Argentine update – Dec 15, 2016




3. ARGENTINA: COUNTRY FORECAST SUMMARY (Economist Intelligence Unit – ViewsWire)

4. ARGENTINA: ECONOMIC STRUCTURE (Economist Intelligence Unit – ViewsWire)

5. ARGENTINA: KEY DEVELOPMENTS (Economist Intelligence Unit – ViewsWire)



By Luis Andres Henao
December 14, 2016
BUENOS AIRES, Argentina — Venezuela’s foreign minister threatened to enter Argentina’s foreign ministry through a window if necessary Wednesday, but she still didn’t get into a meeting of South American countries that suspended her nation from the Mercosur trade bloc.

Police were forced to intervene after Delcy Rodriguez arrived at Argentina’s foreign ministry and accused other Mercosur members who have been critical of her government of conspiring against Venezuela.

Rodriguez was eventually allowed to enter the ministry, send tweets and “enjoy the building,” Argentine Foreign Minister Susana Malcorra said at a news conference. But Malcorra said the Venezuelan was not allowed to attend the meeting and she told Rodriguez in person that Venezuela was not invited.

“I want to be very clear: You never go to a summit, to a multilateral meeting without authorization,” Malcorra said. “This led to a complex situation that I would have preferred to avoid where the foreign minister wanted to enter, in her words: through the door or through a window.”

Mercosur accepted Venezuela as a member when South America was dominated by leftist governments in an effort to link the region’s biggest agricultural and energy markets.

But socialist-run Venezuela fell afoul of its neighbors as it cracked down on the political opposition while conservative governments assumed power in Argentina and Brazil. Venezuela’s regional influence also waned as it cut back on oil shipments once provided to allies at cut-rate prices.

Venezuela was suspended from Mercosur earlier this month over what other member nations said was its failure to comply with commitments on democracy and human rights that it made when it joined the group in 2012.

Malcorra said that Mercosur will use mechanisms for resolving conflicts and that she remains hopeful Venezuela can adopt the standards required for membership.

“We’re waiting for Venezuela to do its part and meet its obligations,” Malcorra said. “When that happens, Venezuela will be welcomed back into Mercosur.”

By Caroline Stauffer
Dec 14, 2016

Dec 14 Argentina is in talks to buy four C-295 aircraft manufactured by Europe’s Airbus Group SE as it moves to replace an outdated military fleet, a navy spokesman said on Wednesday.

Purchase of the twin-turboprop tactical military transport planes for the navy and air force could take up to two years to complete, the spokesman said.

Argentina’s state-run news agency Telam said the four planes were meant to help replace a fleet of F-27s, the last of which was retired in November.

The amount Argentina is willing to pay for new planes is unknown.

Telam also said Airbus had signed an agreement with Argentina’s aircraft factory (FadeA) earlier this year giving FadeA a role in manufacturing planes.

Airbus did not immediately respond to a request for comment.

3. ARGENTINA: COUNTRY FORECAST SUMMARY (Economist Intelligence Unit – ViewsWire)
13 December 2016

Country forecast overview: Highlights

* The president, Mauricio Macri, of the centre-right Propuesta Republicana (Pro), is pressing ahead with a programme of economic policy adjustment in an effort to eliminate distortions and return the economy to sustainable growth. The adjustment process is proving a difficult one, involving politically unpopular austerity measures, and the risk of social unrest will therefore remain significant for much of the forecast period.

* Given the president’s minority position in Congress, and the priority given to urgent macroeconomic reforms, there is likely to be limited progress on the pursuit of legislation that would successfully address long-standing institutional weaknesses and structural constraints to growth. Comprehensive reforms to strengthen bureaucracy, reduce corruption or enhance the effectiveness and independence of the judiciary will be slow. Furthermore, The Economist Intelligence Unit does not expect meaningful advances-at least in the short term-on a structural reform agenda (incorporating tax and labour market reform) that could improve long-term potential growth rates.

* After a contraction in real GDP in 2016 reflecting macroeconomic policy tightening and currency depreciation, we are forecasting a pick-up in exports, investment and private consumption in the medium term. There will be a business confidence boost from policy tightening. Combined with macroeconomic adjustment, and a gradual removal of foreign-exchange and import controls, these policies should set the economy on a more solid long-term footing. However, some aspects of the policymaking environment will remain tricky, with labour-market reform and a comprehensive fiscal reform remaining low on the agenda.

* Currency adjustment should gradually bolster the current account as a weaker peso starts to boost goods and services exports and rein in imports. On this basis, we expect the current-account deficit to narrow in 2017-21. We also expect the country’s ability to finance moderate current-account deficits to improve over the forecast period, assuming that capital inflows pick up as investor confidence in the Macri administration grows.

* Argentina’s GDP per head is still among the highest in the region and, combined with improved access to credit, moderate rates of economic growth in the medium term will boost purchasing power and create market opportunities. Still-high poverty rates and income inequality will restrict the pool of consumers, but to a lesser extent than in many other countries in the region.

Country forecast overview: Key indicators

Key indicators 2016 2017 2018 2019 2020 2021
Real GDP growth (%) -2.2 2.5 3.7 2.9 3.3 3.3
Consumer price inflation (av; %) 41.3 22.2 12.8 9.3 7.9 6.3
Budget balance (% of GDP) -5.3 -4.9 -4.2 -3.6 -3.1 -2.9
Current-account balance (% of GDP) -2.6 -1.9 -1.5 -1.6 -1.5 -1.5
Lending rate (av; %) 31.3 23.1 16.2 11.7 10.0 8.7
Exchange rate Ps:US$ (av) 14.8 17.0 19.0 20.7 22.1 23.5

4. ARGENTINA: ECONOMIC STRUCTURE (Economist Intelligence Unit – ViewsWire)
13 December 2016

Data and charts: Annual trends charts

Data and charts: Quarterly trends charts

Data and charts: Monthly trends charts

5. ARGENTINA: KEY DEVELOPMENTS (Economist Intelligence Unit – ViewsWire)
13 December 2016

Outlook for 2017-21

* In his first year of office, the president, Mauricio Macri, has introduced substantial policy adjustments as his administration works to reduce economic distortions and return the economy to sustainable growth.

* The combined effect of high inflation and subsidy cuts is hitting consumers hard, and their patience with adjustment is wearing thin. This poses risks to governability but, so far, relations with Congress remain fairly good.

* After a contraction of 2.2% in 2016, we are projecting a solid recovery in GDP in 2017-18, taking growth to 3.7% in full-year 2018. However, weak external conditions will drag down growth in the second half of 2018 and in 2019-21.

* After a post-devaluation spike in inflation in 2016, we expect easing in 2017-21 on the back of fiscal tightening and increased domestic output. The shift to an inflation-targeting framework will support price stability.

* The peso will continue to depreciate gradually in nominal terms (following devaluation at end-2015) in 2017-21, as substantial dollar demand amid rising imports will be countered by solid capital inflows.

* Currency adjustment should gradually bolster the current account as a weaker peso starts to boost goods and services exports, and dampen imports. As a result, the current-account deficit will gradually narrow in 2017-21.

* The Economist Intelligence Unit expects capital inflows to pick up in 2017, reflecting moves to address economic imbalances and a weak legal frame-work. This will support higher foreign-exchange reserves and import cover.


* The government has agreed to support legislation declaring a “social emergency” that will see more funds dedicated to social groups in 2017-19. Government, business and unions have also agreed a temporary firing freeze.

* The government has also presented a proposal for income tax reform to Congress, with the aim of reducing the tax burden of lower-income taxpayers.

* After an initial setback in the Chamber of Deputies (the lower house of Congress), the government has succeeded in passing framework legislation guiding public-private partnerships (PPPs), which is expected to boost investment in infrastructure and support the economic recovery.

* In Argentina’s first Article IV consultation in a decade, the IMF has expressed broad support for the country’s economic policies. A normalisation of relations with the IMF represents another encouraging sign in the govern-ment’s efforts to restore trade and investment relations with key partners.

* Consumer prices rose by 2.4% month on month in October, reflecting the one-off impact of increases in utilities tariffs. Core inflation came in at 1.8%.

13 December 2016


The Banco Central de la República Argentina (the Central Bank) has loosened restrictions on US dollar-denominated lending to the government for the first time since the 2001-02 crisis.


Argentina’s financial crisis of 2001-02 was driven in part by currency mismatches on banks’ balance sheets. The restrictions on dollar lending to the public sector were put in place in the aftermath of the crisis to help to address the problem. Restrictions have now been loosened in response to rapid growth in dollar-denominated deposits, reflecting inflows emanating from a tax amnesty on undeclared financial assets this year. Another factor contributing to the change is likely to have been the expectation of higher financing costs for emerging markets in the wake of Donald Trump’s victory in the US presidential election in November, which risks complicating the government’s external financing plans.

Under the new regulations, banks will be able to underwrite dollar-denominated Treasury bonds for an amount equivalent to half that lent to the private sector. At the end of November dollar-denominated deposits amounted to US$27.1bn, while dollar-denominated loans totalled US$9bn, which means that at present the government will be able to borrow around US$4.5bn from banks, although this figure is likely to rise. In 2017 government financing needs are likely to come to around US$30bn.

Under previous regulations, bank lending in dollars had been restricted to exporters with revenue streams in dollars. Regulations have been eased to some extent for the private sector as well to include suppliers of exporters. The loosening of restrictions on public-sector borrowing in dollars comes with the stipulation that the government’s ability to collect export or import taxes must be considered by banks at the time of underwriting. The government has, in fact, lifted most export taxes since it took office in December 2015, although hard-currency revenue from taxes on soya exports will continue.

Critics have suggested that the new regulations send a signal of continued government influence over Central Bank operations. However, the Central Bank governor, Federico Sturzenegger, asserts that the goal of the latest measure is merely to activate the high level of idle dollar liabilities by increasing regulatory flexibility.

By Elizabeth King
December 14, 2016

In December 2001, Argentina was thrown into chaos. The worst violence the South American nation had seen since the early 1980s raged across the country as president Fernando de la Rúa resigned: 39 people were killed, the economy tanked, and police became aggressive against civilian demonstrators.

But while protests and riots raged, and the nation’s presidency changed hands three times in 10 days, a generation of Argentine computer fanatics, made resourceful by unstable and challenging economic and social circumstances, was busy learning to program, publishing cheeky technical e-zines, and gearing up to become elite hackers.

Though Argentina was confronted with state violence and a severely devalued peso, hacker culture bloomed. In 2001, the same year that de la Rúa prematurely stepped down from office, the renowned annual securities conference Ekoparty was founded in Argentina.

The Ekoparty Security Conference is one manifestation of the hacking boom. It has been held annually in Buenos Aires since it was founded by Juan Pablo Daniel Borgna, Leonardo Pigner, Federico Kirschbaum, Jerónimo Basaldúa and Francisco Amato in 2001. During this gathering of hackers in Argentina’s capital, securities pros present research, participate in hacking competitions, race to pick locks, and meet with major securities companies from around the world.

Ekoparty describes itself as “a unique space for the exchange of knowledge” which “provides a series of dynamic and relaxed activities, related to playfulness and computer security.” Despite how serious hackers are about their work, there’s no doubt they have a lot of fun doing what they do, a theme this conference embraces and encourages among attendees.

There has also been a pop culture embrace of Argentina’s hacking culture. A crime and mystery TV mini-series called El Hacker premiered in 2001, highlighting a national interest in this line of work during this time period, and reemphasizing hacking as a new theme in the global entertainment (The Matrix was released just two years prior with international success).

The peso’s value plummeted following the 2001 crisis, and everything became more expensive, including computers and other technology that young hackers-in-training wanted to get their hands on. But this new barrier to access didn’t stop teenagers and young adults from pursuing their urge to subvert programs, create game cheats, and learn how to find the vulnerabilities inherent to any machine.

Lucas Apa, a hacker and penetration expert with US-based security company IOActive was fresh off of an evening addressing the Argentine senate and discussing electronic voting security risks when we spoke over the phone.

Apa told me he first became interested in hacking while playing video games as a kid. “When video games went into CD format, they became very expensive,” he remembered. “So it was really common to buy cracked [or, pirated] games. Sometimes the games worked, other times I’d take them home and there would be a problem with the crack.”

This was the first time he encountered manipulated software and was immediately interested. “From games I started looking at other kinds of software, and was intrigued with how cracks were made. By now it was 2001, and there was a Spanish language cracks mail list called Cracks Latinos. Lots of Argentines learned about cracks from these mail lists.”

Learning cracks, Apa said, ended up becoming very useful for writing exploits (data or a piece of software that can take advantage of a program’s vulnerabilities), one of the most lucrative forms of hacking, and something Argentine hackers are famous for.

Apa and fellow IOActive consultant Carlos Mario Penagos presented at the Black Hat conference in 2013 after they found ways that malicious hackers could hack into industrial plants via wireless sensors. With these exploits, Apa and Penagos found it was possible to manipulate sensors from up to 40 miles away, a security gap that could potentially have had catastrophic consequences in the wrong hands.

Exploit-writing has been a boon for many Argentine hackers, including Juliano Rizzo. Rizzo’s hacking career is currently focused on cryptography, cryptocurrencies, and practical cryptographic attacks previously worked for many years in exploits before “becoming bored with it,” he told me over email.

Before going on to write one of the more important exploits in recent years, Rizzo developed into a hacker the old-fashioned way: he learned to program by hand at the same time he was learning to read and write, he participated in hacker call-ins where a group would discuss security and “H/P/C/V/A: hacking, phreaking, cracking, virus, anarchy”. He also created security challenges for video games with his older brother, and dove into securities magazines written by fellow Argentines.

One of the few Spanish-language securities magazines available at the time, Rizzo said, happened to be written by Argentine hackers, Minotauro Magazine. Another important security magazine Juliano remembers reading was Virus Report, which was edited by the now-deceased Argentine hacker, Fernando Bonsembiante.

By 2001, Juliano was 18-years-old and studying in school, and attending Def Con and Black Hat (both big name international hacking conferences). He wouldn’t attend Buenos Aires’ Ekoparty until 2008, and three years later gained global attention for an exploit he wrote with Vietnamese hacker Thai Duong, which the duo presented at Ekoparty in 2011.

This exploit (only one of several projects Rizzo and Duong have done together), named the BEAST (Browser Exploit Against SSL/TLS) revealed major vulnerabilities in a widespread security protocol that websites use to encrypt data flowing through the internet. With the exploit, hackers would be able to decrypt transactions on PayPal or steal passwords from Gmail. The BEAST exploit, as Thai said at the time, “implements the first attack that actually decrypts HTTPS requests.”

Even without knowing their country is home to some of the world’s top hackers, Argentines often refer to themselves and their compatriots as “life hackers,” or at least subscribe to the idea that Argentines are adept at finding a way to make things work. Some Argentines have told me they think of themselves as MacGyvers. Whether it’s upcycling everything from old pens to jelly jars, or learning to soup up your own computer instead of buying a new one, there’s a talent here for always finding new ways to look at things such that new possibilities emerge.

This cultural trait and mode of thinking is in no small way behind the talented hackers emerged in this country. The crisis in 2001 seems to have fallen at a critical moment, throwing the entire nation into chaos, and fostering, among some, a desire to ‘stick it to the man,’ as hackers are wont to do.

“There were so many problems and a lot of sadness throughout the country,” Apa told me. “So a fascination with technology became a kind of escapism. For some hackers, learning to hack felt like doing something against ‘the system’ or against major corporations that they felt negatively about.”

This sentiment builds on one of the themes that was being discussed in hacker circles such as during the calls Rizzo dialed into: anarchy. Hacking is necessarily a subversive pursuit, and who is better equipped to subvert than brilliant computer pros accustomed to living life on the precipice of possible turmoil?

Hackers are, ultimately, highly skilled and creative problem-solvers, and as it happened, Argentina was faced with a vast number of difficult problems on nearly all levels (political, social, financial) at the same time home internet was becoming common, and there were a lot of young people willing to learn their way through the barriers to become computer pros.

Due to economic instability and restrictions on imports, Argentines have always had to make things work with fewer and lesser resources. The benefit here, Apa said, is a developed knack for “using what is available in ways that nobody else has thought of to accomplish new things.”

This makes them not only particularly Argentine, but also exceptional hackers.


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