ARGENTINE UPDATE – Dec 9, 2015


WEDNESDAY

1. HER TIME IS UP, BUT ARGENTINA’S PRESIDENT IS NOT GOING QUIETLY (The New York Times) (YOU GOT THAT RIGHT!)

2. BATON AND SASH AT CENTER OF PRESIDENTIAL SPAT IN ARGENTINA (The Washington Post)

3. FERNANDEZ BICKERS WITH MACRI OVER ARGENTINA TRANSITION CEREMONY (Bloomberg News)

4. ARGENTINE TRUSTS PAVING WAY FOR CORPORATE BOND SALES, ADCAP SAYS (Bloomberg News)

5. ARGENTINA MAY UNIFY EXCHANGE RATES DEC. 14, LA NACION REPORTS (Bloomberg News)

6. THE ARGENTINE BILLIONAIRE WHO IS STILL BULLISH ON BRAZIL (Bloomberg News)

7. ARGENTINA BRACES FOR PESO DEVALUATION UNDER NEW PRESIDENT (Barron’s Blog)

8. INCOMING ARGENTINE OFFICIAL MEETS WITH DEBT ARBITRATOR IN U.S. (Reuters News)

9. NEW ARGENTINA GOVERNMENT AIMS TO DISMANTLE CURRENCY CONTROLS DEC 14 (Reuters News)

10. LATAM PRO-BUSINESS LEADERS FACE WELFARE CONUNDRUM (Reuters News Blog)

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

12. ARGENTINA POLITICS: FOREIGN POLICY PRIORITIES SHIFT UNDER NEW GOVERNMENT (Economist Intelligence Unit – ViewsWire)

13. FIVE KEY INFRASTRUCTURE PROJECTS FOR THE MACRI ERA (Business News Americas)

14. ARGENTINA’S MACRI EYES NEW GAS LINKS WITH CHILE, PACIFIC (Reuters News)

15. ARGENTINE VEHICLE SALES INCREASE 26.9% Y/Y, EXPORTS DROP 52.4% IN NOVEMBER (IHS Global Insight Daily Analysis)

16. DINOSAURS’ EARLY COUSINS LIVED MORE RECENTLY THAN WE THOUGHT, SAY SCIENTISTS (The Christian Science Monitor)

17. IS THE DRUG WAR COMING TO ARGENTINA? (Foreign Policy in Focus)

18. THERE ARE NO EASY FIXES FOR ARGENTINA’S ECONOMY (Fortune)

19. NINE STEPS PRESIDENT MACRI CAN TAKE TO RESTORE ECONOMIC FREEDOM IN ARGENTINA (The Heritage org)

20. ARGENTINA’S ROAD TO RECOVERY (American Enterprise Institute)

21. ARGENTINA’S ECONOMIC FREEDOM MUST BE MACRI’S FIRST PRIORITY (PanamPost)

22. THE NORTH FACE FOUNDER, DOUGLAS TOMPKINS, DIES IN KAYAK ACCIDENT (Financial Times)

1. HER TIME IS UP, BUT ARGENTINA’S PRESIDENT IS NOT GOING QUIETLY (The New York Times)
By Jonathan Gilbert
Dec. 6, 2015

BUENOS AIRES — In her last days in office, she has appointed ambassadors and signed decrees that will drain federal coffers. Her political appointees refuse to resign. She has even antagonized her successor with stinging remarks at public appearances.

After eight years as president, Cristina Fernández de Kirchner clears out her office at the presidential palace on Thursday. But far from preparing the ground for Mauricio Macri, the president-elect, she is obstructing the transition in a final show of muscle, observers say.

“It is by no means a smooth transition,” said Dante Caputo, a former foreign minister. “And it’s not a transition that protects the well-being of the nation. Rather, Mrs. Kirchner seems irritated about having to hand over power, and she’s expressing it by taking decisions that jeopardize Argentina’s delicate economic situation.”

Mr. Macri, the scion of a wealthy family from outside the political establishment, upended Argentine politics last month by defeating the candidate of Mrs. Kirchner’s leftist party, which has governed for 12 years and was expected to win another four-year term. Mrs. Kirchner was barred by term limits from seeking re-election this year, but she could run again in 2019.

Her resistance is also widely viewed as a maneuver to build an image as an unyielding opposition leader, especially as she prepares for a power struggle within her political movement.

Mrs. Kirchner’s supporters have long considered Mr. Macri, 56, the center-right Buenos Aires mayor, too close to corporate interests. And as he prepares to roll back her interventionist economic policies with market-oriented changes favored by business leaders, Mrs. Kirchner is refusing to fade into the background and, analysts say, is spraying grit into the machinery of his plans.

“A country is not the same as a business,” she said in a recent speech at a hospital in Buenos Aires in which she reminded Mr. Macri of his small margin of victory, fewer than 700,000 votes in a nation of 43 million. “Nobody should be confused about that.” (N.B. Rumour hath it that fraud was involved in the presidential election, and there are stories of aggressions by Kirchner supporters. The initial difference between Macri and Scioli was 6%, not 2%, but as the evening transpired there was a sudden surge for Scioli in votes counted . . . after Scioli had already conceded a 6% victory to Macri earlier. A previous fraudulent electoral vote for governor in the Province of Tucumán that gave the election to the Kirchner candidate — an election now declared null and void — shows what can be done at the voting tables using paper votes. One of the projects of the Macri government is to change the voting system to electronic votes, a process advocated earlier for the presidential elections, but roundly rejected by the FPV.)

Mrs. Kirchner, 62, has also sought to stymie Mr. Macri — already burdened by the largest budget deficit in three decades and critically low Central Bank reserves — by signing a decree broadening a recent court order so that certain funds controlled by the federal government will devolve to all of Argentina’s provinces, not just the few the ruling had applied to. Days later, there was news of another decree that will constrain Mr. Macri, freezing debt owed by the provinces to the federal government.

Even though these moves could eventually be overruled, they were malicious, said Federico Thomsen, an independent economist here. “She would never have done it at the start of her own four-year term,” he said. “It’s a way of showing: ‘We’re leaving in a fighting mood.’ ”

Mrs. Kirchner’s press office did not return calls and emails seeking comment. Aníbal Fernández, her cabinet chief, conceded to reporters that the decree broadening the court order would endanger the payment of state pensions, but said Mrs. Kirchner was simply adhering to her interpretation of the judges’ decision.

As Mr. Macri seeks to reposition Argentina on the world stage — appointing Susana Malcorra, a former United Nations official, as his foreign minister, and distancing the country from socialist Venezuela, Mrs. Kirchner has been making ambassadorial appointments to Cuba, the United Arab Emirates and Australia. Although Mr. Macri can replace those ambassadors, foreign policy experts have criticized her timing.

Her political appointees at public institutions like the Central Bank have also refused to step aside. Mr. Macri, who needs to control monetary policy to carry out his changes, has chosen a lawmaker from his party to lead the bank. But Alejandro Vanoli, a Kirchner appointee whose term ends in 2019, has stood firm. (N.B. Vanoli resigned after the publication of this Update and received the new Central Bank president elect to discuss the economic situation of the Bank..)

“It seems clear to me that the president does not want to collaborate,” Mr. Macri told reporters last week. “It feels like she’s fueling this idea of: ‘How many new obstacles and problems can I create for the next government?’ ” There have been voices of dissent even from within Mrs. Kirchner’s political movement.

Mr. Macri could maneuver around congressional checks and balances to remove Mr. Vanoli and other political appointees by decree. But that could jeopardize one of his key campaign promises: to decentralize the government by diluting the power of the presidency.

“It’s complicated for Macri because he won with a commitment to Republican principles,” said Mariana Llanos, an Argentine research fellow at the GIGA Institute of Latin American Studies in Hamburg, Germany. “To remain credible he has to be careful.”

When Mrs. Kirchner and Mr. Macri agreed to meet at the presidential residence here soon after his Nov. 22 victory, many Argentines hoped for a tidy transition. But Mr. Macri said the meeting had been largely pointless because Mrs. Kirchner refused to discuss subjects apart from his inauguration ceremony. Mrs. Kirchner’s press office did not respond to a request for comment on the meeting.

“Cristina Kirchner’s call to Macri seemed to point to an orderly transition,” said Cintia Maldonado, an analyst at Cippec, an Argentine public policy research center. “But then it didn’t pan out as we would have liked.”

Still, Ms. Maldonado said meetings thereafter between departing and arriving cabinet ministers have suggested a thaw in the tensions. After Axel Kicillof, Mrs. Kirchner’s outspoken economy minister, met his successor, Alfonso Prat-Gay, the incoming minister posted news of the “productive” session on Twitter.

Political transitions have often been rocky in Argentina, said María E. Coutinho, a scholar who specializes in the country’s presidential system, partly because there are no established protocols for transitions, like those in the United States and neighboring Brazil. So a smooth transition depends on the good will of the parties involved. “Transitions after a long political cycle are complicated,” Ms. Coutinho said, adding that the unease between Mrs. Kirchner and Mr. Macri recalled the difficult presidential transition of 1999, after 10 years of rule by Carlos Saúl Menem.

Arguments have even broken out about the ceremony details, friction that points to Mrs. Kirchner’s ambitions beyond the end of her presidential term, according to analysts. “She’s playing to the last minute, reluctantly relinquishing power and showing signs that she doesn’t want to disappear from the political arena,” Ms. Llanos said.

Mrs. Kirchner posted a barrage of messages on her Twitter feed on Sunday evening, claiming that Mr. Macri had disrespected her in a phone call about the ceremony, and accusing him of playing politics by seeking to fuel perceptions that she was complicating the transition.

Still, supporters of Mrs. Kirchner played down the tension, with some pointing to Argentina’s turbulent recent history, in which two presidents have relinquished power earlier than scheduled because of crises.

“After eight years in office, she is handing over the presidency in due time and form,” said Cecilia de Cortázar, 29, a math professor. “She has made a lot of Argentines believe in politics again and I reckon that she actually deserves their affection and applause.”

2. BATON AND SASH AT CENTER OF PRESIDENTIAL SPAT IN ARGENTINA (The Washington Post)
By Peter Prengaman
December 4, 2015

BUENOS AIRES, Argentina — A growing spat between Argentina’s outgoing president and president elect over inauguration day logistics took a strange turn on Friday, with the silversmith responsible for crafting a ceremonial baton saying an assistant was threatened by possible police action.

The brouhaha, which has many Argentines shaking their heads, deepened on the same day that President-elect Mauricio Macri visited neighboring Brazil, his first head-of-state visit since being elected Nov. 22.

Macri wants to receive the presidential baton and sash from outgoing President Cristina Fernandez in the government house, or Casa Rosada, during the Dec. 10 inauguration. However, Fernandez administration officials insist the transfer will happen in Congress.

News channels, which covered the disagreement all day, briefly broke in to show Macri meeting with Brazilian President Dilma Rousseff. Macri was asked by reporters in Brasilia about the tiff. He responded that thankfully Rousseff didn’t bring it up, but otherwise didn’t comment.

“Many of us look at this and think, ‘How embarrassing,’” said Martin Bohmer, former dean of the law school at the University of Buenos Aires. “It’s amazing that we are having so much trouble transferring power.”

The very active social media sites in the South American nation went wild on Friday after silversmith Juan Carlos Pallarols shared his story with several news organizations. The respected craftsman has made every presidential baton since the country’s return to democracy in 1983.

He said Macri officials this week asked him not to turn the baton over to the current administration. But the other side also applied pressure: Pallarols said an assistant received a threatening call from a Fernandez official, saying police would intervene if the baton wasn’t finished and turned over soon.

“It was an unpleasant situation,” said Pallarols, who added that another official later called him to apologize.

On Twitter, a clip from popular cartoon produced by a state television channel was making the rounds. In one episode, “Zamba,” the protagonist, is visiting the Casa Rosada. A guide tells him it’s “where the presidential sash and baton are handed over.”

The constitution establishes that the incoming president’s swearing in ceremony take place in Congress, but does not specify where things like batons or sashes should be handed over.

While Fernandez received the baton and sash in Congress, other new presidents have received them at the Casa Rosada.

“The president is within her rights,” said Cabinet chief Anibal Fernandez. “The articles will be in Congress. If Macri doesn’t want to receive them there, then he shouldn’t receive them.”

Fernandez, a populist leader who publicly criticizes her opponents, has dominated the political landscape the last 12 years: initially as first lady during the administration of late husband Nestor Kirchner, and the last eight as president herself.

News columnists and social media pundits have speculated that Macri will refuse to bow to Fernandez, and will simply put on his own presidential sash or ask a top official in his administration to do it.

Ignacio Fidanza, director of popular political website lapoliticaonline.com, said Fernandez was being “whimsical.”

“She is in a state of shock after 12 years in power and doesn’t understand that she’ll no longer be president,” said Fidanza.

3. FERNANDEZ BICKERS WITH MACRI OVER ARGENTINA TRANSITION CEREMONY (Bloomberg News)
By Jose Enrique Arrioja
December 6, 2015

Argentina’s president Cristina Fernandez de Kirchner complained today about the behavior of her successor President-elect Mauricio Macri while discussing details of the swearing ceremony scheduled to take place on Thursday.

” I have to confess that I was surprised by the exulted– euphemism for yelling– verbiage of the president-elect,” Fernandez said referring to a telephone conversation she held yesterday with Macri to discuss the transfer of power at Casa Rosada, as the nation’s presidential palace is known. She issued the comments in an article published in her website, which main quotes were also tweeted in her account. (N:B: There has been some comment that the accusations of Fernandez that Macri had raised his voice to her (“I reminded him that I am a woman and he is a man,” and shouted her down over the telephone, insisting on following the procedures for the transition ceremony he advocated, seem rather nebulous, since the conversation, had it occurred as Mrs. Kirchner claims, could easily have been recorded at the time and played back to support Mrs. Kirchner’s claims of Mr. Macri’s disrespect.)

Fernandez and Macri are at odds by the protocol of the swearing ceremony. While Fernandez wants the Congress to relay the Presidential band, Macri seeks to have the transition at the presidential palace. The ceremony is an “institutional act” therefore “should take place at the Congress,” Fernandez said in the article.

Fernandez vowed to break the silence about her discrepancies with Macri. “I’ll not tolerate in silence, as until now, the personal and public mistreatment” displayed by Macri since winning the presidential election, Fernandez wrote.

President-elect Macri, who takes office Dec. 10, pledged during the campaign to remove import restrictions and currency controls and let the peso float freely on his first day in office. He won the November 22 elections with 51.4 percent of the vote against 48.6 percent for the ruling party’s Daniel Scioli, ending 12 years of leftist ruling led by the late Nestor Kirchner and Cristina Fernandez de Kirchner.

In responding to Fernandez’ comments Argentina’s vice president-elect Gabriela Michetti defended Macri by saying in her Twitter account that he “is not disrespectful to anyone.” Michetti reiterated the incoming administration’s plans of having the transition ceremony at the Congress to then head to the presidential palace to receive the presidential band from Fernandez. “If the incumbent president rejects this, it will be members of the Supreme Court who will perform the hand over,” she added.

4. ARGENTINE TRUSTS PAVING WAY FOR CORPORATE BOND SALES, ADCAP SAYS (Bloomberg News)
By Carolina Millan
December 7, 2015

* Trust issuance grew 52% in October from year earlier
* Trusts help companies `build a reputation,’ AdCap says

Argentine companies looking to take advantage of a surge in optimism toward the country are increasingly using investment trusts to raise funds and gain investors’ confidence before an overseas bond sale, according to AdCap Securities, a Miami-based broker and investment bank.

South America’s second-largest economy has been in the spotlight for international investors over the past weeks as Mauricio Macri campaigned for president on a pro-business platform and won. Hedge-fund managers from George Soros to Richard Perry and companies including Brazilian foodmaker BRF SA and U.S. oilseed processor Bunge Ltd. have increased investments in the country on a wager that Macri will implement economic reforms such as letting the currency trade freely and settling a decade-old dispute with holdout creditors that imperiled the country’s access to overseas markets.

For Argentina’s small- and medium-sized companies looking to get a head start in tapping capital markets, trusts are poised to grow as the instrument of choice, Daniel Canel, the chief executive officer at AdCap Securities, said in an interview in Buenos Aires. The monthly average amount issued in trusts in the country grew 52 percent in October from the previous year according to a report by Argentina’s securities regulator, the CNV.

“For many years, Argentina companies haven’t issued debt, so there are companies that need to build a reputation before they issue abroad,” said Agustin Honig, the head of sales and trading at AdCap, which underwrites the trust securities. “Until international flows come to Argentina, there’s much need for local financial engineering that can guarantee the first steps of project financing. Trusts allow companies to start raising capital and become known in the market.”

Investment trusts will continue to grow as companies, particularly those in the infrastructure and agriculture sectors, raise money for new projects, Canel added. Since they’re tied to specific assets, investors have more confidence in the likelihood of getting paid back and interest rates are as much as 3 percentage points less than companies would get from bonds, according to Gonzalo Vallejos, the head of capital markets at AdCap.

5. ARGENTINA MAY UNIFY EXCHANGE RATES DEC. 14, LA NACION REPORTS (Bloomberg News)
By Jose Enrique Arrioja
December 6, 2015

Argentina may create a single exchange-rate regime as soon as next week after the new government takes power, incoming Finance Minister Alfonso Prat-Gay said, according to newspaper La Nacion.

The decision will take place Dec. 14 unless certain conditions aren’t yet satisfactory, Prat-Gay told a group of local reporters in Buenos Aires, La Nacion reported on its website Sunday.

“If we can do it on the 14th, we’ll do it on the 14th, and if not, then when conditions are adequate,” Prat-Gay said, according to La Nacion. “We are going to fulfill this promise as soon as possible and as clearly as possible,” he said.

In order to lift foreign-exchange controls, the incoming government wants to see new management at the central bank, Prat-Gay said, because the government’s goals differ from the decisions implemented by current policy makers. “The unification of the exchange market will be the first signal for the economy to start normalizing,” he added.

President-elect Mauricio Macri, who takes office Dec. 10, pledged during the campaign to remove import restrictions and currency controls and let the peso float freely on his first day in office.

Investment banks such as Morgan Stanley favor an immediate correction in the exchange-rate regime. In a report to investors last week, the bank said that “although many Argentina watchers are calling for deferment of the exchange-rate correction, we think that a one-off, early adjustment is the preferred option.”

Argentina’s international reserves fell $24 million on Dec. 4 to $25 billion, the central bank reported. Argentina is currently in default on about $28 billion of foreign-currency bonds after U.S. District Judge Thomas Griesa blocked the country from making payments on the debt until it settles with a group of hedge funds including Paul Singer’s Elliott Management and Aurelius Capital Management.

Argentina’s official exchange rate closed at 9.7275 per dollar on Friday, compared with the implied exchange rate, known as the blue-chip swap, at 15.32.

6. THE ARGENTINE BILLIONAIRE WHO IS STILL BULLISH ON BRAZIL (Bloomberg News)
By Daniel Cancel
December 4, 2015

* Eduardo Eurnekian may take several units public in 2016
*Corp. America interested in joint bid for Petrobras assets

Argentine billionaire Eduardo Eurnekian said he’s looking to increase investments in his Brazilian businesses and may also pursue wind energy assets in the country on a bet that Latin America’s largest economy is poised for recovery.

Eurnekian, the founder and chairman of the Corp. America holding company that includes assets in airports, energy, construction, technology and agriculture, says the political and economic crises in Brazil will come to an end and that protectionist policies in the region are fading with the incoming government of Mauricio Macri in Argentina.

“The positive part about what’s happening in Brazil is that it’s getting resolved,” Eurnekian said in an interview at his office in Buenos Aires on his 83rd birthday while sipping mate, the region’s traditional herbal tea. “We believe strongly in regional cooperation and we’re still very open to increasing our investments in Brazil.”

Corp. America operates airports in Brasilia and Natal in Brazil and holds a 33 percent stake in Unitec, a microchip maker, that it acquired from former Brazilian billionaire Eike Batista. The Buenos Aires-based holding company is working with a bank to possibly take several units public in New York next year which would include the technology, airports and energy businesses, said Eurnekian, who is the son of Armenian immigrants.

“Next year we should be listing two to three companies in the U.S.,” Eurnekian said. “It will depend on a few things but I can guarantee that we’ll be ready when the moment comes.”

Brazilian President Dilma Rousseff is fending off impeachment proceedings while a judicial investigation into graft has ensnared companies including state-run energy producer Petroleo Brasileiro SA and Banco BTG Pactual SA. The economy is heading for its longest recession since the Great Depression, its currency has tumbled almost 30 percent this year, and the stock market is poised for a third straight year of losses.

Petrobras has been trying to sell its Argentine unit this year. While Eurnekian’s Cia General de Combustibles SA already purchased gas fields from Petrobras, he is interested in acquiring more of the assets in a joint bid with other partners, he said. Argentine state-run energy company YPF SA had also put in a bid for the unit.

“We need to wait for the willingness from Petrobras to sell,” he said. “Their situation is complex, they’re sellers but have to resolve a political issue first. I do think they will be leaving the country.”

Rousseff met with Macri on Friday in Brasilia where they discussed regional trade, a possible European Union pact with the Mercosur trade bloc and elections in Venezuela. Macri takes office Dec. 10 and has tapped a former JPMorgan Chase & Co. banker and central bank president as finance minister to fix an underperforming economy and manage the end of currency controls.

In Argentina, there will be a “rush of investment” once Macri generates confidence, he said. For now, bond yields continue to be too high for corporate borrowers which is keeping his units from tapping international capital markets, he said.

“A good dose of confidence should be Macri’s first measure,” he said.

7. ARGENTINA BRACES FOR PESO DEVALUATION UNDER NEW PRESIDENT (Barron’s Blog)
By Dimitra DeFotis
8 December 2015

Argentina’s newly-elected president, Mauricio Macri, takes the reins Thursday, and economic reform that should attract foreign investment is at the top of the to-do list.

Macri’s central banker is likely to move gradually to lift capital controls propping up the peso to attract investors in order to conserve dwindled foreign reserves, writes Alberto Gallo head of global macro credit research at RBS. Argentina’s capital controls include limits on dollar savings and imports. At issue: the incoming government wants new central bank management.

Stocks rallied in anticipation of change, and now they are doing the opposite. The Global X MSCIArgentina exchange-traded fund ( ARGT) has stumbled more than 9% over the past month, while the iShares MSCI Brazil Capped ETF ( EWZ) tumbled 6% and the iShares MSCI Emerging Markets ETF ( EEM) fell 7%. Among individual stocks, MercadoLibre ( MELI) has been a standout, with a flat performance, while YPF ( YPF) is down 23% in the past month, Nortel Inversora ( NTL) is down 17% and BBVA Banco Frances ( BFR) is off 15%.

In the immediate, here is what Gallo sees as dominant on the 2016 Argentina reform agenda:

Devaluing the Peso. Moving to a single exchange rate could happen as early as next week, the incoming finance minister has said. “A newly-appointed central bank governor is likely to pursue successive devaluations, as government debt to GDP could rise by 15 percentage points to around 60% after the currency devaluation (U.S. dollar/Argentine peso from 9.7 to around 15). A devaluation of the peso to the dollar may be unavoidable as emerging market currencies will likely come under pressure from a stronger dollar. In addition, the government needs to finance the country’s fiscal deficit with dwindling foreign reserves (around 4% of GDP vs fiscal deficit of -2.6% in 2015; IMF).

Rapidly easing export controls. Lifting export controls is key to stemming a steady decline in exports since 2011 and to counter weaker demand from trading partners including Brazil which consumes 21% of Argentina’s exports, according to Bloomberg data. Macri has pledged to reduce export taxes rapidly …

Resuming negotiations with international creditors. Argentina has been locked out of international credit markets following a U.S. court ruling that Argentina cannot pay its restructured debt (agreed by 93% of bondholders) until it repays the 7% of bondholders that rejected the restructuring terms.” Macri said a deal with holdout creditors could come in 2016, Reuters reports.

Gallo notes that incumbent central bank Gov. Alejandro Vanoli, who is expected to resign, is under investigation for the bank’s role in selling below-par currency swaps that would lose money in a peso devaluation. A reform-government replacement would be more likely to remove rules that restrict banking sector growth. A silver lining here: “Argentina’s banks have had weak profits, but they also didn’t take part in the emerging market credit binge,” Gallo writes.

8. INCOMING ARGENTINE OFFICIAL MEETS WITH DEBT ARBITRATOR IN U.S. (Reuters News)
8 December 2015

BUENOS AIRES, Dec 8 (Reuters) – Argentina’s incoming secretary of finance met in the United States on Monday with the arbitrator of the South American country’s marathon court battle with creditors over defaulted bonds, a spokeswoman for incoming Economy Minister Alfonso Prat Gay said on Tuesday.

The meeting was between future finance official Luis Caputo Debt and mediator Daniel Pollack, who has been assigned by a U.S. federal judge to help reach a settlement between Argentina and creditors who rejected the terms of the country’s 2005 and 2010 sovereign bond restructuring.

“It was a good meeting,” the spokeswoman said, calling it “an introductory session.”

President elect Mauricio Macri has made settling the multi-year dispute a high priority.

Argentina needs to end the case if it is to open much needed access to international capital markets. Macri was elected last month and is scheduled to be sworn in as president on Thursday.

Macri on Wednesday expressed confidence that a deal could be reached with so-called “holdout” creditors. Asked if it was possible in 2016, Macri said, “Yes, of course.”

Macri, the business friendly mayor of Buenos Aires, won the Nov. 22 presidential runoff election promising to open the country s stagnating economy to investors by dismantling protectionist controls imposed by outgoing President Cristina Fernandez.

Macri will inherit a fragile economy that could benefit from the kind of financing that comes from issuing global bonds.

Anemic growth is underpinned by unsustainable public spending, and inflation is estimated at about 25 percent. Also, the peso currency is over-valued and the central bank is running precariously low on U.S. dollars.

9. NEW ARGENTINA GOVERNMENT AIMS TO DISMANTLE CURRENCY CONTROLS DEC 14 (Reuters News)
6 December 2015

BUENOS AIRES, Dec 6 (Reuters) – The government of Argentina’s president-elect Mauricio Macri said Sunday that it will seek to dismantle a series of capital controls propping up the peso as soon as possible, aiming for December 14 if the central bank is under new management.

Macri has previously demured on giving details on his strategy to lift outgoing president Cristina Fernandez’ so-called “clamp-down” on dollar purchases that has created a multi-tiered exchange rate, saying he must first take a close look at the true state of national accounts.

But incoming finance minister Alfonso Prat-Gay said in an interview with three local dailies that doing so was a top priority to tackle soon after the transfer of power Dec. 10, despite the possibility of a sharp devaluation.

“The program to unify the currency market is the first signal for the economy to start to normalize. We’re going to fulfill that promise as fast and as exhaustively as possible,” Prat-Gay was quoted saying in newspapers La Nacion, Perfil and Clarin.

“If we can do it the 14th, we’ll do it the 14th, and if not, we’ll do it once we see the right conditions,” he said.

Prat-Gay said currency reform could probably only begin once a new central bank chief assumes power and it is clear there will be a sufficient supply of dollars. He added that he hopes to make an announcement soon on a new source of hard currency that will help the bank restore its dwindling reserves.

Current capital controls include strict limits on dollar savings, restrictions on imports and a hefty tax on credit card use abroad.

Prat-Gay did not specify whether the government would seek to undo the controls all at once or bit-by-bit. He could not be reached for comment Sunday.

Prat-Gay was global head of foreign-exchange research at JP Morgan in the late 1990s before leading Argentina’s central bank between 2002 and 2004. Macri picked him to help him end more than a decade of free-spending populism that has hobbled growth and stoked inflation in Latin America’s third largest economy.

Central bank president Alejandro Vanoli is expected to resign in coming days, under pressure from Macri to make way for a currency devaluation to spur exports and halt the drain on central bank reserves used to prop up the peso.

Macri plans to appoint former Buenos Aires city bank chief Federico Sturzenegger to head the bank.

10. LATAM PRO-BUSINESS LEADERS FACE WELFARE CONUNDRUM (Reuters News Blog)
By Martin Langfield
December 7, 2015

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

New pro-business leaders in both Venezuela and Argentina face a conundrum. Unsustainable social spending by the leftist opponents they have just defeated has helped crater the economy in both countries. Addressing that without sparking unrest or wrecking their own credibility will be no mean feat.

Any reform will be a battle in Venezuela, where the Democratic Unity coalition won at least 99 of the National Assembly’s 167 seats on Sunday. Socialist President Nicolas Maduro, whose term in office expires in 2019, may try to use other institutions he controls to stymie any legislative initiatives. That could prompt lawmakers to pursue a recall vote to oust him next year. Perhaps mindful of not alienating voters ahead of that, opposition leader Jesus Torrealba says the coalition will not dismantle highly popular welfare programs, even as it pushes to reform the central bank and roll back nationalizations.

Venezuela’s economy, though, is expected to shrink 10 percent this year, according to the IMF. Its triple-digit inflation is the world’s highest and oil revenue, which accounts for virtually all hard-currency income, has fallen drastically since last year. Pushing for spending cuts may prove unpopular, but failing to do so risks sharing the blame for the economy’s continued dreadful state.

Argentina’s incoming President Mauricio Macri will have more power than the winners of Venezuela’s election when he takes office on Dec. 10. But he faces a similar calculus. The fiscal deficit is ballooning, inflation is in double digits and reserves are dwindling. Macri plans to undo capital controls that have propped up the peso and seek a deal with U.S. creditors suing Argentina over unpaid debt. If his plans work, some of leftist predecessor Cristina Fernandez’s social programs may still prove affordable. If they do not, cutting them could spark unrest.

Populist leftism may be on the retreat in Latin America – even Cuba may soon reach a Paris Club debt settlement and is pragmatically improving U.S. relations. But it’s not going quietly. Maduro and Fernandez are likely to fight tooth and nail to defend social gains. How Venezuela and Argentina fare will be a useful primer when Brazilian voters head to the polls in 2018 to pick leftist President Dilma Rousseff’s successor – assuming she survives impeachment efforts in the meantime.

11. ARGENTINA: COUNTRY OUTLOOK (Economist Intelligence Unit – ViewsWire)
4 December 2015

POLITICAL STABILITY: The election of Mauricio Macri in the second-round presidential run-off on November 22nd heralds a period of substantial policy adjustment as the new administration, which takes office on December 10th, works to reduce the risk of economic crisis and to return the economy to sustainable growth. Reflecting the scale of economic mismanagement under the current government, led by Cristina Fernández de Kirchner, which has produced stagflation and strong currency devaluation pressures, the adjustment process will be a difficult one, involving politically unpopular austerity measures, including a scaling-back of fiscal expenditure. Resistance among Argentina’s powerful unions to austerity, and, in particular, to efforts to rein in nominal wages in bargaining rounds next year, will be strong, and The Economist Intelligence Unit therefore believes that the risk of social unrest will remain high in 2016.

ELECTION WATCH: A series of elections in 2015 has left Mr Macri’s Pro in charge not just of the presidency, but also of the capital city, Buenos Aires, and provincial governments, which together account for almost half of the population. However, the Pro is in a minority position in both houses of Congress and will not have another chance to reverse this position until mid-term legislative elections in October 2017. The Pro will hope that macroeconomic adjust will by then have set the economy on a solid footing, leaving it well placed for the mid-term elections. However, in the meantime, the president-elect will face the challenge of keeping his coalition partners, including the UCR and the smaller centre-left Coalición Cívica on side, while building bridges with the Peronist party. Although the Peronist party was defeated in the recent presidential election, combined, the two main wings of the party have a majority in both houses of Congress; they also control 12 of Argentina’s 24 provincial governments, which are powerful political forces in their own right. Developments in the Peronist party leadership as it adjusts to the loss of the presidency will therefore be a key consideration. As it loses the powers of patronage bestowed on it by the presidency, we believe that the leftist-populist Frente para la Victoria (FV) faction of the Peronist party will lose influence, and that the position of the traditional Peronist wing will improve, most probably under the leadership of Sergio Massa, who came third in the presidential poll. In this scenario a working relationship between Congress and the president could develop. However, in the short term, the FV will obstruct Mr Macri’s reform agenda to the extent to which it is able.

INTERNATIONAL RELATIONS: We assume that the Macri administration will move to repair relations with trade and investment partners that have been damaged by trade protectionism, nationalisation, failure to abide by rulings of the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) and failure to exit default. Relations with the US remain at a low ebb following sovereign default in 2014, which was the consequence of Argentina’s defiance in the face of a New York court ruling. We assume that Mr Macri will work from 2016 to exit default (by arriving at a deal with holdout creditors) and normalise relations with creditor countries, suggesting improved relations with the US, Europe, and with partners in the Mercado Común del Sur (Mercosur, the Southern Cone customs union) in the outlook period. However, at the same time, China will remain a strategic partner. This position was cemented under the Fernández administration by a series of investment accords, and by a US$11bn, three-year currency-swap arrangement agreed in mid-2014 that has bolstered the foreign reserves and given the government a lifeline as it seeks to avoid a currency crisis. Mr Macri seems likely to pursue an extension of this agreement to provide much-needed financing during a period of difficult economic policy adjustment.

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