ARGENTINE UPDATE – Dec 17, 2015


17, 2015

1. ARGENTINA ANNOUNCES LIFTING OF CURRENCY CONTROLS (The Wall Street Journal)

2. ARGENTINA SET TO DEVALUE ITS CURRENCY (The New York Times)

3. ARGENTINE PROSECUTOR SEEKS TO REOPEN CASE AGAINST EX-PRESIDENT (The New York Time)

4. PRESIDENT MAURICIO MACRI LIFTS ARGENTINA’S CAPITAL CONTROLS (Financial Times)

5. ARGENTINA MOVES TO LET PESO TRADE MORE FREELY (Financial Times)

6. ARGENTINA SCRAPPING CONTROLS AS PESO MOVES TOWARD FREE FLOAT (Bloomberg News)

7. ARGENTINA TO DEVALUE PESO, REMOVE CURRENCY CONTROLS THURSDAY (Bloomberg News)

8. GRAIN PRICES DROP AS ARGENTINA PLANS TO SCRAP CURRENCY CONTROLS (Bloomberg News)

9. GRAINS-SOYBEANS FALL FOR 3RD DAY ON ARGENTINA CURRENCY MOVE (Reuters News)

10. ARGENTINA LIFTS CURRENCY CONTROLS, FLOATS PESO IN BID TO BOOST ECONOMY (Reuters News)

11. AS ARGENTINA SHOWS THE EUROZONE, IT’S THE EXCHANGE RATE THAT MATTERS, STUPID (Forbes)

12. IN THE WAKE OF CHANGE, ARGENTINA HAS TO PUSH FOR MORE TRANSPARENCY (Sunlight Foundation)

13. FOREIGN-LANGUAGE OSCAR SPOTLIGHT: THE UNBELIEVABLE TRUE STORY BEHIND ARGENTINA’S ‘THE CLAN’ (The Hollywood Reporter)

14. NORTH AMERICAN BEAVER INVASION OCCUPIES FORESTS AND STEPPES IN SOUTHERN CHILE AND ARGENTINA (Scientific American)

1. ARGENTINA ANNOUNCES LIFTING OF CURRENCY CONTROLS (The Wall Street Journal)
By Taos Turner
Dec 16, 2015

New government says move, expected to trigger depreciation of peso, is ‘the starting point for getting the economy back on its feet’

BUENOS AIRES—Argentina’s new government on Wednesday lifted currency controls, allowing its citizens to buy dollars freely for the first time in four years and setting the stage for a sharp depreciation of the peso.

The move, which officials hope will kick-start the faltering economy, is the strongest President Mauricio Macri has yet made in his bid to roll back the government interference that marked the country’s economy under the previous presidencies of Néstor and Cristina Kirchner.

“Ending the currency controls is the starting point for getting the economy back on its feet,” Finance Minister Alfonso Prat-Gay told a news conference.

The decision carries significant short-term risks but equally big long-term rewards if it triggers greater investment and lifts the country’s sagging export sector, economists said.

In the short term, the move is likely to spark the biggest currency depreciation since Argentina’s messy economic meltdown in 2002. Economists expect the peso to fall from its current official price of 9.8 to the dollar to the black-market rate of between 14 and 15 per dollar, losing a third of its value.

Underscoring the risks, the step came on the same day the U.S. Federal Reserve raised its benchmark short-term interest rate for the first time in eight years, making it relatively harder for other countries, including Argentina, to attract investment.

A weaker peso will make imports more expensive and add to the country’s already high inflation rate of 25%. To keep the lid on price hikes and attract investment, Argentina’s central bank on Tuesday raised its benchmark rate as high as 38%.

Argentina has precious little money with which to defend its currency in an open market: In the past four years, the central bank’s listed foreign currency reserves have plummeted from more than $52 billion to around $24 billion. Economists say the bank’s real net reserves are far lower considering liabilities like money owed to importers and outstanding bond payments.

“In the end, nobody knows how fast the depreciation is going to be, if it will occur in a matter of days, or it may take a little longer. And, of course, that is going to depend on the intervention of the central bank,” Goldman Sachs economist Mauro Roca said from New York.

To address those fears, Mr. Prat-Gay said Argentina is on track to obtain between $15 billion and $25 billion in fresh cash from a combination of agreements with international banks, grain exporters and China’s central bank. He said grain exporters have agreed to turn over $400 million a day in coming weeks from farm sales.

That amount of available dollars is greater than expected and should provide a short-term cushion for the central bank, said Siobhan Morden, the head of Latin America fixed-income strategy for Nomura Securities.

“It is not in itself a solution, but it certainly buys them time to resolve the main problem which is the high fiscal deficit,” she said.

Argentina’s fiscal shortfall is about 7% of annual economic output, a gap that has largely been bridged in the past few years by the central bank printing money, and thus fueling inflation. Mr. Macri has promised to narrow the gap, and has already announced cuts to fuel subsidies.

The cheaper peso will hit multinational companies differently. Some may have to take an accounting write-down, but the vast majority are likely to welcome the policy U-turn.

“We are extremely encouraged by what’s happening in the country,” said Alexander Nickolatos, chief financial officer of Eco-Stim Energy Solutions, Inc., a Houston-based oilfield services company. Mr. Nickolatos said the company’s contracts are dollar-denominated and that it kept a low amount of pesos on hand in anticipation of a depreciation.

Freeing currency controls was the latest in a dizzying series of moves Mr. Macri has made since he took office on Thursday.

His administration has eliminated most farm export taxes, cut personal income taxes, begun re-staffing Argentina’s discredited statistics agency, replaced the central bank president, and appointed two Supreme Court justices.

While many Argentines want to overhaul the sickly economy, they also fear the changes. Retailers and their suppliers have been marking up prices in anticipation of a decrease in the peso’s value.

“We raised our prices by 40% before the exchange-rate changes so we wouldn’t lose money,” said Marcela Ledesma, 48, who runs a retail store selling imported orthopedic equipment such as wheelchairs and walkers.

Prices rose 1.2% in the first week of December alone, the fastest clip since Argentina devalued the peso by 20% in January 2014, according to Elypsis, an economic research firm.

Mr. Roca at Goldman Sachs said inflation will likely rise and economic activity will remain subdued in the short-term. “When you take the medicine, you are going to have some side effects at the beginning,” he said. “But the trade-off is that you will get better economic prospects in the medium and long term.”

Amid rampant inflation and a lack of faith in the peso, Argentines have for years sought refuge in dollars. The demand for greenbacks, combined with rising demand from the government—which itself needed dollars to make debt payments and pay for energy imports—acted like a pressure cooker on Argentina’s financial system, eventually leading to a scarcity of hard cash.

To stanch the bleeding, former President Cristina Kirchner largely banned the sale of dollars in 2011.

To police the strict measures, Argentina’s tax agency trained dogs to patrol the borders and sniff out dollar bills carried by travelers in and out of the country. The agency often arrested people crossing the border with rolls of dollar bills taped to their legs or hidden in automobile compartments.

But the currency controls merely fueled more demand for dollars, leading to the creation of a vast underground currency market where people paid a 50% premium to buy greenbacks. Illegal money changers popped up across the country and individual traders—known as “little trees” for the dollars they figuratively sprouted—became commonplace in certain sectors of Buenos Aires.

Mrs. Kirchner let the peso depreciate very slowly, in the belief that a strong exchange rate boosted people’s purchasing power. But that approach devastated Argentina’s real-estate market, where transactions are done in cash using dollars. It also hurt exporters whose goods became less competitive abroad.

The measures also failed to contain inflation, which was among the world’s highest throughout Mrs. Kirchner’s eight years in office.

Companies, meanwhile, struggled to obtain dollars to buy parts and equipment, stifling growth and sometimes causing critical shortages at places like hospitals, which depend on imported supplies and equipment. In January, Argentina faced a national tampon shortage, prompting women here to take to Twitter TWTR 1.46 % to ask friends traveling abroad to bring back supplies.

Now, Argentina is entering uncharted territory.

Exporters would benefit from depreciation, obtaining up to 50% more pesos for the same product from one day to the next. The housing market could also rebound if people can again buy dollars needed for transactions.

But many ordinary Argentines are anxious.

“Last week, my wholesaler raised prices by 50% on headphones,” said Moises Grinberg, 45, who runs a cellphone and audio accessories shop in Almagro, a middle-class neighborhood in Buenos Aires. “If I raise prices that much on my clients before the holidays they won’t buy anything. So I have to absorb the cost. I’m afraid the devaluation will bankrupt my business.”

2. ARGENTINA SET TO DEVALUE ITS CURRENCY (The New York Times)
By Jonathan Gilbert
Dec. 16, 2015

BUENOS AIRES — Argentines were bracing themselves for a substantial devaluation of their currency, the peso, as the new president, Mauricio Macri, rushed to execute sweeping market-oriented changes intended to revive an ailing economy.

Alfonso Prat-Gay, the finance minister in Mr. Macri’s center-right government, announced the immediate scrapping of currency controls on Wednesday night, the precursor to a probable plunge of the peso Thursday morning.

“Lifting these barriers that have halted the economy for many years will kick it along the path to growth,” Mr. Prat-Gay told reporters. The moves are aimed at bolstering an economy predicted to grow by 0.4 percent this year, according to the International Monetary Fund.

Yet the devaluation is likely to mean hardship in the short term for many Argentines as prices shoot up. It subsequently risks stirring social unrest in a nation where large street protests are commonplace and trade union leaders are influential.
“This is going to affect me because my salary is not going to keep up,” said Leonardo Rodríguez, 24, who earns about $715 a month for delivering cosmetics to stores here.

“Macri doesn’t care about the middle class; he only aspires to favor the rich,” he added, doubting whether the actions of the new president, who is from a wealthy family, would ever benefit him.

Mr. Prat-Gay said that the policies were geared toward ending poverty, one of Mr. Macri’s campaign promises.

Economists have long warned that the peso, whose value was tightly administered by the Central Bank under Mr. Macri’s predecessor, Cristina Fernández de Kirchner, was overvalued. This makes the nation’s manufacturers uncompetitive and thwarts foreign investment

“The devaluation was inevitable,” said Gastón Rossi, a former deputy economy minister and director of LCG, a consultancy in Buenos Aires. “The economy wasn’t sustainable.”

Mrs. Kirchner, who saw the gains of a devaluation nearly two years ago vitiated by inflation, left another devaluation to her successor because the political cost was too high, Mr. Rossi added.

Some economists expect Mr. Macri’s changes to result in a recession or anemic growth next year, followed by a rebound in 2017 of about 3 percent.

Pointing to tensions between supporters of Mr. Macri and supporters of Mrs. Kirchner’s party, which proposed more gradual economic changes, Axel Kicillof, a lawmaker and Mrs. Kirchner’s former economy minister, warned this week, “Brusque devaluations bring great disarray.”

The exchange rate is officially 9.8 pesos per dollar, but because of the unpopular controls that limit access to dollars, they sell in a black market for about 14.5 pesos.

The devaluation will especially benefit Argentina’s influential farmers, who have been hoarding stocks of grain harvests for export, like soy, as they speculated about the move. Mr. Prat-Gay said the government had agreed to a deal with them to liquidate billions of dollars in stocks over the next three weeks.

3. ARGENTINE PROSECUTOR SEEKS TO REOPEN CASE AGAINST EX-PRESIDENT (The New York Time)
By Jonathan Gilbert
Dec. 15, 2015

BUENOS AIRES — A federal prosecutor is trying to revive a criminal complaint filed by Alberto Nisman, a prosecutor who died in mysterious circumstances earlier this year.

Mr. Nisman had accused Cristina Fernández de Kirchner, then the president, of trying to shield former Iranian officials he suspected of planning a 1994 bombing of a Jewish center here in exchange for trade benefits.

Mr. Nisman’s complaint, which Mrs. Kirchner believed was part of a plot to destabilize her administration, dissolved in Argentina’s courts when a three-judge panel ruled unanimously in May to accept another prosecutor’s decision to drop it. That prosecutor, Javier de Luca, concluded that there was no crime on which to base an investigation.

But shortly after Argentina’s new government moved on Monday to abandon a public pact with Iran that Mr. Nisman had claimed was intended to serve as cover for the secret deal described in his complaint, the prosecutor, Raúl Pleé, sought to revive the case, according to Télam, the state news agency.

Mr. Pleé, who could not be reached for comment on Tuesday, has asked that the court of Judge Daniel Rafecas, who originally dismissed Mr. Nisman’s complaint, consider whether new information justifies the reopening of the case against Mrs. Kirchner; her former foreign minister, Héctor Timerman; and some of her political supporters.

The new information is related to negotiations between Argentina and Iran that led to the public pact, according to local news media reports of the document that Mr. Pleé filed.

The pact, signed in 2013 by Mr. Timerman and his Iranian counterpart, proposed the creation of a joint commission to help solve the 1994 bombing, which killed 85 people in one of the worst anti-Semitic attacks since World War II.

But last year, a court ruled that the pact, which was rejected by Jewish leaders, some victims’ relatives and the political opposition to Mrs. Kirchner, was an unconstitutional overreach by the executive branch, a decision that Mrs. Kirchner’s administration appealed to a higher court.

The new president, Mauricio Macri, who took office last week and is seeking to reposition Argentina internationally, had promised to revoke the pact. On Monday, the Justice Ministry ceased the appeal.

Pointing to the politicization of some legal cases in Argentina and the influence of the executive branch, Sergio Berensztein, a political analyst here, said the sequence of events that could lead to a revival of Mr. Nisman’s case would have been unlikely if Mrs. Kirchner’s party had beaten Mr. Macri in last month’s election.

Mr. Pleé has been part of a group of prosecutors within Argentina’s politicized judicial system whom Mrs. Kirchner’s administration accused of maneuvering against her.

Mr. Nisman had led the investigation into the 1994 bombing for a decade before he was found dead in January of a gunshot wound to the head at his apartment here. The investigation into his death, which thrust Argentina into a political crisis, has not established whether it was a suicide or murder.

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4. PRESIDENT MAURICIO MACRI LIFTS ARGENTINA’S CAPITAL CONTROLS (Financial Times)
By Daniel Politi in Buenos Aires
December 17, 2015

Argentina has lifted capital controls and will allow practically unlimited access to foreign currency in a process that will allow the peso to float more freely, finance minister Alfonso Prat-Gay said late on Wednesday in Buenos Aires.

“Whoever wants to buy dollars can buy them and whoever wants to sell them can sell them,” Mr Prat-Gay said.

The move is expected to trigger a sharp depreciation of the peso when the market opens for trading on Thursday.

Rolling back what is popularly known as the “dollar clamp” was one of new President Mauricio Macri’s priorities and marks his biggest pro-market shift since he was sworn in last Thursday.

“There is no magic number,” Mr Prat-Gay said when asked what the government saw as an ideal exchange rate, although he repeatedly referred to the blue-chip swap, currently trading at 14.3 pesos per dollar, as being most representative of the market.

Analysts say the peso could fall as much as 30 per cent to bring what has been a tightly controlled official exchange rate of 9.8 pesos to the dollar closer to the 14.5 per dollar rate at which the currency is trading on the black market.

“It will likely reach somewhere between 13.50 and 14.50,” Alejo Costa, chief of research at Puente, a local brokerage, said.

The minister emphasized the exchange rate would not be administered by Argentina’s central bank in what he referred to as a “dirty float” system.

The need to build the monetary authority’s coffers to manage a potential run on the peso was one of the priorities of Mr Macri’s administration. The government is now confident that $15bn-$20bn will come into the country over the next month through increased exports, new lines of credit from foreign banks and an imminent deal with China to convert renminbi that are in reserves into dollars, Mr Prat-Gay said.

“Lifting the clamp will be the jumping off point for economic growth,” Mr Prat-Gay said.

The full lifting of the clamp begins to unwind a policy first implemented in 2011 as a way to avoid depreciating an overvalued peso amid soaring capital flight. A measure that at first only required the AFIP tax bureau to authorise purchases of foreign currency, quickly expanded its tentacles through all corners of the economy.

The goal of the controls may have been to prevent capital flight, but foreign investment dried up. “The ‘clamp’ managed to kill the supply of dollars and not the demand,” Mr Prat-Gay said.

Mr Costa noted that Argentina had received less than 1 per cent of its GDP in foreign capital over the past four years while Uruguay, its smaller neighbor, had received some 10 per cent and Colombia 5 per cent.

Keeping the restrictions was becoming increasingly expensive as the pre-announced devaluation made exporters wait to sell their products abroad, cutting central bank reserves by about $200m a day since Mr Macri took office.

The impending devaluation should lead to a surge in exports that would provide a cushion to reserves. Grain exporters have committed to sell $400m per day over the next three weeks, Mr Prat-Gay added.

The new administration’s challenge now is to make sure that the devaluation does not lead to a spiraling of already high inflation. To that end it has already shown signs that it is willing to raise interest rates.

“Lifting the clamp is not going to be neutral for inflation and lifting rates is not going to be neutral either,” said Fausto Spotorno, chief economist at Orlando Ferreres & Asociados, a consultancy, “but you have to do it in order to boost the country’s economy in the medium-term.”

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5. ARGENTINA MOVES TO LET PESO TRADE MORE FREELY (Financial Times)
December 16, 2015

It’s really happening. Argentina is lifting capital controls and moving to let the peso trade more freely with immediate effect, Finance Minister Alfonso Prat-Gay announced late on Wednesday in Buenos Aires.

Getting rid of what is popularly known as the “dollar clamp” marks the biggest move yet by newly elected President Mauricio Macri (pictured) to open up the economy and regain investor trust.

The roll-back in currency controls is expected to trigger a sharp fall in the peso when the market opens for trading on Thursday. Analysts say the fall could be as deep as 30 per cent in order to bring what has been a tightly controlled official exchange rate of 9.8 pesos to the dollar closer to the 14.5 per dollar that the currency is trading at in the black market, reports Daniel Politi in Buenos Aires.

In an auditorium packed with journalists, Prat-Gay declined to say whether the government had a goal for what the peso should be worth.

“There is no magic number,” Prat-Gay said, although he did repeatedly refer to the blue-chip swap, currently trading at 14.3 pesos per dollar, as most representative of the market.

The minister did make clear that the exchange rate would be administered by the Central Bank in what he referred to as “dirty float” system.

“Lifting the ‘clamp’ will be the jumping off point for economic growth,” Prat-Gay said

The move announced today begins to unwind a policy that was first implemented in 2011 as a way to avoid depreciating an overvalued peso amid soaring capital flight. A measure that at first only required Argentina’s tax agency to authorize purchases of foreign currency quickly became like an octopus, expanding its tentacles through all corners of the economy.

The goal of the controls may have been to prevent capital flight, but the opposite also became true — foreign investment dried up.

Alejo Costa, chief of research at Puente, a local brokerage, exemplifies the negative effects of the “clamp” by noting that over the past four years, tiny neighbouring Uruguay received some 10 per cent of its GDP in foreign capital while Colombia received 5 per cent. Argentina? Less than 1 per cent.

The impending devaluation should lead to a surge in exports that farmers and others were hoarding in anticipation of a devaluation and a drop in export duties, which were unveiled on Monday.

The big challenge now for the new administration is making sure that the devaluation does not lead to a spiraling of already high inflation. To that end it has already shown signs that it is willing to raise interest rates.

“This is a big step towards macroeconomic orthodoxy,” Capital Economics said.

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6. ARGENTINA SCRAPPING CONTROLS AS PESO MOVES TOWARD FREE FLOAT (Bloomberg News)
By Charlie Devereux
December 16, 2015

* Finance Minister Prat-Gay to speak at 6 p.m. in Buenos Aires
* Peso expected to be floated this week ending a crawling peg

Argentina will move forward with plans to lift currency controls and let the peso float as President Mauricio Macri tries to fulfill campaign promises to create a more open economy.

The move will imply a devaluation of the official exchange rate which has been tightly controlled by the central bank under a crawling peg system. The official rate of 9.82 pesos per dollar compares with a black market rate of 14.5 pesos. Finance Minister Alfonso Prat-Gay will make the announcement at a press conference at 6 p.m. in Buenos Aires on Wednesday, according to the ministry.

The unwinding of currency controls is one of the largest hurdles Macri’s government faces as it tries to move to a single exchange rate to improve the competitiveness of the economy and attract investment while at the same time trying to rebuild reserves needed to control the magnitude of a devaluation. Macri has lifted farm export taxes on most products in the hopes of getting farmers to empty silo bags full of crops to bring money into the central bank. At the same time, a group of international banks are working to lend Argentina money in exchange for a one-year note backed by foreign currency debt held by the central bank, according to people involved in the talks.

“It’s not a process devoid of risk but there’s also significant risk in doing this in several installments,” Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc. said by telephone from New York. “The economy is weak and therefore its a more risky proposition than in other places but it’s unavoidable. If they felt that the risk is too high they would have waited to get the pieces in place to be a little more sure.”

A devaluation of the exchange rate also risks accelerating inflation already running at 24 percent annually and sparking social discontent. The economy is stagnant and Macri needs to promote foreign investment to prop up reserves that have tumbled to a nine-year low of $24.3 billion.

The central bank on Tuesday raised yields on its shortest-maturity notes to as high as 38 percent in the first weekly auction overseen by Federico Sturzenegger in a bid to stoke demand for peso assets and limit the slide in reserves ahead of the expected devaluation.

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7. ARGENTINA TO DEVALUE PESO, REMOVE CURRENCY CONTROLS THURSDAY (Bloomberg News)
By Charlie Devereux
December 17, 2015

* Finance Minister Prat-Gay announces end of currency controls
* Government expects $15b-$25b in four weeks to defend peso

Argentina scrapped most of its currency controls and will allow the peso to start trading freely Thursday, orchestrating a devaluation that fulfills a key component of President Mauricio Macri’s campaign pledge to free up the sputtering economy and lure investment.

Finance Minister Alfonso Prat-Gay indicated he anticipates the peso could plunge by about 30 percent — which is the gap between the official exchange rate and a parallel rate known as the blue-chip swap — when markets open on Thursday in Buenos Aires. The central bank is ready to intervene should declines in the peso spiral out of control, Prat-Gay said at a press conference.

In addition, the government expects between $15 billion and $25 billion in inflows over the next month to bolster reserves.

Individuals will be able to purchase up to $2 million a month and importers who have outstanding debts with the central bank will be offered a bond or a timetable to settle the arrears estimated at $5 billion, he said. Argentina’s markets closed before the government’s announcement.

“We said that we were going to lift currency controls when the conditions were right and today the conditions are right,” Prat-Gay said. “Currency controls managed to kill the supply of dollars and didn’t stop demand.”

The peso closed at 9.8 per dollar in the tightly controlled official market on Wednesday. In the blue-chip swap market, where investors often turn to move money in and out of the country, it ended the day at 14.02. Traders in non-deliverable forwards expect the exchange rate to depreciate to 16 against the dollar in three months and 17.45 in six months, according to data compiled by Bloomberg.

The unwinding of currency controls is one of the biggest hurdles Macri’s government faces as it tries to improve the economy’s competitiveness, lure investment and rebuild foreign reserves from a nine-year low. Macri has removed export taxes on most crops to encourage farmers to empty grain storage bags and bring dollars into the central bank. Argentina has reached an agreement with grain exporters for them to bring in about $400 million a day for the next three weeks, Prat-Gay said.

At the same time, the government is working on a loan of more than $5 billion from a group of international banks that will be ready in 10 days and pay an interest rate of about 7 percent, Prat-Gay said. The financing will be arranged in the local market and shouldn’t violate U.S. court orders that currently prevent Argentina from servicing its foreign law debt due to a dispute with holdout creditors, Finance Secretary Luis Caputo said at the news conference.

The central bank will convert part of the $11 billion-worth of yuan from a currency swap with China into dollars to boost liquidity in reserves, Prat-Gay said.

A devaluation of the exchange rate may also fuel inflation already running at 24 percent annually and spark social discontent. International reserves have tumbled to $24.2 billion, the lowest since 2006, due to debt payments and intervention to maintain the crawling peg.

“It’s not a process devoid of risk but there’s also significant risk in doing this in several installments,” said Alberto Ramos, the chief Latin America economist at Goldman Sachs Group Inc. in New York. “The economy is weak and therefore it’s a more risky proposition than in other places, but it’s unavoidable.”

The central bank on Tuesday raised yields on its shortest-maturity notes to as high as 38 percent in the first weekly auction overseen by Governor Federico Sturzenegger. Higher rates may stoke demand for peso assets and limit the slide in reserves ahead of the devaluation.

With currency controls abolished, trading volume in the peso is likely to increase, said Ezequiel Aguirre, a currency strategist at Bank of America Corp. The central bank will looks to curtail volatility through intervention, he said.

The peso will weaken to 15 per dollar, causing inflation to accelerate to as fast as 47 percent in the first half of 2016, Barclays’ analysts Pilar Tavella and Sebastian Vargas wrote in a report Wednesday.

Devaluing the peso will provoke farmers to sell crops they have been holding back, said Andres Alcaraz, spokesman for grain and oilseed exporter group Ciara-Cec. The tax agency, AFIP, estimates that as much as $11.4 billion of soy, corn and wheat are being held by farmers waiting for better conditions to sell.

“What’s important now are the fiscal announcements they’ll make and greater detail on the inflows they’re negotiating with banks abroad,” said Bank of America’s Aguirre. “This is just the beginning.”

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8. GRAIN PRICES DROP AS ARGENTINA PLANS TO SCRAP CURRENCY CONTROLS (Bloomberg News)
By Megan Durisin and Pablo Rosendo Gonzalez
December 16, 2015

* Move will `rapidly unleash’ crops, exporter group says
* New Argentina president Macri cut crop export taxes this week

Grain prices fell on the Chicago Board of Trade on expectations that Argentina will ease currency controls, leading to an increase in shipments from one of the world’s largest exporters of corn and soybeans.

Argentina will lift currency controls and let the peso float, implying a devaluation of the tightly controlled official exchange rate. The country’s finance minister will make the announcement at a 6 p.m. press conference in Buenos Aires. The policy change will unleash crops hoarded by farmers and lead to a large increase in shipments, according to grain and oilseed exporter group Ciara-Cec.

“The lifting of the FX control policy was the last measure needed to motivate crop sales for export,” Andres Alcaraz, a Ciara-Cec spokesman, said in a telephone interview from Buenos Aires. Combined with the reductions to export taxes and eliminated export permits, the move “confirms the battery of measures that will provoke huge sales.”

Corn futures for March delivery dropped 2 percent to close at $3.69 3/4 a bushel in Chicago. Prices touched $3.69 1/4, the lowest for a most-active contract since Dec. 3. Soybean futures for delivery in the same month fell 0.5 percent to $8.63 1/4 a bushel, while wheat futures tumbled 2.2 percent to $4.83 1/2, the biggest drop in a month.

The slide in grain prices comes amid a commodity slump, with the Bloomberg index of raw materials falling for a fifth session to the lowest since 1999. In the U.S., the Federal Reserve raised interest rates on Wednesday, in the first hike in seven years.

Peso Movement

Argentina’s new President Mauricio Macri on Monday announced the elimination of export taxes on crops, including corn and wheat, carrying through on a campaign pledge. The soybean tariff was cut by 5 percentage points. Argentine farmers have been storing crops, partly in protest of the taxes and the difficult process of obtaining export permits.

The country, which is the leading world exporter of soybean derivatives, has shipped $17.9 billion of grains and oilseeds abroad this year to date, the lowest for the period since 2009, according to data compiled by exporters.

“They cut the tariffs, but I think most of the producers were waiting on the peso move before they made any sales,” Alan Brugler, president of Brugler Marketing and Management in Omaha, Nebraska, said in a telephone interview. “There’s still the question of how low they’re going to go.”

In the current marketing year, Argentina is forecast to be the world’s fourth-largest corn exporter and third-largest soybean exporter, according to a Dec. 9 report from the U.S. Department of Agriculture. The agency increased its estimate for Argentina’s wheat exports by 20 percent to 6 million metric tons, citing expectations that the “new government will reduce export restrictions.”

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9. GRAINS-SOYBEANS FALL FOR 3RD DAY ON ARGENTINA CURRENCY MOVE (Reuters News)
By Naveen Thukral
17 December 2015

* Soy at 3-week low, Argentina seen boosting exports
* Corn struggles, wheat falls on ample world supplies

SINGAPORE, Dec 17 (Reuters) – U.S. soybeans eased for a third consecutive session on Thursday as Argentina’s move to let the peso trade freely will likely prompt farmers in the South
American country to boost exports, increasing competition in an amply supplied market.

Corn was largely unchanged after dropping in the last two sessions, while wheat slid for a second day with plentiful global supplies anchoring the grain markets.

Chicago Board of Trade January soybeans fell 0.6 percent to $8.57-1/2 a bushel by 0250 GMT, after dropping earlier in the session to match last session’s three-week low of $8.56 a bushel.

March corn was flat at $3.69-3/4 a bushel after closing down 2 percent in the previous session when prices hit the lowest since Dec. 3. Wheat lost 0.4 percent to $4.81-3/4 a bushel.

“Policy changes in Argentina will likely remain the key driver for grain markets today,” said Paul Deane, senior agricultural economist at ANZ Bank in Melbourne.

“The anticipated depreciation of the peso will prompt farmers to export large hoarded stocks in coming quarters.”

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