ARGENTINE UPDATE – Oct 29, 2015


BsAs — NYTimes Report on 36 Hours on the Town.. Video.. ENJOY

http://www.nytimes.com/2015/10/11/travel/what-to-do-in-36-hours-in-buenos-aires.html?em_pos=medium&emc=edit_tl_20151009&nl=travel-dispatch&nl_art=1&nlid=36165839&ref=headline&te=1

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1. ARGENTINE KINGMAKER SERGIO MASSA SPURNS KIRCHNER ALLY IN PRESIDENTIAL RUNOFF (The Wall Street Journal Online)

2. ANDRES OPPENHEIMER: A POLITICAL EARTHQUAKE IN ARGENTINA (Miami Herald)

3. MAURICIO MACRI VOWS TO END ARGENTINA’S ISOLATION (Financial Times)

4. SANTANDER SAYS ARGENTINE STOCKS COULD RALLY 30% AHEAD OF RUNOFF (Bloomberg News)

5. MERVAL COULD RALLY 30% AHEAD OF RUNOFF VOTE, CHIARVESIO SAYS (Bloomberg News)

6. MASSA ALLIES LEAN TOWARD OPPOSITION CHALLENGER IN PRESIDENTIAL RUN-OFF (Reuters News)

7. ARGENTINA’S MASSA TO ELECTION RIVALS: WANT MY VOTERS? HEED MY IDEAS (Reuters News)

8. U.S. JUDGE URGES ARGENTINA TO RESUME BOND LITIGATION TALKS (Reuters News)

9. ARGENTINE CORN SEEN WINNER FROM POSSIBLE ELECTION UPSET (Reuters News)

10. ARGENTINA’S KIRCHNER ERA ENDS (The New Yorker)

11. AFTER ARGENTINA ELECTION RALLY, FAVOR BANKS, UTILITIES, EXPORTER STOCKS? (Barron’s)

12. OPPOSITION CANDIDATE’S SURGE IN ARGENTINE ELECTION SUGGESTS IMPROVED BUSINESS ENVIRONMENT
LIKELY, BUT FRACTURED CONGRESS POSES SIGNIFICANT HEADWINDS (IHS Global Insight Daily Analysis)

13. THE LONG VIEW: HOW ARGENTINA AND BRAZIL STEPPED BACK FROM A NUCLEAR RACE (Americas Quarterly)

14. ‘DISGUSTING’ AND ‘BITTER’: THE AWFUL BOOZE ARGENTINA CAN’T GET ENOUGH OF (CNN Wire)

1. ARGENTINE KINGMAKER SERGIO MASSA SPURNS KIRCHNER ALLY IN PRESIDENTIAL RUNOFF (The Wall Street Journal Online)
By Taos Turner
28 October 2015

Dissident Peronist politician who ran third in first round withholds support for Daniel Scioli

BUENOS AIRES—Sergio Massa, Argentina’s dissident Peronist politician and a potential kingmaker in next month’s runoff vote, snubbed the favored candidate of President Cristina Kirchner on Wednesday, saying he favors politicians who seek a new path for the country.

“Argentina needs change,” Mr. Massa said.

He hasn’t officially endorsed either of the candidates who bested him and who will contest the runoff—Daniel Scioli of the ruling Peronist Victory Front Party and Buenos Aires Mayor Mauricio Macri, 56 years old, a market-friendly businessman who heads the “Let’s Change” coalition. But Mr. Massa and his top allies are making it clear that they are eager to leave behind the policies of Mrs. Kirchner, who wanted her successor to be Mr. Scioli, a 58-year-old former powerboat racing champion who is governor of Buenos Aires province.

Roberto Lavagna, one of Mr. Massa’s top aides and a former economy minister, said he favored a break from the ruling party’s policies. “Clearly, change is a No vote for the Victory Front,” he said.

Another close and influential Massa ally, Gov. José Manuel de la Sota of Córdoba province, was more emphatic: “I’m not going to vote for Scioli.”

Mr. Massa, who was Mrs. Kirchner’s cabinet chief before breaking with her, called for both candidates to commit to a series of policy proposals ahead of the Nov. 22 second round, including plans to cut income taxes and combat corruption and narco-trafficking.

In comments made Tuesday, Mr. Massa suggested that Mr. Scioli wasn’t independent of Mrs. Kirchner, who has served two terms after succeeded her husband, Néstor, in 2007. Mr. Kirchner, who served one term, died in 2010.

“As long as he is not a leader of his own political force, he cannot govern anything,” Mr. Massa said of Mr. Scioli. He added that Mr. Scioli “has to stop being Cristina’s employee.”

At play are the 5 million voters who went for Massa, a 43-year-old former mayor of the sprawling riverine city of Tigre. In Sunday’s surprising results, Mr. Scioli fell short of what he needed to win the presidency outright, getting 37% of the vote to 34% for Mr. Macri.

Mr. Massa got 21%. But the politician, who has pointedly criticized alleged corruption in Mrs. Kirchner’s government, emerged as a force within Peronism, the ideologically pliable movement to which both he and Mr. Scioli belong.

“This is not about Peronism or anti-Peronism,” Mr. Massa said. “People have to choose between continuity and change. We’re choosing change.”

Analysts say it would be a mistake for Mr. Massa to openly endorse either candidate. Mr. Scioli could lose without Mr. Massa’s endorsement and the support of his voters. But if Mr. Massa endorses Mr. Macri, he could anger followers who aren’t ready to support a non-Peronist, particularly someone like Mr. Macri, who is seen as a friend of Wall Street.

A poll released Wednesday shows Mr. Macri beating Mr. Scioli 48% to 37% next month.

“Though we think these first results will not be definitive and include a good deal of inertia from the recent election, we see the odds of a Macri victory at 75%,” said Elypsis, an economic research firm, that closely predicted the first-round election.

What seems clear is that Mr. Massa is positioned to become the next leader of the Peronist movement if Mr. Macri wins the presidency, said Ana María Mustapic, a political scientist at Torcuato Di Tella University. “For Massa, it’s better for Scioli to lose badly,” Ms. Mustapic said.

Still, both candidates are trying to lure Mr. Massa and his supporters.

“We’re willing to agree on policies and to find common ground,” Mr. Macri said on Tuesday.

Mr. Scioli has said he is eager to listen to Mr. Massa’s ideas. “If you look at Massa’s voters you see that many are Peronists,” an aide to Mr. Scioli said. “In Scioli’s mind, they will vote for him, not Macri.”

2. ANDRES OPPENHEIMER: A POLITICAL EARTHQUAKE IN ARGENTINA (Miami Herald)
October 28, 2015

Center-right opposition leader Mauricio Macri’s outstanding performance in Argentina’s Oct. 25 first round elections was a political earthquake that — regardless of who wins the Nov. 22 runoff vote — will most likely put an end to 12 years of leftist populist rule, and may have a big impact on other South American countries.

Macri, the mayor of Buenos Aires, surprised everybody by not only forcing a runoff election against government-backed candidate Daniel Scioli, but also by winning the giant province of Buenos Aires — home to 37 percent of the country’s voters and which had been in the hands of Scioli’s Peronist party for nearly three decades — and most of the country’s biggest provinces.

In addition, Macri and fellow opposition candidate Sergio Massa won enough seats in Congress to end President Cristina Fernández de Kirchner’s followers having an absolute majority in the Chamber of Deputies.

Most importantly, by doing much better than most polls had predicted, Macri has the political momentum. He enters the race for the runoff election looking like a winner.

Polls had placed him about 10 points behind the government’s candidate, and many had predicted that Scioli would win the overall election in the first round. Instead, Macri came in a close second, almost tied with Scioli, fueling speculation that he will be able to garner enough votes from defeated opposition candidates to win the second round.

Marci and Scioli’s demeanor on the night of the first round vote said it all. A radiant Macri made what amounted to a victory speech, with a peace-and-love message calling for national reconciliation. “Gracias! Gracias! Gracias!” he kept telling the crowd. Scioli, by contrast, looked like an angry, sour man, warning the nation of dire times if the country were to change course.

Scioli now faces a formidable challenge: If he moves to the center to expand his base, he risks losing the support of Fernández’s leftist populist political machine. If he shifts to the left to secure the government’s political machine, on the other hand, he won’t win many of the moderate votes he needs to expand his base.

To make things worse, relations between the outgoing president and Scioli, which had never been good, got worse after Sunday’s vote. Both sides blame one another for the poor results. Tensions are running high in government circles, government officials concede.

“If the government candidate wants to be president, he will have to stop behaving like a Cristina [Fernández] employee,” said Massa, the No. 3 finisher in first round election.

Massa has not supported either of the final candidates, but is more critical of Scioli than of Macri. Most of Massa’s supporters are tired of the Fernández government’s rampant corruption, mismanagement and authoritarian rule.

A source close to Massa, with access to his campaign’s internal polls, tells me Massa’s supporters are government critics who are likely to vote for Macri “by a bigger than 2 to 1 margin.”

However, this does not mean that an opposition victory is a done deal because many Massa supporters are “Peronists” — followers of the late general Juan Domingo Peron, like Scioli — who could be swayed by a Scioli campaign depicting Macri as an allegedly right-wing candidate who would dismantle social programs. That’s a message that could still work with many voters in Argentina, the Massa campaign source said.

Scioli’s strategy in a planned debate with Macri will be to focus on ideology, seeking to demonize his rival and present him as the candidate of the rich. Macri’s strategy, in turn, will be to focus on the government’s record of corruption, mismanagement, abuse of power and economic downturn, and to depict Scioli as a government peon.

My opinion: Argentina’s election is coming down to a choice between continuity and change, and — in a country with zero economic growth — Macri’s message of change may have the most appeal. Scioli could still win, but only if he changes course and distances himself from the government. Either way, this looks like the end of the leftist populist cycle in Argentina.

3. MAURICIO MACRI VOWS TO END ARGENTINA’S ISOLATION (Financial Times)
By Benedict Mander in Buenos Aires
October 28, 2015

Mauricio Macri vows to end Argentina’s long debt stand-off and drop capital controls on his first day as president, a prospect that is a real possibility after his strong showing in presidential elections on Sunday.

Investors cheered the stunning performance of the centre-right mayor of the city of Buenos Aires in Sunday’s first round of polls, buoyed by his pledge to abandon populist policies that have left the country’s economy teetering on the brink of crisis.

“This is a problem of trust. This government has destroyed trust among Argentines and the world,” said Mr Macri in an interview with the Financial Times, referring to fears that removing capital controls could trigger a run on the currency. “We are going to put Argentina back on a path to growth and back into the world.”

Markets have rallied on the prospect of a market-friendly Macri government after the first round left the challenger almost neck and neck with Daniel Scioli, president President Cristina Fernández de Kirchner’s chosen successor.

The winner of the run-off vote on November 22 will inherit an economy with a ballooning fiscal deficit, inflation of around 20 per cent and international pariah status in global capital markets following Argentina’s 2001 default.

The former president of one of Argentina’s most popular football clubs, Boca Juniors, Mr Macri singled out inflation as one of the most urgent problems, promising to bring it down to single-digits in “a couple of years”. “We can’t continue with this level of inflation,” he said.

Mr Macri also promised to be tough with “holdout” hedge funds demanding full payment on $1.3bn of defaulted bonds. But he said it was important to fix the long-running problem, which is blocking the country’s access to the international capital markets.

“That doesn’t mean that I won’t defend the interests of my country. I will be tough and severe in negotiations, but I don’t want to have a conflict, especially when there is no need to have one,” he said.

This is a problem of trust. This government has destroyed trust between Argentines and the world
– Mauricio Macri

Mr Macri stressed the importance of strengthening the rule of law and ensuring a regulatory framework that would stimulate investment, especially in infrastructure. He also accused the Fernandez government of cheating in official statistics as he promised to restore the credibility and independence of institutions, including the statistics agency and the central bank.

First, though, the 56-year-old son of a powerful Italian-born construction magnate needs to defeat the government-backed Mr Scioli in the second round vote next month that will bring an end to 12 years of populist rule by Ms Fernández and her late husband and predecessor, Néstor Kirchner.

Mr Scioli, who is the governor of the populous province of Buenos Aires that surrounds the city, won the most votes, with 36.9 per cent compared to Mr Macri’s 34.3 per cent. But Mr Macri argues that voters for the other four candidates — including Sergio Massa, a dissident Peronist, who came third with the support of 21 per cent — will choose him in the run-off.

“Those who didn’t vote for the government are looking for a change, so it is our responsibility now to be clear with them to show them that they can rely on us, and that we want the same things,” said Mr Macri.

Argentina’s economy a poisoned chalice for president’s successor whoever wins election inherits a ballooning fiscal deficit

“We are looking forward to sitting down [with Mr Massa] and finding agreement over policies, that’s the first stage. We want to go step by step,” said Mr Macri, who did not rule out the possibility of offering ministerial positions to Mr Massa, who was briefly Ms Fernández’s cabinet chief, in exchange for his support.

Nevertheless, Mr Macri admits to being surprised by his stunning performance in Sunday’s elections that left pollsters scrambling to explain how their predictions could be so wide of the mark.

“We were sure we were going to make it to the second round, but the results were amazing, amazing,” says Mr Macri. Many expected the Peronists to win outright on Sunday and extend their 70-year domination of Argentine politics.

“The government has been very successful in spreading the idea that they were invincible, that it was their destiny to rule this country forever. But suddenly on Sunday night we all realised that we could [do it]. Yes we can!” Mr Macri said.

After eight years at the helm of “one of the most important cities in the world”, Mr Macri now wants to move on. “We’re very proud of what we have done here with a very good team. We succeeded in putting Buenos Aires back into the world right at a time when Argentina was in conflict with the rest of world,” he said. “Now we are ready to run the country.”

4. SANTANDER SAYS ARGENTINE STOCKS COULD RALLY 30% AHEAD OF RUNOFF (Bloomberg News)
By Carolina Millan
October 28, 2015

* Merval benchmark index rises to highest in more than a year
* Speculation increasing opposition’s Macri could win presidency

The rally in Argentine stocks this week after the better-than-expected performance by the opposition in Sunday’s first-round election may just be the beginning, according to Banco Santander Rio SA.

Argentine stocks could rally an additional 20 to 30 percent over the next three weeks ahead of a Nov. 22 runoff vote if opposition candidate Mauricio Macri consolidates his lead in polls, according to Walter Chiarvesio, an equity analyst at Banco Santander Rio in Buenos Aires.

The Merval extended gains Wednesday to surge the most in the world as investors anticipate a possible victory for the market-friendly Macri over ruling party candidate Daniel Scioli, who has campaigned on continuity with gradual changes. The utilities and banking sectors are the most attractive in the short-term, Chiarvesio said.

“The market is reacting to Macri’s good performance on Sunday and anticipating that Macri will win the election,” Chiarvesio said.

The Merval rose 7 percent to the highest since September 2014 at 3 p.m. in Buenos Aires, led by Banco Macro, which soared 15 percent to the highest price on record. American depositary receipts of Argentine stocks also jumped more than 10 percent in New York trading, led by banks including Macro, Grupo Financiero Galicia SA and BBVA Banco Frances SA.

Macri’s policy proposals include ending capital controls on his first day in office and settling a decade-long dispute with holdout creditors from Argentina’s 2001 default. A Gonzalez y Valladares poll published in Cronista on Tuesday showed Macri with 45.6 percent support for the second round, compared with 41.5 percent for Scioli.

5. MERVAL COULD RALLY 30% AHEAD OF RUNOFF VOTE, CHIARVESIO SAYS (Bloomberg News)
By Carolina Millan
October 28, 2015

* Merval benchmark index rises to highest in more than a year
* Speculation increasing opposition’s Macri could win presidency

The rally in Argentine stocks this week after the better-than-expected performance by the opposition in Sunday’s first-round election may just be the beginning, according to Banco Santander Rio SA analyst Walter Chiarvesio.

Argentine stocks could rally an additional 20 percent to 30 percent over the next three weeks ahead of a Nov. 22 runoff vote if opposition candidate Mauricio Macri consolidates his lead in polls, Chiarvesio said in an interview.

The Merval rose the most in the world Wednesday as investors anticipate a possible victory for Macri over ruling party candidate Daniel Scioli, who has campaigned on continuity with gradual changes. The utilities and banking sectors are the most attractive in the short-term, Chiarvesio said.

“The market is reacting to Macri’s good performance on Sunday and anticipating that Macri may win the election,” Chiarvesio said.

The Merval rose 5.5 percent to the highest since July in Buenos Aires, led by Banco Macro, which soared 13 percent to a record. American depositary receipts of Argentine stocks also jumped more than 10 percent in New York trading, led by banks including Grupo Financiero Galicia SA and BBVA Banco Frances SA.

Macri’s policy proposals include ending capital controls on his first day in office and settling a decade-long dispute with holdout creditors from Argentina’s 2001 default. A Gonzalez y Valladares poll published in Cronista on Tuesday showed Macri with 45.6 percent support for the second round, compared with 41.5 percent for Scioli.

6. MASSA ALLIES LEAN TOWARD OPPOSITION CHALLENGER IN PRESIDENTIAL RUN-OFF (Reuters News)
By Richard Lough and Maximilian Heath
October 28, 2015

Oct 28 (Reuters) – Ruling party candidate Daniel Scioli’s hunt for swing voters in Argentina’s presidential run-off vote suffered a blow on Wednesday when two of defeated candidate Sergio Massa’s top allies said they would not vote for him.

Jose Manuel De la Sota, the governor of Cordoba province and a senior figure in Massa’s alliance, said the leftist government of outgoing leader Cristina Fernandez had been “anti-federal and authoritarian” in style. Roberto Lavagna, a former economy minister, said he wanted to see “change”.

As Scioli and his conservative challenger scramble for Massa’s 5 million voters, politicians from Massa’ New Alternative alliance are meeting in a Buenos Aires hotel to draw up a blueprint of policy priorities.

Massa allies on Monday told Reuters that the document would have more in common with pro-business Macri’s campaign platform and would be a tacit “wink” in his direction. Massa, though, may not explicitly back one candidate of the other.
“Kirchnerismo has done no good for the country,” De la Sota told reporters, referring to the name given to the leftist populism of Fernandez and her late husband and predecessor Nestor Kirchner. “It has gotten drunk on power.”

Asked if he would vote for Scioli, De la Sota gave a categoric “No”.
Macri’s unexpectedly strong showing in Sunday’s ballot shocked the ruling Front for Victory party which had expected to win the election in the first round, or at least go into the second round with a wide lead.

Fernandez, a fiery leftist who often rails against Western excess, will leave behind a divided nation. She is hailed by the poor for expanding social welfare programs and protecting local industry but loathed by others who blame her for strangling the economy.

Massa’s camp says the policy blueprint will lean heavily on his first-round campaign pledges: fighting inflation, scrapping the income tax for workers and removing hefty taxes on corn and wheat exports.
Scioli promises to maintain Fernandez’s social safety net and talks only of gradual change to her protectionist policies that include trade and capital controls.

Macri promises fast-moving reform to dismantle the controls. Massa had pitched himself as a middle-way candidate.

“Personally I am in the change camp. We need to have a clear understanding what change means. But in any case, it is not a vote for the Front for Victory,” said Lavagna, who had served under Nestor Kirchner before splitting with him. Lavagna was touted to return to the Economy Ministry had Massa won.

7. ARGENTINA’S MASSA TO ELECTION RIVALS: WANT MY VOTERS? HEED MY IDEAS (Reuters News)
By Richard Lough and Maximilian Heath
October 28, 2015

Defeated Argentine presidential hopeful Sergio Massa unveiled key policy demands on Wednesday and said his 5 million supporters would vote in next month’s run-off election based on how the two remaining candidates respond.

Massa, whose plans ranged from cracking down on drug-runners to scrapping income tax for workers, stopped short of endorsing either ruling party candidate Daniel Scioli or his conservative rival Mauricio Macri.

“The stance that the two candidates take vis-a-vis these proposals will define where more than 5 million voters place their support,” he said.

Earlier, Scioli’s hunt for swing voters suffered a blow when two of Massa’s top allies said they would not vote for him.

Macri has the momentum early in the race to the Nov. 22 run-off after his strong showing in Sunday’s ballot defied polls and shocked the ruling Front for Victory party, which had eyed a win in the first round.

Jose Manuel De la Sota, the governor of Cordoba province and a senior figure in Massa’s alliance, said the leftist government of outgoing leader Cristina Fernandez had been “anti-federal and authoritarian” in style. Roberto Lavagna, a former economy minister, said he wanted to see “change”.

“Kirchnerismo has done no good for the country,” De la Sota told reporters, referring to the name given to the leftist populism of Fernandez and her late husband and predecessor Nestor Kirchner. “It has gotten drunk on power.”

The policy blueprint leaned heavily on Massa’s first-round campaign pledges and included scrapping the income tax for workers, removing hefty taxes on corn and wheat exports, tackling narco-gangs and stamping out corruption.

“Between change and continuity, change has already won,” Massa said. “Now what we need to construct is intelligent change.”

Massa allies on Monday told Reuters that Macri would find more common ground with the policy priorities than Scioli and that the document would be a tacit “wink” in Macri’s direction.

RELUCTANT KINGMAKER

Although the lawmaker who split with the ruling party in 2013 is in a strong position to influence the outcome of the run-off, he has ducked playing kingmaker.

Doing so could risk the ambitious 43-year-old’s power base. Many of his supporters blame Fernandez for hobbling the economy but view Macri as beholden to big business. Others balk at the prospect of four more years of brazen leftist populism under Scioli.

“He can insinuate, say change is desirable and let voters chose their own path. There is no need for him so split his own force,” said political analyst Federico Thomsen.

Fernandez, a fiery leftist who often rails against Western excess, will leave behind a divided nation. She is hailed by the poor for expanding social welfare programs and protecting local industry but loathed by others who blame her for strangling the economy.

Scioli promises to maintain Fernandez’s social safety net and talks only of gradual change to her protectionist policies that include trade and capital controls.

Macri promises fast-moving reform to dismantle the controls. Massa had pitched himself as a middle-way candidate.

Massa broke from the ruling party in 2013 and is a strong critic of Fernandez. On the campaign trail, however, he also warned Macri could drive the economy into a new crisis by imposing pro-market reforms too abruptly.

“We need to have a clear understanding what change means. But in any case, it is not a vote for the Front for Victory,” said Lavagna, who was touted to return to the Economy Ministry had Massa won.

8. U.S. JUDGE URGES ARGENTINA TO RESUME BOND LITIGATION TALKS (Reuters News)
By Nate Raymond
October 28, 2015

Oct 28 Days after an election sent the Argentine presidential race into a runoff, a U.S. judge on Wednesday urged the South American nation to resume talks to settle bondholder litigation flowing from its $100 billion default in 2002.

U.S. District Judge Thomas Griesa in New York made the remarks as creditors suing over defaulted bonds urged him to expand to nearly $8 billion the amount Argentina must pay them to service its restructured debts.

Griesa did not reference Sunday’s election to replace Argentine President Cristina Kirchner Fernandez, whose administration has called the suing creditors “vultures.”

But he noted Argentina previously declined to participate in settlement negotiations and said he assumed “at this late date in this very lengthy litigation that attitude is over with.”

“The way to ultimately resolve this litigation must come through settlement,” Griesa said.

The comments came during the latest hearing litigation by creditors seeking full repayment on Argentine bonds following the country’s 2002 default.

The holdouts spurned Argentina’s 2005 and 2010 debt restructurings, which resulted in 92 percent of its defaulted debt being swapped and investors being paid less than 30 cents on the dollar.

Wednesday’s hearing concerned whether Griesa should order Argentina to pay 530 creditors seeking $6.15 billion when it services its restructured debt.

Those creditors were seeking the same treatment as several hedge funds the country was ordered to pay $1.33 billion plus interest.

That decision, which the U.S. Supreme Court declined to review, pushed Argentina into default again in July 2014 after it refused to honor Griesa’s orders and failed to settle with the holdouts, who with interest are now owed $1.76 billion.

Robert Cohen, a lawyer for Elliott Management’s NML Capital Ltd, a lead holdout, argued on Wednesday that expanding the amount of debt subject to an injunction would be a “plus not a minus” in facilitating a settlement.

Carmine Boccuzzi, Argentina’s lawyer, countered that doing so would complicate settlement talks by expanding the number of holdouts with “veto power” over a deal.

The hearing came after Sunday’s presidential election in Argentina to determine who would succeed Fernandez ended with a strong showing from a pro-business opposition candidate.

A run-off between opposition candidate Mauricio Macri and ruling party candidate Daniel Scioli is scheduled for Nov. 22.

9. ARGENTINE CORN SEEN WINNER FROM POSSIBLE ELECTION UPSET (Reuters News)
By Hugh Bronstein
October 28, 2015

The surprisingly strong showing by Argentina’s opposition presidential candidate last weekend could prompt higher than expected corn exports at a time when U.S. farmers are already nervous about their competitiveness.

Mauricio Macri defied the opinion polls by easily forcing a run-off with ruling party candidate Daniel Scioli. Macri says he would scrap corn and wheat export curbs and eliminate export taxes on both crops while Scioli keeps his platform more vague.

Farmers say Macri’s policies would be a huge incentive for them to switch some soy fields over to corn after years of neglecting crop rotation due to interventionist government policies that have hammered down corn’s profitability.

Macri, a proponent of free markets after eight years of heavy state controls under outgoing President Cristina Fernandez, has the momentum going into the final vote on Nov. 22. But Fernandez-ally Scioli is still very much in the race.

With this season’s wheat already in the ground, Argentine growers are planting soy this month through December while late planting in the main corn belt extends into the early January dog days of the Southern Hemisphere summer.

The Buenos Aires Grains Exchange had forecast 2015/16 corn planting would fall to 2.7 million hectares from 3.4 million in the previous year — a prediction made before Macri’s pundit-defying electoral shocker on Sunday.

“If the political signals are right, we could see the same corn area planted this year that we had last year,” said Martin Fraguio, executive director of the Maizar corn industry chamber.

That would mean an increase in Argentine 2015/16 corn planting of about 25 percent over current estimates, which would add to the country’s exportable surplus.

So far in 2015, Argentina has shipped abroad 12.9 million tonnes of corn, according to official data.

Increased planting could put Argentina in contention with Ukraine, the world’s No. 3 corn exporter. It could also prompt the U.S. Department of Agriculture to reverse course on its Argentina export outlook for 2015/16, which it trimmed by 1 million tonnes earlier this month to 14.5 million.
That would be a headache for U.S. corn farmers already grappling with a strong dollar. The muscular greenback has meant that growers in main rival Brazil, where the country’s currency has weakened by nearly a third this year, can offer lower prices.

The United States and Brazil are the world’s No. 1 and 2 corn exporters, respectively, followed by Ukraine, which ships around 17 million tonnes a year, and then Argentina.

Spot U.S. corn exports are currently offered around $180 per tonne FOB at the Gulf Coast, some $10 per tonne FOB above Argentine shipments.

U.S. shipments for spring — when the potential size of the 2015/16 Argentine harvest should be known — are being offered around $182 per tonne. Argentine exports are way below.

“The market is showing us that (export quotas) won’t be disturbing the market next harvest,” Santiago del Solar, who farms thousands of hectares in Buenos Aires province, said in an email.
“$140-143 per tonne is better than $130 we had a few weeks ago for April 2016,” he added.

But Solar also cautioned the area planted with corn this season might be restricted.

“We can expect more late-planted corn area this year, but only up to a point because a lot of us already have inputs and fields already prepared for soybeans,” he said.

Soybeans are exempt from Argentina’s export curbs but carry a hefty 35 percent export tax, which Macri says he wants to cut by 5 percent per year.
NO QUOTAS, BIG PROFITS?

If export quotas are lifted on corn, farmers’ profits could catapult higher for the 2015/16 crop year, according to industry consultancy Agritrend. A farmer who owns his land could make profits of $672 per hectare on corn, up from $350 currently.

Farmers renting land would make $548 per hectare — more than double the $225 with export curbs, the consultancy said. About 60 percent of Argentine farmland is leased.

A Macri win could also spur planting of Argentine wheat, which goes into the ground in June and July.

“We expect Macri will from day one send corn and wheat export taxes to zero. That’s a huge incentive to plant both,” Fraguio said.

Cuts in wheat taxes and quotas could prompt more sales to Brazil, displacing imports of U.S. hard red winter wheat which have been filling the gap. Concerns over that were cited for part of a pullback in HRW wheat futures on Tuesday.

10. ARGENTINA’S KIRCHNER ERA ENDS (The New Yorker)
By Jonathan Blitzer
October 28, 2015

Even before the returns were in on Sunday night, the three candidates in Argentina’s national elections were already making their speeches, and each one, in his way, claimed victory. It wasn’t that the results were ever in dispute, though it did take a curiously long time for them to materialize; rather, the takeaway was, like so many things in Argentina throughout the last eight years, a question of how one chose to read into the results the controversial incumbent President, Cristina Fernández de Kirchner.

The candidate Kirchner endorsed, Daniel Scioli, the governor of the province of Buenos Aires, was the front-runner, with the most to lose. “The governors are with me, the Presidents of the regions are with me, the mayors are with me, and the legislators are with me,” he told the press beforehand. He entered Sunday with an air of inevitability surrounding his candidacy, but if he failed to gain forty-five per cent of the vote, or if his opponents drew within ten per cent of his total, he would have to face a runoff on November 22nd. Almost no one predicted it, but that is exactly what happened. Scioli won Sunday’s election by a very narrow margin—taking slightly more than thirty-six per cent of the vote—and as a result he limps into the second round of voting looking jilted and precarious.

Scioli didn’t do himself any favors on election night. When, about two hours before the results were announced, he began attacking his principal rival, the conservative mayor of Buenos Aires, Mauricio Macri, he seemed to be giving a premature concession speech. Without using the word balotaje, or runoff, he began his campaign for it by rattling off Kirchner’s signal accomplishments (welfare expansion, the nationalization of an oil company), and saying that none of that would have been possible under Macri. “Argentines don’t want to go back to the economic adjustments, devaluations, and indebtedness,” he said, dredging up the catchwords of past conservative administrations. A vote for Macri, he claimed, would return the country to the nineteen-nineties, when corruption and misguided economics led to one of the largest sovereign defaults in history.

For Macri, an unrepentant conservative in a country run by an iconic left-wing populist, the bar was low: he only had to make the contest close for the night to seem to go his way. “What happened today changes the politics of this country,” he declared, on securing just thirty-four per cent of the vote. (The gubernatorial candidates on his ticket also won in the provinces of Buenos Aires and Jujuy, in the country’s north.) He’s since received an unexpected boost from the third-place finisher, Sergio Massa, Kirchner’s disgruntled former Cabinet chief, who had twenty-one per cent of the electorate behind him. Massa and Scioli belong to the same broad-based ideological movement, known as Peronism, but Massa has suggested that he might throw his support to the Macri camp. On Monday, amid speculation about what that could mean for the runoff, Scioli announced that he’d debate Macri on November 15th. With Macri gaining momentum, Scioli will try to reposition himself—not just in terms of his rival but also, crucially, in relation to Kirchner herself.

From the start of the campaign, Scioli has had to walk a fine line where Kirchner is concerned. “Continuity with some change, that’s what people want,” Maria Victoria Murillo, a political scientist at Columbia University, told me. On the one hand, Scioli has portrayed himself as a successor to Kirchner, who, while divisive, enjoys a broad base of support in the middle-class electorate. On the other, he needs to create distance because the economy is bottoming out—G.D.P. is down, inflation has soared, exports have sunk, and unemployment is up—and the public has grown restive. As the journalist Carlos Pagni put it, “the prosperity that always accompanied Kirchnerism has ended.”

Scioli has claimed that he’s for “gradualism” and moderation, at once an exponent of continuity and change. A case in point is his posture on a group of creditors who have taken Argentina to court over the repayment of old bonds in default. The hedge funds which these investors represent are known as “vultures,” for buying up distressed debt and suing for the full value of the assets. Kirchner has been sparring with them for years, refusing to pay them the more than a hundred billion dollars they claim is due and turning the battle into a populist cause célèbre. While global commodity prices were high, Kirchner could afford to be shut out of capital markets—part of the collateral damage of her hard line on the issue—but the circumstances have changed; it’s likely her successor will have to strike some sort a deal. Scioli, for his part, has sounded as bellicose as Kirchner when asked about the vultures in public. But off the record his advisers have said the candidate understands he’ll have to negotiate. “Kirchnerism is over,” one Scioli adviser reportedly said. “Soon enough, they’ll realize.”

One of the ironies of Scioli’s situation is that he’s always had a fraught relationship with Kirchner. Some of the bad blood goes back to the administration of her late husband and predecessor, Nestor. Scioli was Nestor Kirchner’s running mate in 2003, a holdover from some of the deals Kirchner had to cut in order to round up support for his Presidential bid. Once in office, he seemed to resent Scioli, whom he kept close but never really trusted. Each time Scioli veered from the Kirchner line—say, on a tax measure or some minor matter of policy—he was publicly brought to heel. “What followed were years of petty snubs and various humiliations,” Gabriel Pasquini, the author, with Graciela Mochkofsky, of a book on Kirchner, told me. Scioli endured the situation until the Kirchners nominated him for the governorship of the province of Buenos Aires, in 2007. On the surface it was a prestigious post, since forty per cent of the country lives in the province, but historically it’s been double-edged for seekers of higher office. “There’s a dictum of sorts that the governor of Buenos Aires province will never become president,” Pasquini said. Rather than a proving ground, the province, because of its size and the scope and complexity of its problems, tends to mire its leaders in controversy and overexposure.

Then there’s the question of Cristina Kirchner’s endorsement, which was only ever half-hearted. Earlier this month, at a joint campaign stop, Cristina Kirchner said, “I ask all Argentines to get beyond all the antipathies we have and to think about what we’ve done over these years. There has to be continuity.” Some interpreted the word “antipathies” as a reference to Scioli, whom she seemed willing to accept but not embrace for the sake of her legacy. Others claimed she was speaking more generally about the “antipathies” wrought by her back-to-back administrations. Whatever the case, Kirchner loyalists have been less ambiguous about their misgivings with Scioli. Last week, the leader of one influential group of Kirchnerist intellectuals said he’d be voting for Scioli but only with a “long face.“ Needless to say, this poses problems for a candidate pitching himself as Kirchner’s anointed successor. “Will the President even let herself be summoned in the form of her candidate?” Carlos Pagni asked, practically rhetorically, in La Nación.

Scioli’s careering prospects going into next month’s runoff highlight Kirchner’s weaknesses, but not for the reasons that most people think. The conventional wisdom is that if Kirchner’s candidate falters, it signals the end of her own clout. That decline has long been in motion, the result of a dwindling economy and the mere passage of time: after twelve years in power, including two terms in office, she cannot run again for the Presidency until 2019. Some analysts maintain that her objectives going into these elections were Machiavellian from the start: that she intended to hand over the Presidency to a successor who would come into office with a limited mandate with which to face an increasingly intractable economy. This does not seem unlikely after Sunday, and it could conceivably strengthen Kirchner’s hand if she ever wanted to return to office. (And a Macri win, after all, might not be the worst thing for her.) Still, her bastions of support within the Peronist party will have to adjust to life without her, whether or not she plans to run again in four years.

The real mark of Kirchner’s weakness, though, may be that she never really had a proper successor in the first place. It’s hard, even now, to define what Kirchnerism is, exactly. After the past eight years, it looks to be a mélange of populism, elements of genuine progressivism, fierce partisanship, economic nationalism, and political savvy (even if it reads as bluster abroad). Central to a lot of it was the economic boom that funded the policies for which Kirchner is most beloved. And yet these years have been marked by unremittingly severe domestic crises. The battle lines were drawn within months of Kirchner taking office, when she levied a new tax on agricultural exports that prompted national strikes and road blockages; before long, she was embroiled in an ugly and protracted fight with the media conglomerate Clarín. From the start of her first term, there were repeated calls for her resignation, and they never really went away. “People see what they want to see with Kirchner,” Murillo said.

Through it all, there were two people who kept Kirchnerism afloat as a rhetorical armature, political posture, and topsy-turvy set of policies: the Kirchners themselves. Their original plan appeared to be trading off presidential terms to elongate their time in office. Then, in 2010, Nestor Kirchner died of a heart attack, and just like that the equation diminished. The year before, he and his wife had made a pitch for a new leftist coalition, to broaden their base of support, but it never materialized. In 2011 Kirchner handpicked a Vice-President, possibly with an eye toward grooming a successor, but he was almost immediately named in a corruption scandal and spent the rest of their term in the shadows. Settling on Scioli was something of a defeat for Kirchner, since he was the only candidate who could be both nominally loyal to her and could win an election. You’d think a caudillo never has to compromise, but you’d be wrong.

11. AFTER ARGENTINA ELECTION RALLY, FAVOR BANKS, UTILITIES, EXPORTER STOCKS? (Barron’s)
By Dimitra DeFotis
October 28, 2015

Argentina’s first runoff presidential election won’t come for another month, but Raymond James analysts are positive on equities despite a runup and outperformance relative to other Latin American assets.

Analysts Federico Rey Marino, Santiago Wesenack and Fernando Suarez wrote on Tuesday:

“Argentine stocks rallied by an average of 12% in U.S.-dollar terms on Monday 26, on the back of Sunday’s presidential election results. Stocks in banks and utilities were the best performers, after gaining 15% and 13%, respectively. FPV candidate Daniel Scioli, and Cambiemos candidate, Mauricio Macri, will now compete in a presidential run-off for the first time ever on November 22. We maintain our constructive medium-term view on Argentine equites, as we believe the next administration will start making progress to put the economy back on track again sooner rather than later. Counting on normalization, we continue to favor banks, utilities, and agro/export-related companies. However, now only trading at an average of 15% below the March highs, after accumulating a 19% increase in the past three trading sessions, we consider additional support for current valuations may rely on further certainties regarding the outcome of the election, and more insight regarding future macro and sectorial policies.”

Indeed, the Global X MSCI Argentina exchange-traded fund (ARGT), which is up 2.4% today, is up 20% just in October. Still, investors should consider that the fund is up only 2.3% this year, while the iShares Latin America 40 ETF (ILF), weighed down by assets in Brazil, is down 24%.

Argentine banks with U.S.-traded shares include Banco Macro (BMA), which is up 7.5% today and up 52% this month, and Grupo Financiero Galicia (GGAL), which is up 4.5% today and up 40% this month. Argentine electricity distributor Empresa Distribuidora y Comercializadora Norte, otherwise known as Edenor (EDN), is up 2% today and up 36% this month.

In energy, oil-and-gas exploration company YPF (YPF) is up 5% today and up 27% this month, while Petrobras Argentina (PZE) is up 4% today, but up only 1.4% this month.

12. OPPOSITION CANDIDATE’S SURGE IN ARGENTINE ELECTION SUGGESTS IMPROVED BUSINESS ENVIRONMENT LIKELY, BUT FRACTURED CONGRESS POSES SIGNIFICANT HEADWINDS (IHS Global Insight Daily Analysis)
By Paula Diosquez-Rice, Laurence Allan, Carlos Caicedo
28 October 2015

This will be the first time in 27 years that an Argentine election goes into a second round, which will take place on 22 November.

IHS perspective

Significance

The first round of Argentina’s presidential and general elections put government candidate Daniel Scioli, Front for Victoy (Frente para la Victoria: FpV) – 36.8% and opposition candidate Mauricio Macri, Republican Proposal/Let’s Change (Pro/Cambiemos) – 34.33% – nearly neck and neck.

Implications

Pro-business Macri has the momentum, further indicated by the gains his party made in gubernatorial elections in Buenos Aires province and in national congress, but third-place candidate Sergio Massa (21% of the vote) has emerged as kingmaker.

Outlook

An improved business environment is anticipated regardless of whether Scioli or Macri wins the presidency; however, the complicated balances between the president, Congress and the provinces will slow down implementation of policies.

Presidential candidate Sergio Massa talks to the press after voting in Buenos Aires, Argentina, Sunday, 25 October, 2015PA.24540672
The slim margin of Daniel Scioli’s first-round lead had not been anticipated by pollsters and the main expectation within the government camp was for Scioli to win outright in the first round. Reflecting this, Scioli went as far as naming his cabinet. IHS has consistently assessed that the election would be close and a second round between Scioli and Mauricio Macri would be necessary. Macri’s Republican Proposal (Propuesta Republicana: PRO) and centrist opposition Let’s Change (Cambiemos) electoral coalition also performed strongly in the congressional election and won gubernatorial elections in the key province of Buenos Aires.

Those two factors strongly suggest that Macri has the better momentum going into the second round. However, the potential second-round choices of voters who supported third-place Sergio Massa, with 21.34%, will be critical to the outcome.

Massa crucial for the second round

Sergio Massa is already the subject of an intense campaign of offer and counter-offer between Scioli and Macri, as they seek to get his second round support. Although Massa remains nominally a Peronist and thus from the same political background as Scioli, efforts at finding common ground for an alliance have failed so far. Likewise, aggressive Kirchnerist tactics against Massa, since he performed strongly at mid-term election in 2013, has resulted in Massa hardening his anti-government stance. The vice presidency would be an obvious offer to make to Massa, but that would mean displacing President Cristina Fernández de Kirchner’s favourite, Carlos Zannini, in that role. Sources close to Scioli have admitted that bringing Massa to their side would not be easy. Significantly, Massa has said that if Scioli remains Fernández’ “puppet” he will lose the election.

Personal atmospherics between Macri and Massa appear better. Although a proposed electoral coalition between them was rejected early in the campaign, neither side has attacked the other with the same bitterness that has been evident between Scioli’s campaign team and the other two candidates. Massa has given some hints on where his sympathies lie by noting that he was against “continuity”. However, Macri’s ability to offer attractive political posts to Massa is constrained by the political debts owed to his coalition partners, notably the Radical Civic Union (Unión Cívica Radical: UCR), without whose strong national networks he could not have reached the second round.

A deteriorating macroeconomic situation to prove major challenge for new president

Argentina’s next president will face a challenging macroeconomic environment. The fiscal deficit is expected to reach 6% of GDP in 2015. National accounts data show fiscal spending growing at double digits in real terms, while tax revenue has lagged well behind.

Meanwhile the dispute with the “holdouts” over defaulted debt shows no sign of abating. The latest ruling, by US-based judge Thomas P. Griesa, allowed for another 15 plaintiffs (the so-called “Me too’s”) to sue Argentina, increasing the amount of debt in dispute to USD10 billion. To this adds dwindling foreign-exchange reserves, declining export revenues, and forecast low commodity prices for 2016. This significantly constrains Argentina’s ability to use the central bank reserves to bail out the government as has been the case so far.

Further challenges for the central bank are how to source the US dollars needed to stabilise the peso and meet the private-business demand for hard currency. Sources in the tradeable sector have reported that the central bank is still to authorise USD9-billion requested by importers. Equally challenging for the next government would be how to manage devaluation expectations. The peso remains overvalued; unlike other emerging-market currencies it has devalued by just 11.3% against the dollar this year. This contrasts with the 62% depreciation experienced by the currency of Brazil, Argentina’s main trading partner. Both Macri and Scioli have vowed to address these imbalances, but this is likely to take months rather than weeks. A carefully managed transition process will be required in order to avoid capital flight and runaway inflation.

Outlook and implications

Markets welcome the surge of pro-business Mauricio Macri; bond prices rose on the back of the first round result. That is understandable given Macri’s public statements; he has vowed to lift currency and import controls and let an overvalued peso to find its market value straight away. However, IHS assess that the removal of such controls cannot be done overnight, given low levels of foreign reserves and high levels of inflation. Yet, we assess that the election results so far represent a marked weakening of Kirchnerism, opening the door for an improved business environment in , regardless of who wins. Even under Scioli, who has a good rapport with the private sector, progress towards a more predictable, business friendly environment is anticipated. The downside under a Scioli administration, is his close association with outgoing President Cristina Fernández, who will try to force him to maintain the state interventionist polices that have alienated investors and isolated Argentina. Scioli, as moderate politician is unlikely to heed that; however, he will be forced into complex negotiations with Kirchnerism, which will try at every step to have a say in policymaking.

The makeup of Congress will pose significant headwinds for effective governance. On 25 October, voters also elected a large chunk of National Congress and the governors in 11 of Argentina’s 25 provinces. On the first, the headline was the significant setback suffered by the Front for Victory (Frente para la Victoria: FpV) in congress, which saw its number of seats dwindle to 117, although it still remains the largest single bloc, with different opposition factions having the remainder of the 257 seats in congress. The FpV retains a majority in the Senate. A Scioli government would thus not have an easy ride in the chamber of deputies. A Macri presidency would face an FpV, diminished but still the largest single bloc in the chamber, with the Senate a clear obstacle for him. He will need to build congressional alliances to push through legislation. Although the tendency of minority parties to gravitate towards the government side remains strong, maintaining such alliances will be difficult and unpredictable. Legislative progress for either man as president is therefore going to be extremely difficult, at least until the October 2017 mid-terms. A new president will thus face high barriers to pass parameter-shifting legislation into law and any especially contentious policies – more likely from Macri than Scioli – will become diluted, unless the new president uses his wide discretionary powers. Use of those though could easily spark fierce resistance from other sectors in Congress.

13. THE LONG VIEW: HOW ARGENTINA AND BRAZIL STEPPED BACK FROM A NUCLEAR RACE (Americas Quarterly)
By Matias Spektor
October 28, 2015

The severe tone of the U.S. National Intelligence Estimate of September 8, 1982, was worthy of the darkest moments of the Cold War. It warned that if Country A built a nuclear device, “security relationships” in the entire region “would be upset.” Furthermore, it warned Country B “could be prompted to move as quickly as possible to attain a nuclear weapons capability to buttress its own security and sense of national prestige.”

It scarcely seems possible in today’s context, but Country A was Argentina and Country B was Brazil. Indeed, in the late 1970s and early 1980s, South America’s two biggest countries were on the verge of a nuclear race. With a long-standing diplomatic rivalry, they were now bent on developing sensitive nuclear technology, including enriching and reprocessing uranium, and building ballistic missiles.

Making matters worse, military regimes governed both countries at the time, and this work took place with little if any civilian scrutiny. National security doctrines in both countries identifi ed each other as a major potential security threat, with the armed forces having contingency plans in place in the event of war.

Yet, starting in the 1980s, the two countries set out on an ambitious path of nuclear cooperation. In the process, they imposed new restraints on their nuclear programs and rewrote national security doctrines to eliminate the possibility of war. To everyone’s surprise, they also built a mechanism of mutual nuclear inspections that was unprecedented anywhere.

This set the stage for the bilateral relationship of today, which — apart from occasional skirmishes over trade, or on the soccer field — is entirely peaceful. Indeed, South America as a whole is free of interstate conflict, due in part to the two countries’ success in defusing tensions during that era.

How did it all happen?
A Common Threat

Argentina and Brazil began cooperating on nuclear matters in large part because of the policies of President Jimmy Carter’s 1977–1981 government. The White House was trying to prevent the further proliferation of nuclear technology by curtailing third-party exports of sensitive technologies, while also pushing against the human rights violations perpetrated by the military regimes.

Both Buenos Aires and Brasilia saw Carter as a threat to their national “rights” to nuclear technology development. And, crucially, they thought U.S. policies denying them technology were even more threatening than the risks emanating from the other’s nuclear program.

We now know this perception made some sense. After all, at a three-day conference in 2012 to explore this chapter in history, documents reviewed by a group of experts revealed that neither Brazil nor Argentina were anywhere close to developing full-fledged nuclear weapons programs. Foreign intelligence agencies overestimated their achievements. Documents also show that neither country built its nuclear program primarily as a response to a perceived nuclear threat from the other.
Interpersonal Trust

Previously secret documents also indicate that, due in part to the perceived threat from Washington, Argentine and Brazilian officials were able to establish a high degree of empathy and trust at the highest levels. Two episodes in particular stand out because they could have led to a serious deterioration in the relationship, but ended up leading to greater nuclear cooperation instead.

The first was in November 1983, when the Argentine government announced its mastery of the technology to enrich uranium in a pilot-scale lab at the then-secret facility of Pilcaniyeu. The announcement caught Brazilian authorities by surprise, and they doubled down on their effort to develop uranium-enrichment capacity at the Aramar facility — which they achieved in 1987.

Yet, before they went public, Argentine authorities made a point of giving their Brazilian counterparts early warning. The governing junta sent a private letter to Brazil’s military president, João Figueiredo. The gesture was welcomed in Brasilia. Brazilian authorities knew Argentina lacked the industrial capability to enrich uranium, and thereby to develop a nuclear explosive.

A month after the Pilcaniyeu announcement, civilian rule returned to Argentina and Raul Alfonsín became president. Alfonsín understood the risk of Brazil and Argentina becoming ensnared in a nuclear arms race, and recognized that diverting resources to wasteful military competition could wreck his plans for securing Argentina’s democratic transition.

In early 1984, Brazil presented through informal channels a proposal for a joint declaration renouncing nuclear tests. Argentina agreed, and soon afterwards it put forward a proposal to develop a system of bilateral safeguards and mutual inspections.

Still, there was no guarantee yet that tensions would be fully defused. So when civilian rule also returned to Brazil in 1985 and José Sarney became president, the two leaders began working quickly to build trust. When they met for the first time, Alfonsín said he wanted to visit the Itaipú Dam, which for over a decade had been at the heart of a bilateral dispute over the use of international waters in the River Plate Basin. During that same trip, Alfonsín made an additional gesture of trust by inviting Sarney to visit the Argentine nuclear facility at Pilcaniyeu. The new spirit of reciprocity required that Sarney extend the same courtesy to Alfonsín, who visited Aramar in 1986. These symbolic visits filtered down to deeper and more frequent cooperation between scientists and technicians, including visits to each other’s installations.

The second big test of the cooperative relationship came in August 1986, when the Brazilian newspaper Folha de São Paulo revealed two major shafts in the Serra do Cachimbo site in northern Brazil. According to the newspaper, the boreholes had been drilled by the air force as testing sites for nuclear explosions.

Argentine officials were taken aback by the leak, and let Brazil know. In Brasilia, the government moved quickly to inform their Argentine counterparts that the boreholes were repositories for nuclear waste similar to ones Argentina had built in Patagonia.

In a recent newspaper interview, Sarney took pride in how the relationship he achieved with Alfonsín helped avert a bigger crisis. “We established a trusting relationship between us,” the former president said. “What we see happening now with immense difficulty with Iran, we did here in South America without international mediation.”
A Concerned U.S. Congressman

It is indeed true that nuclear rapprochement in the Southern Cone did not necessitate foreign mediation. But it would be unfair not to recognize the role of a congressman from the United States.

The first proposal for an Argentine-Brazilian system of mutual nuclear inspections was developed by a U.S. congressman from Illinois, Paul Findley. In 1977, Findley traveled to Buenos Aires and Brasilia to argue that a system of bilateral inspections could help mitigate suspicions in the United States and elsewhere about the countries’ nuclear intentions. A month later, the Findley proposal appeared in The Washington Post.

The Brazilians dismissed Findley’s plan at once. Yet in subsequent years, officials in Buenos Aires came back to it time and again. Alfonsín repeatedly insisted with his Brazilian counterparts that such a mechanism would pave the way for greater stability in South America. Sarney eventually agreed to explore mutual inspections. When he did, Findley did not seek credit.

By the early 1990s, the two countries set up a binational agency to carry out inspections and controls. In 1994, Argentina and Brazil joined the Tlatelolco Treaty that established Latin America and the Caribbean as a Nuclear Weapons Free Zone. Shortly thereafter, they both joined the Nonproliferation Treaty, definitively establishing themselves as non-nuclear actors — and, above all, peaceful neighbors.

Spektor is an associate professor of international relations at Fundação Getulio Vargas in Brazil and a columnist at Folha de São Paulo, a leading newspaper. He is author of 18 Dias: quando Lula e FHC conquistaram o apoio de Bush (2014), Kissinger e o Brasil (2009) and, more recently, he coedited The Origins of Nuclear Cooperation: a Critical Oral History between Argentina and Brazil (2015) with Nicholas Wheeler and Rodrigo Mallea.

14. ‘DISGUSTING’ AND ‘BITTER’: THE AWFUL BOOZE ARGENTINA CAN’T GET ENOUGH OF (CNN Wire)
By Kamilia Lahrichi
28 October 2015

(CNN) — Think medicine tastes awful?

Maybe Fernet isn’t the drink for you.

To some palates, the incredibly bitter Italian liqour is worse than cough syrup.

Bizarrely though, in Argentina it’s so popular that the country now consumes more than 75% of all Fernet produced globally.

And since the drink is traditionally mixed with Coca-Cola in an ice-filled glass, it also contributes to making Argentina one of the planet’s highest Coke consumers.

People here knock back about four times the global Coca-Cola average.

Fernet and Coke is so popular in Argentina that the country now hosts the only Fernet production facility outside Milan — the Fratelli Branca distillery on the outskirts of Buenos Aires.

There, even marketing manager Heman Mutti acknowledges that the drink possesses a medicinal air.

“Fernet was initially sold in Italian pharmacies” as a digestive aid, he says.

The drink reached Argentinian shores in the late 19th century along with European migrants and soon became one of the country’s cultural mainstays, along with tango, barbecue, mate and dulce de leche.

Testament to its importance to the Argentinian way of life, in 2014 Fernet was added to a price-freeze program to protect it from skyrocketing inflation.

Rhubarb and roots

Fernet owes its unconventional taste to a top secret recipe that involves about 40 different herbs including saffron, rhubarb, cardamom, myrrh, chamomile, aloe and gentian root.

Juan Chico, manager of BARTOK bar and restaurant in the upscale Palermo neighborhood in Buenos Aires, says Fernet is the most widely consumed liquor in the restaurant.

Although the bar displays an array of spirit and wine bottles, Chico sells on average 70 glasses of Fernet a day.

He claims that the central Argentine city of Cordoba alone consumes more Fernet than all of Italy, largely due to its strong Italian heritage.

That’s often a surprise to Italian visitors, some of whom struggle to comprehend its popularity.

“It had been two years since I’d seen anyone drink Fernet in Italy,” says Italian nightclub promoter Giovanni Digliardi, who did a double take the first time he stepped into an Argentine bar and was immediately offered a “Fernecola” — Fernet mixed with Coke.

Digliardi, who moved to Buenos Aires in 2008, recalls his grandfather drinking Fernet as a digestif with a glass of hot water.

He’s still baffled by the fact that Argentinians pair the beverage with food at dinners and social events.

“To be honest, Fernet isn’t a proper drink like caipirinha or pisco sour,” he says.

‘A bitter kiss that makes your eyes close in disgust’

Despite it’s popularity, for many Argentinians, Fernet is an acquired taste.

When psychologist Florencia Martinez, a native of Gualeguaychu in Argentina’s Entre Rios province, first sipped it, the verdict was straightforward: she poured it away in horror.

“Totally disgusting,” she confesses, letting out a “bleargh” and lowering her eyebrows, still outraged by the memory.

After that she wouldn’t “get her nose close to a bottle of Fernet for many years,” preferring gin and tonic.

Time passed and disgust faded.

She started swallowing the liquor toward the end of nights with friends because she liked “the refreshing and sweet taste of Coke.”

“And this was the road of no return,” she says, laughing. “It became my liquor of choice.”

It’s a familiar story among Fernet aficionados.

Typically, the initial tasting is a hostile experience, but the drink eventually wins over its audience.

“We met here for the first time, the womanizer Fernet I had heard so much about,” romanticizes Yasmin Simeonova, an architect from Macedonia working in Buenos Aires.

“Trying it out was like a kiss, a bitter kiss that burns your tongue and makes your eyes close in disgust.”

Herb freshness

Simeonova says at first she questioned the sanity of those who championed the drink.

That changed.

“After three years in Buenos Aires, I now have a very strong and passionate relationship with Fernet,” she says.

“I love it and it loves me. We’re having fun times until early mornings, in plastic glasses, half-cut bottles of Coke, wandering in streets, below bridges and across borders.”

Drinking Fernet from a plastic Coke bottle is known as “viajero” (meaning “traveler” in Spanish).

At night, especially during weekends, youngsters and older people alike roam the streets with their containers of mixed drinks.

Fernet also seems to win over experienced sweet-toothed drinkers.

“I’m a product of the U.S. university system, meaning I spent the better part of four years of my life drinking nauseatingly sweet grain alcohol mixed with Kool-Aid,” says Emily Sarah, managing partner of a financial advice company in Buenos Aires.

“Needless to say, Fernet’s herby freshness was a pleasant surprise and lacked the negative associations with the unpleasant consequences of sweet drinks,” she says.

According to its makers, Fernet’s recipe has remained unchanged for 170 years.

Whatever Argentina’s drinkers are suffering from, clearly this “disgusting” Italian medicine is the cure.

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