ARGENTINE UPDATE – Dec 31, 2015


1. ARGENTINA’S ‘LITTLE TREES’ GETTING CHOPPED DOWN BY NEW PRESIDENT (Los Angeles Times)

2. ARGENTINA’S NEW PRESIDENT : A FAST START (The Economist)

3. ARGENTINA SEES WHEAT, CORN CROPS SETTING RECORDS UNDER NEW RULES (Bloomberg News)

4. ARGENTINA: CROP QUOTAS QUASHED; AUTO TAX CUTS; MACRI SHOW OF STRENGTH? (Barron’s)

5. PACKAGED FOOD IN ARGENTINA (PR Newswire (U.S.))

6. PREHISTORIC GIANT ARMADILLO SHELL FOUND IN ARGENTINA (Discovery Online)

1. ARGENTINA’S ‘LITTLE TREES’ GETTING CHOPPED DOWN BY NEW PRESIDENT (Los Angeles Times)
By Andres D’Alessandro and Chris Kraul
December 30, 2015

It didn’t take Argentina’s new president very long to ruin Lorena Garcia’s business.

Garcia, a money changer, is one of legions whose livelihood was turned upside down when Mauricio Macri, in one of his first acts as president, eliminated a subsidized exchange rate for the Argentine peso.

“The golden age is over,” Garcia said in a low voice, a calculator by her side, as she sat in her jewelry shop on Florida Street. Her district in central Buenos Aires has long been home to legions of “arbolitos,” or “little trees,” as money changers are known here, in a reference to the green of the U.S. dollar.

The buying and selling of dollars has long been an under-the-table, technically illegal side business at shops like hers. Business boomed under Macri’s predecessor, Cristina Fernandez de Kirchner, who kept the official dollar exchange rate at an artificially low level, as much as 50% under the market value, in a bid to restrain inflation.

Before Dec. 16, when Macri’s center-right government abolished the subsidized rate, the peso was officially trading at about 9.5 to the dollar, but shops like Garcia’s were offering around 14 to the dollar. Once Macri’s changes went into effect, the peso’s value floated to about 13 to the dollar, close to the rate on the “blue market,” as the off-books money changers were known.

Almost instantly, some two thirds of the arbolitos closed up shop, by Garcia’s estimate. Although she continues to change money for tourists and informal business owners who keep their cash under the official radar, volume is down sharply.

“This has happened before and arbolitos have always come back,” Garcia said.

The elimination of an official exchange rate was one of Macri’s first acts after taking office on Dec. 10. He made no secret during his campaign of his plans to scrap much of Fernandez’s left-leaning economic policies and wasted little time in doing so, blaming them for Argentina’s dismal economy, which currently suffers from stagnant growth and 28% inflation.

Despite the pain felt by Garcia and other moneychangers, Macri’s policy shifts have generated positive public response overall, pollsters say.

“According to a survey we did for a private firm, we figure that the Mauricio Macri government now can count on 60% support,” said Analia del Franco of the Analogias polling firm in Buenos Aires.

In his short time in office, Macri has slashed high taxes on farm goods, eliminated some export controls and moved to cut a yawning budget deficit caused partially by Fernandez’s expansive spending on social-welfare programs. The red ink this year will equal 7% of the country’s total economic output, economists expect.

Macri has been busy dismantling some of Fernandez’s foreign policies as well. He scolded Fernandez’s former ally Venezuela for alleged human rights abuses at a recent meeting of regional leaders and has reiterated his campaign pledge to improve relations with the United States, a frequent rhetorical punching bag for his populist predecessor.

Among the sectors most pleased with Macri is Argentina’s farm and cattle sector, which chafed under controls implemented by Fernandez that were designed to limit many goods’ access to export markets in a bid to keep overall demand, and thus prices, low for domestic consumers.

“There is a strong optimism,” said Jaime Campos, president of Argentina Business Assn., a leading trade group, in an interview with Clarin newspaper. “We are confident that the government will do things correctly. [Macri has] a team that is well prepared, integrated and that knows the issues.”

Campos also applauded Macri’s efforts to reach out for better relations with Brazil and Chile while “keeping a distance from countries that don’t respect human rights,” a reference to Venezuela.

At the meeting of South American leaders earlier this month, Macri called on Venezuelan President Nicolas Maduro to release political prisoners, including Leopoldo Lopez, the former Caracas borough mayor jailed since February 2014 on incitement to violence charges, which Lopez and his supporters say are trumped up.

Fernandez was a staunch defender of Venezuela’s socialist policies and a close colleague of that country’s late president, Hugo Chavez.

Macri also served notice that he won’t repeat Fernandez’s friendly gestures to Iran, whose officials are suspected of having planned the 1994 bombing of a Jewish community center in Buenos Aires that left 85 dead.

Soon after taking the oath of office, Macri said he would not try to block, as Fernandez did, a 2014 ruling by a federal prosecutor that an agreement between Iran and Argentina regarding the bombing investigation was unconstitutional. The prosecutor said the agreement Fernandez made with Iran shielded certain suspects from international arrest warrants.

Macri also made friends among some U.S. investors by indicating he was open to settling a $100-billion bond default dating back to 2002 by making good on unpaid judgments.

White House aides have been quoted as saying that President Obama is considering a Latin America trip next year that will include a stop in Argentina, partly in recognition of Macri’s stated desire to improve bilateral relations.

In another move cheered by many free-speech advocates, Macri said he will “normalize” the calculation of government economic data, a reference to allegations that Fernandez pressured government statisticians to paint a rosier economic picture than warranted.

Not all Argentines approve of Macri’s market-friendly policies. Although Fernandez herself has been silent, groups of her supporters have organized three marches since Macri took power to protest his changes in telecommunications policy, his upcoming judicial appointments and other changes.

“These economic measures produce the transfer of millions from Argentine workers to large exporters and to financial powers who benefit from the liberalization of the economy [and] put at risk the workers, their savings, production and jobs,” said a joint statement issued by several workers groups closely associated with Fernandez.

And some economists also warn that Macri’s domestic policy changes could exacerbate Argentines’ financial pain, at least in the short term. Few expect the current high inflation rate to moderate over the next few months and some warn that the economy could shrink over the first six months of 2016, before resuming growth by the end of next year.

But Macri says the first dividends of his more market-friendly policies have begun to arrive; he announced this month that private firms had committed $500 million in new investment in energy projects. Foreign oil and natural gas companies by and large stayed away from Argentina’s promising oil reserves during Fernandez’s administration because of her price controls and history of having nationalized energy firms.

“People and markets have reacted positively,” said Mariano Gorodisch, a Buenos Aires-based financial analyst and journalist. “Signs of confidence indicate an improved future.”

2. ARGENTINA’S NEW PRESIDENT : A FAST START (The Economist)
Jan 2nd 2016

Mauricio Macri’s early decisions are bringing benefits and making waves

MAURICIO MACRI, who took office as Argentina’s president in December, has wasted little time in undoing the populist policies of his predecessor. On December 14th he scrapped export taxes on agricultural products such as wheat, beef and corn and reduced them on soyabeans, the biggest export. Two days later Alfonso Prat-Gay, the new finance minister, lifted currency controls, allowing the peso to float freely. A team from the new government then met the mediator in a dispute with foreign bondholders in an attempt to end Argentina’s isolation from the international credit markets.

This flurry of decisions is the first step towards normalising an economy that had been skewed by the interventionist policies of ex-president Cristina Fernández de Kirchner and her late husband, Néstor Kirchner, who governed before her. They carry an immediate cost, which Mr Macri will seek to pin on the Kirchners. Some of the new president’s other early initiatives are proving more controversial.

The economic reforms seem to be working. Farmers who had hoarded grain in the hope that the tariffs would be lifted are now selling, replenishing foreign-exchange reserves that had been drained to defend the artificially strong peso. The newly freed currency fell by more than 30%, a further boost to exporters. It has stabilised at around 13 pesos to the dollar. “Substantive” talks with holdout bondholders starting in early January could lead to a return to credit markets in 2016.

But the devaluation has pushed up the inflation rate, already more than 25% when Mr Macri took office. To rein it back, on December 15th the central bank raised interest rates on short-term fixed deposits by eight percentage points to 38%. The government hopes to persuade business and trade-union leaders to keep tight control of prices and wages. But that may prove difficult: the unions are fragmented and little disposed to help Mr Macri, a centre-right politician; businesses may balk at holding down prices. Barclays, a bank, expects the economy to contract by 1.1% in 2016. But increased foreign investment should lead to renewed growth of 3.5% in 2017.

Mr Macri’s attempts to bring fresh talent into institutions dominated by Ms Fernández’s kirchneristas have run into resistance, from both foes and allies. On December 14th, with the Senate in recess, Mr Macri temporarily appointed by decree two Supreme Court judges. He then booted out the chief of the media regulator, Martín Sabbatella.

In both cases his motives were worthy. He wants independent jurists in the courts. Mr Sabbatella had clashed with Grupo Clarín, a big media group. Mr Macri thinks his removal will strengthen press freedom. But critics say he misused his authority. On the judges, at least, he has relented. He will now wait for the Senate’s approval.

Touring northern Argentina, where 20,000 people have been displaced from their homes by floods, Mr Macri blamed the former president, saying she had failed to invest in flood defences (see article). For now, Argentines are likely to believe their new president. However, if the economic slowdown is prolonged, the honeymoon will not be.

3. ARGENTINA SEES WHEAT, CORN CROPS SETTING RECORDS UNDER NEW RULES (Bloomberg News)
By Pablo Rosendo Gonzalez
December 30, 2015

* Output may easily double in future harvests, Minister says
* Country eliminated taxes and export permits that set quotas

Argentina is poised to double its wheat and corn crops after recently revised grain export policies, Buenos Aires Province Agriculture Minister Leonardo Sarquis said.

The government published a decree Tuesday in the official gazette ending its export permit policy.

President Mauricio Macri had eliminated export taxes on corn and wheat as well as bureaucratic export permits since assuming office on Dec. 10.

Export restrictions were implemented in the past decade under former presidents Nestor Kirchner and his wife Cristina Fernandez de Kirchner in a bid to boost government revenue and ensure domestic supplies. Local prices for both cereals slumped and farmers reduced wheat plantings, switching to crops that didn’t require export permits and weren’t taxed such as barley.

“Now that we have changed these wrong policies, the wheat planted area will be doubled by farmers,” Sarquis said in an interview. “Corn may take another year to double, but for sure we will have record crops of both cereals from now on.”

Buenos Aires province produces 70 percent of the country’s wheat.

Peso Devaluation

Argentina’s Agriculture Ministry is forecasting the current wheat crop to be 10.9 million metric tons. That’s below the 2007-08 record crop of 16.4 million, before the export permit policy was initiated.

The country’s record corn crop of 27 million tons was harvested in the 2013-2014 season, according to the Buenos Aires Grain Exchange. Argentina is the world’s fourth-largest corn exporter.

The export of grains has become more profitable for farmers after Argentina’s government lifted four years of currency controls, leading to the the biggest one-day peso devaluation in the last 14 years on Dec. 17.

In the last 10 days, Argentina, the world’s largest shipper of soybean derivatives, shipped three times the amount of grains and oilseed abroad that it sold in the entire month of November. It shipped $1.2 billion of grains and oilseed in the last 10 days compared with November exports of $451 million, according to the exporters’ group data.

Export taxes for soybeans were cut to 30 percent from 35 percent by Macri.

4. ARGENTINA: CROP QUOTAS QUASHED; AUTO TAX CUTS; MACRI SHOW OF STRENGTH? (Barron’s)
By Teresa Rivas
December 30, 2015

More Argentina news: Argentina’s President Mauricio Macri has already suspended limits on currency exchange, and made a big investment in the nation’s energy sector, but there are even more changes on the table as he plows through his first weeks in office.

Victor R. Caivano/Associated Press
Macri’s government has already cut excise taxes on new cars in an attempt to boost auto production, which could use a boost after years of lackluster growth thanks to economic weakness at home and in major trading partner Brazil.

Reuters’ Walter Bianchi has the details:

The government of Mauricio Macri will analyze the impacts of the lowered taxes after six months and modify them as needed, Production Minister Francisco Cabrera said.

A tax on cars that cost more than 350,000 pesos ($27,000) will fall to 10 percent from 30 percent while a tax on luxury vehicles that cost more than 800,000 pesos will fall to 20 from 50 percent, Cabrera said.

Elsewhere, Macri also eliminated limits on the amount of corn and wheat that Argentina’s farmers can export, which his government will believes will lift the country’s grains production to as much as 130 million tonnes a year during the president’s first term. Argentina currently produces around 100 million tonnes.

Farmers had sought the change under Marci’s predecessor, Cristina Fernandez, but she said the curbs were needed to keep domestic food needs met.

Reuters’’ Nicolas Misculin reports:

The new center-right administration of President Mauricio Macri eliminated taxes on corn, wheat and soy exports earlier this month, making good on a campaign pledge to take steps to encourage agricultural production.

The export quotas had curbed corn and wheat planting and resulted in the overplanting of soy in recent years.

New changes are coming quite quickly for Macri, who is already fulfilling a number of his campaign promises. Yet his swiftness may be more than simply appeasing those who voted for him.

Many predicted that Macri’s hands would be tied after a bitter election cycle that ended with Fernandez skipping Macri’s inauguration and many of her party still in power. As The Washington Post’s Frederic Puglie writes, Macri is bent on disproving those who thought he would be mired in red tape and opposition:

Mr. Macri evicted the head of the government’s powerful media regulation body, one of a handful of Fernandez-appointed officials who defied the new president’s call to resign. He reversed Argentina’s posture toward Venezuela by pushing Caracas to release political prisoners and tried to circumvent Congress by temporarily appointing two Supreme Court justices.

The flurry of activity is meant to show “gobernabilidad,” or the administration’s ability to govern despite a divided parliament dominated by Ms. Fernandez’s Front for Victory and other Peronists — who also hold much sway in Argentina’s powerful trade unions.

Finally, two of Argentina’s former transportation ministers will go to jail over a 2012 train crash in the capital of Buenas Aires that killed 50 people.

The New York Times’ Jonathan Gilbert has this brief:

Juan Pablo Schiavi, who held the post at the time, was given an eight-year sentence, convicted of causing the deaths. Ricardo Jaime, his predecessor, was given a six-year sentence, merged with punishment for a previous charge of receiving bribes while in government. Both were found guilty of fraudulent practices that jeopardized the management of train lines and led to the tragedy, a four-judge panel said. Nineteen others were convicted, including the driver of the train and Sergio Claudio Cirigliano, whose company operated the commuter line.

5. PACKAGED FOOD IN ARGENTINA (PR Newswire (U.S.))
30 December 2015

NEW YORK, Dec. 30, 2015 /PRNewswire/ — In 2015 packaged food in Argentina recorded retail volume growth of only 1%, which was in line with the natural growth of the population. The economic crisis played a key role in driving demand for packaged food, boosting the consumption of staples to the detriment of more sophisticated and added-value products. Products such as rice and pasta recorded good performances as these products are inexpensive, easy to prepare and can be combined with other foods. Moreover, the reduction in real wages…

Euromonitor International’s Packaged Food in Argentina report offers a comprehensive guide to the size and shape of the market at a national level. It provides the latest retail sales data 2010-2014, allowing you to identify the sectors driving growth.

6. PREHISTORIC GIANT ARMADILLO SHELL FOUND IN ARGENTINA (Discovery Online)
By Carlos Spegazzini
December 30, 2015



A passer-by on Christmas Day found a meter-long shell on a riverbank in Argentina which may be from a glyptodont, a prehistoric kind of giant armadillo, experts said Tuesday.

A local man thought the black scaly shell was a dinosaur egg when he saw it lying in the mud, his wife Reina Coronel told AFP.

Her husband Jose Antonio Nievas found the shell beside a stream at their farm in Carlos Spegazzini, about 40 kilometers (25 miles) south of the capital Buenos Aires.

“My husband went out to the car and when he came back he said, ‘Hey, I just found an egg that looks like it came from a dinosaur,” she said.

“We all laughed because we thought it was a joke.”

Nievas told television channel Todo Noticias he found the shell partly covered in mud and started to dig around it.

Various experts who saw television pictures of the object said it was likely to be a glyptodont shell.

“There is no doubt that it looks like a glyptodont,” said paleontologist Alejandro Kramarz of the Bernadino Rivadavia Natural Sciences Museum.

“The animal became extinct thousands of years ago and it is very common to find their fossils in this region,” he told AFP.

330-Pound Beavers: What Earth Would Look Like Without Us

Glyptodonts are the ancestors of modern armadillos. They had big round armored shells and weighed up to a ton.

They lived in South America for tens of millions of years.

Kramarz estimated the specimen found by Nievas was relatively young at 10,000 years.

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