Victory (Frente para la Victoria) in both Chaco and Tucumán. In Tucumán, the result was disputed by opposition supporters amid violence directed at opposition candidates and allegations of electoral fraud. Despite protests involving clashes with police the result was subsequently upheld by Tucumán’s Supreme Court.

August primaries established three main presidential candidates: successor to Kirchner in the Front for Victory coalition and outgoing governor of Buenos Aires province, Daniel Scioli; dissident Peronist Sergio Massa of the Renewal Front (Frente Renovador); and mayor of Buenos Aires Mauricio Macri of center-right Let’s Change (Cambiemos). Recent polls show Scioli on the cusp of the 40% of the vote plus a 10% edge over his nearest opponent necessary to avoid an unpredictable runoff on November 22nd. However it is far behind Kirchner’s 54% tally in 2011.

The not-quite-commanding margin for Scioli is partly due to electoral realignment since Argentina’s 2013 legislative elections. His emergence as the Front for Victory candidate can be directly traced to the success of Sergio Massa’s Renewal Front. Cristina Kirchner’s cabinet chief from 2008-09, Massa openly split in 2013 to form an alliance rooted in industrialists and mayors from the province of Buenos Aires.

Massa’s coalition won crucial mid-term victories that denied Kirchner the Congressional supermajority necessary to support a constitutional amendment which would have allowed her to run for a third consecutive presidential term. The elections also revealed a gap on Kirchner’s left, as the Trotskyist Workers’ Left Front (Frente de la Izquierda y de los Trabajadores) garnered three seats in the National Congress as well as provincial and municipal legislative representatives across the country, highlighting that the lessons of Argentina’s 2001-02 uprisings have not been forgotten.

Front-runner Scioli has therefore been wooing social movements and the left wing of his own party – channeling Pope Francis’ social agenda in declaring that if elected he will create a Ministry of Popular Economy – while also seeking to attract $30 billion a year in foreign investment to make Argentina a “productive paradise.”

Electoral realignment has not only paved the way for and conditioned Scioli’s candidacy, it has drawn the opposition candidates Massa and Macri closer to each other. However it has so far stopped short of producing an outright electoral alliance between the two.

Beneath changes in the electoral landscape are deeper structural challenges confronting Kirchnerism. Economic growth boomed from 2004-10 under Néstor Kirchner and during Cristina’s first term. While critics are quick to dismiss the impressive economic growth as rooted in the dumb luck of a commodities boom – especially in soy – Mark Weisbrot of the Center for Economic Policy Research points out that soy export indicators in GDP growth do not support such a narrative.

While claims of absolute reliance on soy may be overstated, its structural impacts cannot be denied. Because soy has virtually no domestic market, its emergence as a key export allowed Kirchner administrations to sidestep the conflicts of the past over the prices of beef and wheat, products crucial both for exports and domestic consumption by urban popular sectors. Yet, the growth of soy has generated other political tensions. Its critical role in financing extensive state spending on social programs led to a standoff with agro-export interests when an increase was proposed in export taxes in 2008.

The soy boom has also fueled rising land prices and concentrated ownership in the hands of transnational corporations. This has partially offset the fiscal benefits of soy, as revenues have paradoxically funded the social programs covering the basic needs of those displaced from the countryside by its expanding production.

The resulting “agriculture without farmers” recalls the “pampas without settlers” used by historian James Scobie to describe expanding wheat production in the 19th century. Such echoes of Argentina’s agro-export past underscore the shift – common in the region – from Washington consensus structural adjustment programs to what sociologist Maristella Svampa calls the “commodities consensus” of renewed reliance on mineral extraction and export-oriented agricultural production.

As Argentina’s main source of foreign currency, soy dovetails with the other major external constraint on Argentina’s economy, namely debt. Only after a bitter 2010 dispute with the head of Argentina’s Central Bank did Cristina Kirchner secure access to the reserves necessary to pay off the sovereign debt, renegotiated after the 2001 default.

While a bumper soy crop in 2014 helped replenish the Central Bank’s foreign reserves, they remain under pressure. Economy Minister Axel Kicillof announced earlier this month that nearly $6 billion would go to pay holders of Argentina’s Boden 2015 bonds. Meanwhile, officials triumphantly declared the Boden 2015 payment “the end of a long process of dis-indebtedness” – a clear swipe at holdout “vulture funds” currently litigating in New York for full repayment of secondary market bonds purchased after Argentina’s 2001 default.

The battle with vulture funds, in particular, has become a political rallying point for Kirchner in her final year in office. The UN General Assembly recently adopted nine principles on sovereign debt restructuring triggered by the June 2014 US Supreme court decision preventing Argentina from paying creditors who had agreed to previous restructurings. While the UN principles are non-binding, Kirchner and Kicillof have touted them as a major victory, and sent them to the Argentine Congress to be drafted into domestic law.

Discussion of these structural constraints has been largely muted in the presidential campaigns. Scioli, articulating his economic plan, focused mostly on bringing inflation down to single digits without austerity, but did not mention the debt dispute. These structural issues were also largely absent from the October 4th presidential debate – the first in Argentina’s history – in which Scioli did not even deign to participate.

But economic pressures have been mounting. In January 2014, the Central Bank announced the largest currency devaluation since 2002. Facing a return of high inflation, capital flight, falling foreign reserves, and a devaluing peso, Kirchner has variously turned to currency and price controls. Such measures have met with lukewarm success, as de facto inflation has continued to rise and the “blue” or unofficial dollar hit an all-time high of 16.08 pesos in late September.

Critics of Kirchnerism point to familiar economic problems, as well as growing corruption and insecurity. Nevertheless Peronism – the political legacy of President Juan Perón who governed between 1946-55 and 1973-74 – remains the dominant political force in Argentina. Even Macri, whose political career has been based on being a gorila (Argentines’ name for non-Peronists), recently embraced Perón. Flanked by erstwhile Kirchner ally and head of the General Confederation of Labor (Confederación General de Trabajo) Hugo Moyano, Macri inaugurated a statue to Juan Perón in downtown Buenos Aires in the hope that some of the populist magic would rub off on him.

Even as all three main candidates claim the legacy of Perón, voters will decide on visions for the role of the state that clearly diverge. The divide is most glaring between Scioli and Macri, who will almost certainly be the two candidates on November 22nd should the election go to a runoff. While the former promises basic continuity with the Kirchnerist model, Macri, drawing metaphors from his days as president of the soccer club Boca Juniors, argues that the state should act only as a “groundskeeper” for the field on which private enterprise are the true players. Macri’s plan means fiscal austerity and a general return to the 1990’s economic model that led Argentina into collapse in 2001. In a second round scenario between the two, Sergio Massa would be the king-maker, strengthening his position long-term.

A victory for Scioli on October 25th or after is not guaranteed. Should he prevail he will inherit a country that has substantially recovered from its debt default and crisis of political representation that peaked in 2001-02, even as structural challenges have become apparent. This stability has consolidated under Peronism during more than a decade of Kirchner administrations. The Radical party (the Unión Cívica Radical), Peronism’s historical counterweight, has become associated with overseeing hyperinflation in 1989 and economic and political crisis in 2001. The military is thoroughly discredited. Macri’s upstart Let’s Change coalition has little reach outside the Federal Capital of Buenos Aires.

In this political landscape, the Kirchnerist avatar of Peronism appears poised between continuity and schism. Prominent human rights activist Estella de Carlotto, much to the delight of Scioli’s media critics, recently referred to him as a potential “transition” president keeping the seat warm for Cristina Kirchner to run again in 2019. However, Massa’s emergence within Peronism points to a rightward drift among a significant sector of the movement. The dominance of Kirchnerism in Argentine politics and society might, paradoxically, also be its greatest source of instability.

By Belén Marty
October 21, 2015

* Commerce Secretary Says Consumers Need Him to Stop “Deceptive Marketing”

The Argentinean government is taking greater control over the products sold in the country. As of Wednesday, October 14, Argentina’s high-profile Commerce secretary, Augusto Costa, will now be in charge of approving labels for food and beverages, as well as fragrance, personal-care, and cleaning products sold in Argentina.

Resolution 420/2015, published on Wednesday in the Official Bulletin, requires companies to present product labels and tags to the Commerce secretary in advance.

The Trade Loyalty Department will then have 15 days to decide whether or not the goods will be placed on the Argentinean market. In the event that the agency does not issue a ruling on a given product within the time frame, the item may enter the market, but will be subject to subsequent regulation.

Costa explained the government’s reasoning for the new policy with an example: He placed two Hellmann’s brand ketchup bottles side by side. On one bottle, the label read “fresh tomatoes,” and on the other, “fresher tomatoes.”

“We met with Unilever [Hellmann’s distributor] and we taste-tested each ketchup on a sausage, and they tasted the same,” Costa explained. “These are strategies that companies all over the world use to mask hikes in prices. They may not be breaking any laws, but we created this legislation to get rid of the loophole, and put a stop to this deception.”

Qué buen uso le está dando Augusto Costa a su master en la London School of Economics. Sommelier de ketchup.

— CACK (@caterinack) October 16, 2015

“What a great use of Augusto Costa’s Master’s degree from the London School of Economics. Ketchup sommelier.”

Less than 15 days away from the presidential election, Costa explained that no new personnel will be hired to perform these newly created functions.
“We will use officials already in office to carefully determine which products are the most relevant, like mass-consumption products. We will not fill the building with camporistas [Kirchner supporters], nor change the job market in Argentina.”

The resolution also prohibits companies from placing the words “sale” or “discount” on product labels. The government argues that “if the company cannot guarantee the savings will reach consumers, they should not include this message.”

According to the initiative, the Commerce Department aims “to ensure the proper execution of domestic commercial policies regarding protection for consumers and a competitive market.”

By Charles Newbery
October 21, 2015

On a street corner in Buenos Aires, “No fue magia” (“It wasn’t magic”) is painted on a wall above the initials of President Cristina Fernández de Kirchner.

The graffiti is praising what is seen as the success of Argentina’s president – and that of her late husband and predecessor, Néstor Kirchner – since the country emerged from the 2001-2002 financial crisis.

It also shows how adept the couple have been in building and sustaining a fervent following for their brand of populist left politics, known as Kirchnerism.

When Mr Kirchner took office with the (still ruling) Justicialist Party in 2003, “he vowed to lead Argentines out of hell and into purgatory. He told them they weren’t responsible for the crisis, but victims,” says Eduardo Fidanza, director of Poliarquía Consultores, a public opinion and political consulting firm in Buenos Aires.

Mr Kirchner blamed the free-market policies of the 1990s that had been prescribed by the International Monetary Fund and were advocated by the big banks and corporations. He said these policies pushed Argentina into a crisis of 25 per cent unemployment and 54 per cent poverty in the early 2000s.

In contrast, he pursued inclusive growth aimed at benefiting all members of society, not just big business, as he claimed. Recovery came quickly – and robustly. The economy grew by an average of 6 to 8 per cent each year between 2003 and 2011, and unemployment fell below 7 per cent.

Soaring international commodity prices and demand played a significant role in this recovery as Argentina is one of the world’s leading suppliers of beef, corn, soybeans and soybean derivatives like soy oil.

Mr Kirchner helped fuel exports, chiefly by keeping the exchange rate undervalued. The export boom fattened central bank reserves and brought budget and trade surpluses.

Through the good times, the Kirchners put a focus on culture, labour and the poor, as well as addressing Argentina’s difficult past. They reopened the trials into state torture during the 1976-83 military dictatorship, ramped up state funding for film and television programming, and made football free to watch on TV. Same-sex marriages were legalised. They created child and pregnancy subsidies to help the poor through the crisis, and nationalised Aerolíneas Argentinas, the national airline and YPF, the national oil company. And unions regained their collective bargaining powers, which help to boost wages and pensions.

All of this instilled a sense of stability after so many years of volatility, making the Kirchners “appear as the saviours of Argentine society,” Ana Wortman, a cultural sociologist at the University of Buenos Aires, tells Equal Times. This won them widespread support from Argentina’s middle class, not just the poor and working classes.

Cristina Fernández succeeded her husband in 2007 with 45 per cent of the vote, and won re-election in 2011 with an unprecedented 54 per cent, helped by sympathy for her husband’s death in 2010.

Now 62, Cristina will leave office on 10 December 2015 with a 40 per cent approval rating, rare in a country where most second terms – and some firsts – end in crisis.

Amongst her supporters, Cristina has “a quasi-religious status for saving Argentina from catastrophe,” Wortman says.

Economic woes

Her presidency, however, brought a change to the Kirchnerism model that could be its undoing. Cristina aggrandised her husband’s message. It was no longer about reaching purgatory; it was about remaining in heaven, living in abundance and not accepting austerity, Fidanza says.

The first years of recovery came without many hitches as factories used their neglected capacity after the economic crisis to meet rising consumer demand. But investment didn’t keep pace, due to currency controls, price caps, protectionist trade policies, heavy regulation and other interventionist measures that cut profit potential and made it harder to do business.

Inflation soon hit double digits and peaked at 40 per cent in 2014, before coming down to 27 per cent this year as a slowing economy cut demand. Blackouts and petrol shortages worsened, and infrastructure creaked. Fifty-one people died in a train crash in 2012 after a series of derailments.

“The economic model is unsustainable,” says Eduardo Levy Yeyati, an economist and author of Porvenir, an exploration of future development models for Argentina. “We’re squeezing the last drops of lemon so that people have the feeling of wellbeing.”

The government is running a 6 per cent budget deficit on track to reach 8 per cent in 2016. Shrinking dollar reserves are making it harder to service the national debt and pay for essential imports like energy and food. Manufacturers get dollars in rations for importing equipment and parts, slowing their output. Companies can’t readily send profits abroad, putting a damper on investment. Argentina can’t borrow abroad to ease the strain until a US$100 billion default from 2001 is fully settled, and hiking taxes any further could spark protests like a four-month farm revolt in 2008. Or it could turn more union bosses against Kirchnerism, and deepen a polarisation between its followers and opponents.

Presidential election

The hard times are expected to run through to 2016, a forecast that would mar any party’s chances to retain power.

However, that’s not the case for Kirchnerism. The ruling Justicialist Party candidate, Daniel Scioli, is ahead in the polls for the 25 October general election.

A former vice president of Mr Kirchner and the current governor of Buenos Aires, Scioli, 58, has a 10-point lead on Buenos Aires Mayor Mauricio Macri, a 56-year-old conservative businessman. In third place is Sergio Massa, 43, a congressman and former chief of cabinet for President Kirchner.

All three are more moderate than President Kirchner, and there’s a consensus amongst them that adjustments must be made to rekindle growth, says Levy Yeyati.

This includes settling the defaulted debts, addressing an overvalued exchange rate, cleaning up bogus economic data, scrapping capital controls, cutting inflation and slashing subsidies to rein in the budget deficit.

Such steps are expected to attract what has largely eluded Kirchnerism: foreign investment. But the initial cost is likely to be job losses, higher utility rates and lower purchasing power.

“It was one thing to take the country from hell to purgatory, and another to take it from heaven to purgatory,” says Fidanza.

The belt-tightening won’t come easy. There will be the threat of strikes no matter who becomes president, says Norberto Galasso, a historian and author of Kirchnerism (2003-2015): The Project that Transformed Argentina.

Argentines have grown used to welfare and advancement under Kirchnerism, from buying new cars to sending their children to university for the first time, he says.

“Many people want the model to continue no matter the difficulties”.

For this reason, Galasso believes, Cristina has fielded a close confidant, Carlos Zannini, as Scioli’s candidate for vice president. Zannini, 61, will keep Scioli in check and maintain Cristina’s influence to run for president again in 2019.

“Cristina is a fighter for her convictions,” he says. “I don’t see her dedicated to caring for her grandchildren. She will continue to be an influencer.”

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