ARGENTINE UPDATE – Jan 12 & 13, 2016









By Richard Lough and Maximiliano Rizzi
Jan 11, 2016

BUENOS AIRES, Jan 11 (Reuters) – Argentine police commandos recaptured two of the country’s most notorious convicts in a rice mill plant on Monday, the vice governor of Santa Fe province said, ending a 15-day manhunt through backwater towns and flooded farm land.

Victor Schillaci and brothers Martin and Cristian Lanatta, who are convicted of drugs-related killings, escaped from jail on Dec. 27 in a prison break that raised questions about the political ties of the country’s narco gangs.

Security forces nabbed Martin Lanatta on Saturday, but his brother and Scillaci slipped through the dragnet, heaping embarrassment on President Mauricio Macri who had publicly celebrated the capture of all three.

They were finally cornered near the farming town of Cayasta in Santa Fe, 570 km (354 miles) north of the capital Buenos Aires, and appeared to have surrendered without a struggle.

“The two fugitives have been detained. Special forces from the Santa Fe police got them,” Vice Governor Carlos Fascendini told Radio del Plata.

The 15-day hunt had gripped the Argentine nation and news that it is over will ease pressure on Macri, who was left red faced after false information led officials to announce the search was over while two of the men remained on the loose.

Officials in the security ministry declined to comment ahead of a press conference by the minister.

State news agency Telam cited a local Cayasta official as confirming the mens’ capture.

Local TV channels broadcast a photograph of the two men, seated on the ground in scruffy clothing, with their hands behind their backs. Reuters could not immediately verify the image.


The three men were serving life sentences for the 2008 killing of three businessmen in the pharmaceutical industry, allegedly linked to an ephedrine trafficking gang. The high-profile case was dubbed “The triple murder.”

Ephedrine is used for the production of methamphetamine.

The search has focused attention on the growing muscle of drug gangs in Argentina, which drug-enforcement officials say has become an increasingly important transit point for the smuggling of South American drugs to Europe and the Americas.

Prosecutors said they had launched an investigation into whether narco gangs helped the three men in their prison break.

Macri, who took office on Dec. 10, last week accused the leftist government of former President Cristina Fernandez of “inaction or even complicity” with drug traffickers.

TV footage over the weekend showed security agents wading waist deep through flooded fields and raiding properties as hundreds of police intensified their search, backed by forces in boats and helicopters.

Martin Lanatta, now held in a maximum prison outside the capital, is due to talk soon to prosecutors about the escape.

“According to the medical carried out yesterday, he’s in a good enough state to make a statement,” said federal prosecutor Cristian Citterio.

By Richard Lough
Jan 11, 2016
Jan 11 Argentina does not expect to make an offer to U.S. hedge funds suing over unpaid debt when negotiations resume in New York on Wednesday, the daily La Nacion quoted the country’s cabinet chief as saying.

“We don’t plan to make an offer,” Cabinet Chief Marcos Pena told La Nacion. “This is a preliminary conversation.”

Pena’s office said he was in a meeting and not available to comment.
The funds, led by billionaire Paul Singer’s Elliott Management, are suing Argentina for full repayment of debt the country defaulted on in 2002. A large majority of creditors accepted about 30 cents on the dollar in 2005 and 2010 restructurings.
Finance Secretary Luis Caputo was to fly to New York later on Monday and was expected to meet with representatives of the so-called “holdout” funds in the office of the U.S. court-appointed mediator brokering the negotiations.

President Mauricio Macri, who took office on Dec. 10, faces a hard currency crunch and needs to resolve the decade-long legal battle to restore investor confidence and regain access to global credit markets. But he has promised Argentines he will haggle hard.
“All our problems shouldn’t rush us into making concrete advances,” Pena was quoted as saying.

Negotiations between the funds and former President Cristina Fernandez collapsed in July 2014, leading Argentina to fall back into default. Fernandez called the holdouts “vultures” bent on crippling the country’s economy in their pursuit of profit.

By Maximiliano Rizzi and Maximilian Heath
Jan 11, 2016

Argentina’s new government has informally lifted restrictions on beef exports imposed by the previous government in a bid to ensure reasonable prices at home, the secretary for agriculture, livestock and fisheries told Reuters on Monday.

Argentines are among the world’s most voracious beef eaters and local beef prices are a hot-button political issue. But farmers say the restrictions are not the solution, adding they have damaged profitability and prompted them to cut investment.

“There are no restrictions any more,” Agriculture Secretary Ricardo Negri said in a telephone interview, corroborating reports from farmers. The measure has not yet been officially published.

President Mauricio Macri, who took office last month, campaigned on a platform to reduce state intervention in Latin America’s third-largest economy and promised to end all export quotas. He has already lifted such restrictions on shipments abroad of wheat and corn.
Argentina’s powerful farming groups had fiercely opposed former President Cristina Fernandez over these quotas as well as hefty export taxes she introduced to boost low foreign reserves.
“The mood has changed in the sector, now that expectations are good, producers are ready to increase production,” said Miguel Schiaritti, the head of Argentina’s meat industry chamber. “They are exporting without the state imposing any restrictions.

Under Fernandez’s government, exporters had to register their export request and wait for approval. Now they no longer need to wait, said Schiaritti.
Beef exports will likely only rise slightly in 2016 from their current level of around 200,000 tonnes per year, growing more strongly in following years, Schiaritti said.

“We must wait a while, exports will change in the first few months but only slowly,” he said.

January 11, 2016

Security forces in the central Argentine province of Santa Fe on Monday caught Cristian Lanatta and Victor Schillaci, the two convicts who were on the lam for 15 days from a maximum security prison where they were serving a life sentence for a triple murder.

“The two fugitives are back in custody,” provincial Lt. Gov. Carlos Fascendini announced Monday on Radio del Plata.

He said the two fugitives were trapped by provincial special forces near the rural town of Cayasta, where the first escapee, Martin Lanatta, was nabbed last Saturday.

The detention was not immediately confirmed by Security Minister Patricia Bullrich, after the mix-up last Saturday when she announced that Cristian Lanatta and Schillaci had been captured, then had to deny it just hours later.

Nonetheless, Cayasta Deputy Mayor Veronica Devia said in a radio statement that they had been caught in a rice-growing region just a short distance from where Martin Lanatta was detained on Saturday.

The Lanatta brothers and Victor Schillaci pulled off the jailbreak 15 days ago at a maximum security prison in Buenos Aires, where they were serving life sentences for the triple murder of Sebastian Forza, Damian Ferron and Leopoldo Bina. All were involved in a case of trafficking ephedrine, an ingredient in synthetic drugs such as methamphetamine.

By Christopher Sabatini, Amy Williams
Monday, Jan. 11, 2016

Argentina’s new president, Mauricio Macri, inherits a host of problems and points of friction at home and abroad from his predecessors, Cristina Fernandez de Kirchner and, before that, her late husband, Nestor Kirchner. But in contrast to the daunting domestic economic issues his new administration faces—just 0.4 percent economic growth in 2015 and an economy projected to shrink by 0.7 percent in 2016, on top of inflation estimated at 20 percent—the international hangover of nearly 13 years of Kirchner governments looks relatively easy to fix.

International spats were an extension of the angry, polarizing rhetoric and policies of Kirchnerismo that voters rejected on Nov. 22. In the coming year, Macri’s administration must deal with three specific problem files: mending fences with the United Kingdom over Argentina’s Falkland Islands saber-rattling; resolving the unpaid debt with American hedge funds; and improving relations with the United States. Even with some political restraints at home, the former mayor of Buenos Aires and scion of a well-known Argentine businessman should be up to the task, if he can apply his no-drama demeanor that won him the presidency to Argentina’s foreign policy, which is in sore need of repair.

The trouble goes back to Nestor Kirchner’s election in 2003, which came in the midst of one of Argentina’s worst economic disasters. In January 2002, the previous government had been forced to end its strict dollar-to-peso exchange rate, wiping out citizens’ savings and leading to a contraction of GDP of almost 20 percent from 1998 to 2002. Shortly after reaching office, Kirchner declared default and stopped all payments on the country’s debt.

It was just the start of a nationalist correction to a decade of pro-market and pro-U.S. policies. Kirchner demanded that former creditors take a 66 percent haircut to settle the debt, railed against the International Monetary Fund and, in 2005, facilitated an anti-U.S. demonstration when Argentina hosted the Summit of the Americas.

After she succeeded him, Nestor’s wife Cristina ramped up those battles, while also aggressively and publicly reasserting Argentina’s claims on the Falklands, a string of rocky islands home to some 2,000 people and half a million sheep just 300 miles off its coast. Its citizens are British, but Argentina has claimed the islands as its own since the U.K. asserted control over them in the 19th century. In 2012, while on a visit to London, Kirchner took out an advertisement in British newspapers claiming that British control over the islands was “a blatant exercise of 19th century colonialism” and demanding that the U.K. return the stolen land to Argentina, regardless of the wishes of the residents, or “colonists,” as she calls the islanders.

Other rhetorical and international stunts severely strained Argentine-British relations. All along, the U.K. has maintained that it “will always be there to defend” the Falklands. In a 2013 British referendum on the political status of the island, 99.8 percent of Falklanders expressed their desire to remain a part of the United Kingdom.

Some chalked Kirchner’s Falklands rhetoric up to her need to distract Argentinians from the problems at home, including declining economic growth and inflation. While partly true, it was also part of a larger modus operandi of the government in which it reflexively relied on a sense of victimhood and stoked fear of international conspiracies against Argentina.

The contrast in governing styles alone between the Kirchners and Macri should ease the challenge of correcting this kind of isolating foreign policy. But Macri can also take a few steps to restore Argentina and the Southern Cone to the good graces of the international community.

First, when it comes to the U.K., Argentina’s foot-stomping over the Falklands was ineffective and polarizing. Argentinians feel passionately about the Falklands, but they do not support a military effort to retake them. For that reason, Macri reiterated Argentina’s claims to the islands on Jan. 3, but he also emphasized the need to continue negotiations. Just taking Argentina’s rhetoric down a notch and behaving more professionally would go a long way in improving bilateral relations, which couldn’t be any worse than they were.

Falklanders have already welcomed Macri’s approach as a change of course from the bellicose, impractical attitude of the previous administration. Who controls the island will always remain a point of tension, but Argentine-U.K. relations, and even broader South American relations with the U.K., should not be reduced to the rocky outcroppings in the South Atlantic.

Second, in dealing with Argentina’s holdout creditors, Macri’s government should benefit from its private-sector pedigree. His new Cabinet lacks the knee-jerk response to international creditors that characterized Kirchner’s, from his new finance minister, Alfonso Prat-Gay, a former JP Morgan executive, to the new energy and mining minister, Juan Jose Aranguren, a former CEO of Shell Argentina.

Macri’s government desperately needs to find new sources of capital, given the empty bank accounts that Kirchner left them. The Kirchners termed the creditors who had refused to sign on to the 2005 and 2010 buy-outs of the debt “vulture funds,” largely because the creditors had bought up the bonds on a secondary debt market. Several American hedge funds refused to yield to Argentina’s debt restructuring and demanded full payment on the defaulted bonds. In 2012, and again in 2014, a judge in New York ruled in the hedge funds’ favor, unleashing a barrage of Kirchner’s vitriol against them.

Macri possesses none of that penchant for political posturing when it comes to fixing Argentina’s finances. At the same time, with only $26 billion in Argentina’s Central Bank reserves and reportedly much less in liquid assets, the country will need, very soon, to ingratiate itself back into capital markets. For their part too, the hedge funds will also likely be more inclined to resolve the dispute, wishing to get some payout and finding a less antagonistic partner on the other side of the negotiating table.

And third, Macri will need to mend relations with the United States, which have been under strain given the Kirchners’ many moves to challenge and denounce Washington, from allying with hard-line leftist governments in Venezuela, Ecuador and Bolivia to stoking conspiracy theories about American meddling in Argentina’s affairs. All of that played well in a country with the highest level of anti-Americanism in the hemisphere—just under a majority.

But there are concrete areas in which the U.S. and Argentina can improve relations. There are genuine opportunities for constructive collaboration against the drug trade, given allegations of increased narcotics trafficking across Argentina, and against corruption, with growing complaints by U.S. companies in Argentina that they have been asked for bribes or been threatened by officials.

Any job is made easier when the person before you underperformed, and that’s the situation Macri finds himself in. Thirteen years of Kirchnerismo may have left Argentina’s economy in tatters, but it also left Macri with a lot of room to maneuver.

Written by Arron Daugherty
Monday, 11 January 2016

Argentina authorities have captured one of three recently escaped fugitives serving time for the politically-charged “Triple Crime” murder case.

Martín Lanatta was arrested near the town of Cayastá in central eastern Santa Fe province, after being injured in a car crash, the BBC reported.

Lanatta, his brother Cristian and Víctor Schillaci escaped from General Alvear prison on December 27. The men were serving time for the murder of three pharmaceutical businessmen that became known in Argentina as the “Triple Crime.”

Authorities continue to search Cayastá and surrounding area for the remaining fugitives but have yet to capture them.

InSight Crime Analysis

The recapture of Martín Lanatta and the ongoing hunt for his fellow fugitives has the potential to damage both of Argentina’s major political camps.

The Triple Crime occurred in 2008, during the administration of former President Cristina Fernández de Kirchner.

In an interview prior to his escape, Cristian Lanatta claimed the former Chief of the Cabinet, Aníbal Domingo Fernández, had ordered the murders in a bid to consolidate control over ephedrine trafficking in Argentina. This was not the first time Fernández was accused of being involved in the Triple Crime or trafficking ephedrine, a precursor chemical for manufacturing methamphetamine and other designer drugs.

With the case once again in the media, Argentina’s newly-elected President Mauricio Macri may choose to highlight Fernández’s long-time connection to Kirchner and her political movement, known locally as Kirchnerismo.

This narrative of corruption under Kirchnerismo could be particularly useful as Macri moves to consolidate Buenos Aires’ federal and local police forces into one department and continues an aggressive government audit, which has resulted in the slashing of thousands of state jobs.

On the other hand, although the case began under Fernández de Kirchner’s watch, any further developments have the potential to reflect badly on Macri. During Martín Lanatta’s recapture, the Macri administration incorrectly reported that all three fugitives had been captured. Opponents were quick to paint his administration as inept and local newspaper Pagina/12 attributed the mistake to a lack of coordination between police forces.

Macri likely realizes the potential political damage an extended pursuit of the fugitives presents. Authorities have arrested the head of General Alvear prison and several of the fugitives’ family members, and are reportedly looking at a group of Buenos Aires police for suspicion of helping the fugitives escape.








By Ryan Dube
January 12, 2016

Talks With Holdout Bondholders, Which Start Wednesday in New York, Aim to End Long Dispute

BUENOS AIRES—Argentine President Mauricio Macri’s government on Wednesday starts negotiations with creditors to end a long, bitter dispute and permit the country to tap financial markets for the first time in years, helping its battered economy recover.

“We are ready to bring the matter to a close and negotiate a solution,” Mr. Macri said Tuesday. “I hope we can rapidly leave this issue behind because it limits our ability to grow.”

Officials will meet in New York with bondholders that had rejected previous debt restructurings following Argentina’s huge 2001 default.

The meeting will include Argentina’s finance secretary, Luis Caputo, U.S. hedge funds that successfully sued Argentina for full repayment of the soured securities, and Daniel Pollack, a mediator appointed by U.S. District Judge Thomas Griesa, who has overseen the case. Attorneys for a group of small Argentine creditors who also won court judgments in the U.S., where the bonds were issued, are also expected to participate.

Ending the long-running saga is seen as crucial if Mr. Macri is to jumpstart a stagnant economy mired in double-digit inflation driven by the generous spending policies of his predecessor, Cristina Kirchner, and hobbled by a lack of access to capital markets. A settlement would lower borrowing costs for the government and corporations as Mr. Macri looks to overturn 12 years of populist policies.

But the negotiations also carry political risk for a fledgling government in a country where many consider the creditors “vultures” out to gut Argentina.

“Everybody wants a face-saving solution,” said Claudio Loser, an Argentine economist and former Western Hemisphere director at the International Monetary Fund. He said the government “wants to solve the problem, but politically they don’t want to appear [to be] selling off to the quote-unquote vultures.”

The conflict is rooted in the 2001 default of some $100 billion of debt, at the time the largest sovereign default in history. The government convinced investors in 2005 and 2010 to exchange almost 93% of the defaulted bonds for new debt valued at about 33 cents on the dollar.

The holders of the remaining 7% of the bonds have held out, hoping for a better deal. They include U.S. hedge funds such as Elliott Management Corp., which is headed by Paul Singer, and Aurelius Capital Management LP. Both snatched up debt on the cheap, betting they could get Argentina to pay the full amount.

Elliott and Aurelius declined to comment.

The holdouts also include thousands of smaller creditors in Argentina and Europe who bought the sovereign bonds at full value before the default. A settlement with all of the holdout creditors could cost Argentina about $10 billion, according to economists.

Guillermo Nielsen, a former finance secretary who led the 2005 restructuring, said the Macri administration would likely cushion the blow of the payout by swapping the defaulted securities for new bonds rather than paying in cash.

“Argentina can’t pay in cash, it is going to have to pay in bonds,” Mr. Nielsen said. “There will be a negotiation over what type of bonds Argentina is going to use to make the payments.”

The talks have raised hopes for holdout creditors such as Carlos Ulla, who has waited almost 15 years for Argentina to pay back the savings that he and his late father lost in the default.

“There is a lot of hope since Mauricio Macri’s election because clearly this is a government that is interested in returning to international markets,” said Mr. Ulla, a 57-year-old lawyer from Argentina’s northeastern city of Santa Fe. “I expect to receive 100%.”

A deal would likely require approval from lawmakers to overturn legislation that prevents Argentina from providing the holdouts with better terms than previous restructurings. That could be a challenge in a Congress full of Kirchner loyalists.

Axel Kicillof, Mrs. Kirchner’s former finance minister and a current congressman, described the holdout creditors as “intransigent” and their demands for full payment “unfair.”

“If the government goes and negotiates, that doesn’t seem bad to me,” Mr. Kiciloff said in an interview. “What would be bad is if they go against the interests of Argentina.”

Arturo Porzecanski, a professor of international economics at American University who has closely tracked the bond dispute, doubts there will be a quick settlement. He recalled Finance Minister Alfonso Prat-Gay’s criticism of the restructurings in a 2013 court briefing as “extremely generous” to the bondholders due to an annual dividend linked to the country’s economic performance.

Mr. Porzecanski also pointed to the Macri administration’s recent efforts to secure a loan from international banks worth some $5 billion by using its central bank to sidestep the court judgments, sending a bad message to holdout creditors. “That makes me skeptical that one or two trips to New York and they are going to smoke the peace pipe,” he said. “Don’t hold your breath.”

Argentina’s Finance Ministry declined to make Mr. Prat-Gay available for an interview. Mr. Prat-Gay has previously said the government would be tough in negotiations.

The Finance Ministry on Tuesday said it would hire a new law firm to lead negotiations with the holdout creditors. It said officials will meet with potential firms this week. Cleary Gottlieb Steen & Hamilton, which was leading the case, will continue to provide legal services.

For investors, the prospect of Argentina settling its debt battles will mean a large chunk of new emerging-market debt offerings, says Gorky Urquieta, co-head of the emerging-markets debt team at New York-based Neuberger Berman, which holds Argentine bonds that were exchanged for the defaulted debt.

Some Argentine companies have already been shopping themselves to foreign investors in anticipation of a deal with creditors. The firms expect a settlement would lead ratings companies to lift corporate debt in Argentina above its CCC status, making it easier to attract foreign investors.

Alberto Bernal, chief emerging-markets and global strategist at Miami-based XP Securities, says many international investors would be happy to finance Argentine companies if a deal is reached. He expects a settlement this year, but says that would require creditors accepting less than the full value for their bonds.

That won’t work for Horacio Vazquez, a 59-year-old electrical engineer who lost $73,000 and his job in the 2001 default. Months before, he had invested in sovereign bonds after seeing government advertisements.

The years that followed saw him fighting for his savings to be repaid, which attracted scorn from a government that mocked him and other small Argentine holdouts as unpatriotic.

“This has gone from being an economic necessity to a fight over principles,” he said at a Buenos Aires café. “After waiting 14 years, if the government doesn’t offer something convincing, we’ll continue without a deal.”

January 12, 2016

The Argentine peso is on a winning streak this week.

The currency – which only became a free floating currency less than a month ago – has risen 2.3 per cent against the dollar over the past two trading sessions, making it the world’s best performing major currency this week.

So what’s behind the bullishness? Two words: holdout creditors.

Argentina is due to restart talks with its holdout creditors on Wednesday and expectations are running high that a deal can be reached that would finally allow the country to put an end to a decade long debt stand-off.

Argentina has been locked out of international capital markets since its 2001 default. And the country defaulted again in August 2014 after former president Cristina Fernandez de Kirchner refused to abide by a US court ruling that barred it from servicing its restructured bonds without first settling with creditors who rejected the terms of the country’s 2001 default.

But under Mauricio Macri, Argentina’s new president who was swept into office on his promises to abandon Ms Kirchner’s populist policies, a resolution is now looking like a real possibility.

Since taking office, Mr Macri has wasted no time. His administration has moved quickly to cut most farm taxes and lift capital controls. He reiterated on Tuesday his desire to settle with the holdout creditors.

He said in a press conference, according to Bloomberg:

It’s very important that we resolve the problems of the past. We want to stop being a country that’s branded as not honoring its pledges and we want to resolve all outstanding issues.

Analysts say a deal with holdout creditors would help usher the country’s return to international capital markets and allow Argentina to shore up its dwindling hard currency reserves.

By Charlie Devereux
January 12, 2016

* Macri says Argentina’s vision on arrears has changed
* Argentina wants debt mediator to find reasonable holdout deal

Argentina has turned a page and wants to end a decade-long legal battle with holdout creditors left over from the 2001 default, Argentine President Mauricio Macri said.

Macri said he wants Daniel Pollack, who was appointed by a New York court to mediate an accord between Argentina and a group of bondholders led by billionaire hedge fund owner Paul Singer, to help facilitate a “reasonable deal” in order to end the conflict and open the doors to foreign investment once again in the South American country. Finance Secretary Luis Caputo will meet with Pollack and representatives of the holdout creditors in New York tomorrow to restart talks.

Macri, who took office a month ago, said the stance taken on the issue by his predecessor Cristina Fernandez de Kirchner “wasn’t rational” and that he hoped Pollack would help the two parties find common ground. In July 2014, Fernandez refused to abide by a U.S. court’s ruling to pay the holdouts in full when servicing restructured debt, causing Argentina to default for a second time in 13 years.

“It’s very important that we resolve the problems of the past,” Macri said in a press conference in Buenos Aires. “We want to stop being a country that’s branded as not honoring its pledges and we want to resolve all outstanding issues.”

While Argentina managed to restructure about 93 percent of its debt by imposing a 70 percent discount on creditors, Singer’s Elliott Management and other bondholders refused the offer and sued in court for better terms. Creditors have said they would accept repayment in bonds.

By Richard Lough and Jorge Otaola
Jan 12, 2016

Argentina will tell the mediator brokering debt negotiations with U.S. investment firms suing the country over unpaid debt that it wants to resolve the decade-long legal battle, President Mauricio Macri said on Tuesday.

Talks between Argentina, which is in default on some sovereign bonds, and U.S. hedge funds led by billionaire Paul Singer’s Elliott Management are set to resume on Wednesday.

“We don’t want to remain listed as a defaulter, we want to resolve all outstanding issues,” Macri told a news conference.
Macri took office on Dec. 10 after ousting the leftist government of President Cristina Fernandez, who refused to settle with the funds that spurned debt restructurings following Argentina’s record $100 billion default in 2002.

The center-right leader who advocates free-market policies said Argentina would tell mediator Daniel Pollack that the change in government had brought a “shift in the vision that we Argentines have toward our debt.”

Negotiations between the funds and Fernandez collapsed in July 2014, leading Argentina to fall back into default. Fernandez denigrated the holdouts as “vultures” bent on picking on the carcass of the country’s earlier monster default.

By Dimitra DeFotis
January 12, 2016

Argentina’s government has a grip on asset prices and the country’s currency, but has negotiated a 12% price reduction for local oil in dollars and a gasoline price increase of 6% in pesos.

While the international price of crude, Brent, has tumbled 17% so far in January to a recent $30.81, and the U.S. benchmark is trading at nearly the same level, Raymond James pegs Argentina’s Medanito oil price at $67.50 per barrel and Escalante oil at $55 per barrel. That’s one reason that Argentine energy producers have outperformed international oil prices of late: YPF (YPF) is down 11% this year and Petrobas Argentina (PZE) stock is flat. Over the past 12 months, Brent prices and YPF shares are eachs down about 40%, but Petrobras Argentina shares are up more than 18%.

The Global X MSCI Argentina exchange-traded fund (ARGT) was a relative winner over the past year, thanks in part to regime change: it fell 7% in that time span, while the iShares MSCI Emerging Markets ETF (EEM) fell 24% in the same time period.

Raymond James, which has market outperform ratings on YPF and Petrobras Argentina, says that with the Argentine peso depreciation of roughly 40% since mid-December after a new and more conservative Argentine government took office, prices in pesos should remain higher. Raymond James writes:

“Although still at a premium to international benchmarks, we expect oil prices to remain stable after this initial reduction. According to the press, prices at the pump will remain stable in February, but should regain momentum in March. In-line with this, we believe that prices at the pump will follow inflation this year, but should decrease in U.S. dollar terms, as devaluation exceeds the inflation rate. All in all, we expect to see margin pressure at the refining level …

The government has agreed with companies to increase pricing at the pump by 6% (in pesos) to partially offset the devaluation effect on refiners’ operating expenses (due to the higher price paid in pesos for oil purchases). In addition, and as mentioned previously, oil prices would fall in U.S. dollar terms, but this should be more than offset by the devaluation effect (12% oil price decline versus 40% devaluation).”

By Federico M.Rossi
12 January 2016

Mauricio Macri said he would renew Kirchnerism’s ways while preserving its social policies, but it has immediately become clear why he sold colour balloons during the campaign.

Macri’s government started with an unprecedented pressing by the Executive Branch: it is the first government since 1983 that has not convened the customary special sessions at the National Assembly. Lacking a majority in both chambers of parliament, he took the decision to impose a winner-takes-all logic.

By abolishing taxes on food exports, he quickly paid his allies for their support with a sharp reallocation of income to the agribusiness sector. As expected, this has caused a massive and uncontrolled price rise in the country’s supermarkets. The other radical measure is the deregulation of imports, by which he has paid its coalition of transnational corporation CEOs faster than – even they – expected.

On the other hand, Macri has done little to fulfill his campaign promises to another sector that supported him: the middle classes who were looking for change. The only measure taken has been the opening of the currency market, but it has come with a massive devaluation. This will undoubtedly generate a higher concentration of the economy in the agribusiness and the transnational corporate and exporting sectors, for which there are no limits in currency transactions.

Moreover, one of the stronger promises made during Macri’s campaign was the scrapping of the income tax on wages. But it has not been removed and it is gradually being left out of the government’s agenda. The unions are already fighting for a mere compensatory bonus, which is a very limited measure compared to the previous fight for the right not to be double-taxed. If unions do not react promptly and change strategy, the situation will substantially worsen for the working population.

The alliance for the adjustment

Macri’s strategy to implement an unpopular adjustment is based on a tripartite agreement: legal consent, a gag on information and repression. The control strategy of the Judiciary is the most controversial of all the crucial decisions Macri has made so far. The appointment of two Supreme Court judges with a barely legal procedure which has only been used previously during the nineteenth-century oligarchic system and twice by the military dictatorship has prompted rebuff from the Unión Cívica Radical (Radical Civic Union – UCR), all the opposition parties and even the Supreme Court itself. The control of the Supreme Court is crucial because it would allow Macri to skip Congress through permanent vetoes and avoid the Judiciary’s interference with his advance on the Legislative Branch. The control of the Judiciary has carried on with two new decrees by Macri that hinder the implementation of the Criminal Procedure Code and disempower the Attorney General’s Office. Macri will most probably come up with further reforms by decree during the summer.

Second in this strategy, the gag on information, began with the accession of several high-ranking Clarín and La Nación managers to government posts. This move is to be completed with the annulment of the Broadcasting Act, which has been praised by the United Nations and the Organization of American States as a global example for freedom of expression and pluralism. In order to abolish it, Macri decreed the intervention of the Agency for the Control of the Audiovisual Communication Services and its equivalent for the Internet, thus violating the autonomy of these entities and virtually liquidating the effective implementation of the law. This is intended to ensure that market domination by both communication groups will not be threatened and also to ensure their access to the State, which is something that was previously denied them.

The third leg of this strategy is the most classic of all. The handbook for all the adjustments includes strong repression. Nobody ever passively accepts getting poorer, so it must be imposed by force. The Cambiemos alliance knows this perfectly well from experience, for many of its members were also members of Fernando De la Rúa’s government. So much so, that Macri quickly sent in the police to the always difficult Northern provinces. The move went quite wrong and produced the first 43 victims of Macrismo. But this did not stop the Minister of Security, Patricia Bullrich, who declared a state of emergency so as to give added means to the security forces – and repression, consequently, arrived quickly for workers at the Cresta Roja poultry company. These emergency security measures are being approved by most governors because they know full well that the sub-national authorities are the first victims of any uprising against adjustment policies.


This mix of fast decisions has to do with Macri’s attempt to impose a reduction cycle of social and civic rights leading to a democradura (democratorship), a sort of low-intensity democracy functioning in a non-republican way. This reduction of the social role of the State – which the country has already experienced in the past – combined with a violation of the democratic procedures of the Republic is an explosive recipe for a young democracy like Argentina.

How is it possible, then, that a president who just won by 680,000 votes is now imposing adjustment policies? The problem comes from presidentialism – a system that puts the president in the position of a total winner even if he is not. Macri has no legitimacy to impose structural adjustments because he won by a very narrow margin and did not reach a majority in either House of Congress. This demeanor is encouraged by an autocratic style of government that is characteristic of governors and that Macri was quick to reproduce as governor of Buenos Aires and is now trying to do the same at national level. Macri presents himself, and so does a part of the local and international press, as a modern liberal politician, a pro-market democrat with a social conscience, a business and family man who understands his role as statesman. This, however, is only the façade: he is, really, a socially conservative and rightwing neoliberal who says what people want to hear while he gradually leads us to a democratorship.

The solution would have been different in a parliamentary system. Macri would have been leading the largest minority in a coalition with Kirchnerism, and he would have had to negotiate a joint government or call elections again after a year of transitional government. This would have been much more representative of the election results.

Organizing social resilience

The difference between contemporary Argentina and that of the past is that Argentines have an experience of over 12 years of a center-left government that massively included popular and middle-class sectors, previously excluded during the Washington Consensus period. This important part of society is now very active and politicized and it is certainly resisting many of Macri’s changes aimed at establishing a democratorship. A first expression of its strength was to be seen the day before Macri’s inauguration, when hundreds of thousands filled the Plaza de Mayo in Buenos Aires on the last day of Cristina Fernández de Kirchner’s mandate. The very same people organized the first protest against the adjustment and in defence of the freedom of expression on December, 14. And it was them again who assembled in Plaza Congreso on December, 17, to reject the adjustment, oppose the appointments by decree to the Supreme Court, and to voice their disapproval of Macri’s attempt to cancel the Broadcasting Act. Popular resistance led to the January, 6, massive march to demand the opening of Congress in January, which showed a high level of coordination with the Kirchnerista benches and received large media attention, as well as that of Macri’s government.

It became clear in those fleeting days that the small margin with which Macri won did not mean a changing of the cycle, but the sharp imposition of a new era. The story has not been written yet and the coming period will be characterized by the legislative and union battles, as well as the cultural and territorial ones. Social resilience – i.e., the ability of the population to rally and defend its acquired rights before the aggression which we are undergoing – is key to avoiding the possibility of living in a more unjust society.

It will be crucial for organized actors to uphold the depth of the cultural incorporation – as “rights” and not “aid” – of the changes produced by the inclusive policies of the previous presidencies. We should not trust that this will happen naturally, for the government has already started the battle in these fields. Organized resilience on the part of society may alone put a brake on a new attempt by the Right to undermine the democratic State and to commodify social relations.

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