1. ARGENTINA PESO SUFFERS STEEPEST DROP SINCE 2002 (The Washington Post)
January 23, 2014
BUENOS AIRES, Argentina — The peso is suffering its fastest fall since Argentina’s 2002 economic collapse as dwindling reserves keep the Central Bank from trying to prop up the currency by intervening in the foreign exchange market.
The 16 percent loss in the peso’s official value against the dollar over Wednesday and Thursday could worsen the country’s inflation, which is among the worst in Latin America, analysts said.
The peso fell from 6.88 per dollar on Tuesday to 7.14 on Wednesday. By Thursday’s close, it was at 8 to the dollar. On the black market, where Argentina’s currency is even weaker, the peso dropped 6 percent Thursday to 13 per dollar.
The sharp depreciation is likely due to a new government strategy of seeking a sudden devaluation instead of a gradual one, said Juan Pablo Ronderos of economic consulting firm abeceb.com
“There was a first sign of this change on Tuesday because the Central Bank didn’t show up (to intervene) until midday, and on Wednesday and today it just disappeared from the market,” Ronderos said. “The gradual devaluation wasn’t working because the Central Bank kept on sacrificing lots of its reserves and it kept on being reflected on consumer prices.”
Analysts expect Argentina’s inflation to reach more than 30 percent this year, the second highest rate in Latin America after Venezuela.
“The sharp drop will aggravate inflation, although the impact may be mitigated by the fact that some imports will already be purchased at the much weaker black market exchange rate,” Neil Shearing, chief emerging market economist at Capital Economics in London, said in a research note.
“The bigger picture, though, is that the economic mismanagement of the past decade has once again pushed the country to the brink of a balance of payments crisis,” Shearing wrote.
Critics of the left-leaning government blame economic problems on its higher spending on social programs, expansion of business regulation and nationalization of some companies.
Argentina has been kept from global credit markets since defaulting on its debt during its 2001-2002 financial crisis. So officials have been trying to keep dollars in the country for the Central Bank to use to pay off government debts.
But the bank’s reserves have plunged to $29 billion, the lowest level in more than seven years despite increasingly restrictive currency controls meant to stem capital flight.
The controls make it nearly impossible to legally trade pesos for dollars, but many Argentines have turned to black market money changers to obtain dollars.
Many in the country are haunted by memories of the financial crisis, when banks froze deposits and the currency lost value, and they want dollars to keep in emergency stashes.
2. ARGENTINA REELS: A POPULIST FORMULA GOES FLAT (The Wall Street Journal)
By Ken Parks, Taos Turner and John Lyons
24 January 2014
BUENOS AIRES — Argentina devalued its peso Thursday in a move that raised fears of a financial crisis in South America’s second-biggest economy and recalled the meltdown a decade ago that sent the country on its long decline from a darling of global capitalism to economic pariah.
A slide of more than 15% in early trading Thursday forced Argentina’s central bank to step in by selling dollar reserves. The intervention narrowed the peso’s loss to 8%, but that was the biggest one-day decline since Argentina defaulted on its public debt and devalued its currency in 2002.
“The market is exploding,” said Francisco Diaz Mayer, a currency trader at ABC Mercado de Cambios.
The increasing strains in Argentina’s economy are the result of populist policies by Nestor Kirchner, the country’s late president, and his successor and wife, Cristina Kirchner. Their blueprint was simple: Use the boom in rising commodities prices for Argentinian exports like soy — and ramp up government spending to stoke the economy.
Argentina’s leaders also refused to submit their economic policies for review by the International Monetary Fund, which once saw the country as a poster child for free-market policies but was blamed by many Argentines for the peso’s collapse.
For years, the formula led to rapid growth and re-election for the Kirchners. But the strategy also resulted in inflation that is among the highest in the world, as well as unorthodox policies to contain the damage, such as price and currency controls. Argentina’s central bank tightly controls the peso.
The devaluation was a dramatic about-face for Mrs. Kirchner, who had vowed not to lower the peso, saying anyone who wanted to profit from such a free-market policy would have to wait for another government.
On Thursday morning, though, her cabinet chief, Jorge Capitanich, signaled that the administration had stepped out of the market. “It wasn’t a devaluation caused by the state. For free-market lovers, the supply and demand of foreign currency expressed itself yesterday,” he said.
The peso tumbled to 8.50 per dollar from 7.14 per dollar. The central bank then reversed course and ended up selling $100 million in reserves to stem the slide, a person familiar with the matter said Thursday.
Venezuela partially devalued its own currency on Wednesday, weakening the bolivar to about 11.3 per dollar for certain transactions, including tourism and remittances, compared with the official exchange rate of 6.3 per dollar.
Few economists expect Argentina’s move to take pressure off the peso, mostly because a weaker currency could stoke inflation further by making imports more expensive and prompting ordinary Argentines to try to get their money out of the country by any means possible.
The devaluation was a risky gambit by Mrs. Kirchner to bolster the peso and stem a sharp decline in the stockpile of dollar reserves, which the central bank has been using to buy up the currency at fixed prices that are far higher than what the peso trades for on the black market.
Argentina is starting to face a dollar crunch. Central-bank reserves fell to $29 billion at the start of this year, down from $52 billion in 2011. Even before Thursday, the central bank had been burning through an estimated $100 million a day to defend the currency, according to Elena Castro, a vice president at brokerage firm Auerbach Grayson & Co.
“The big question is if the devaluation feeds into higher prices and leads to more social tensions. Annual wage talks will start soon, and the big question is what increase the unions will ask for. That is probably going to create political and social problems,” said Carlos De Angelis, a professor of social sciences at the University of Buenos Aires.
Another sign that the move might backfire was the response on the black market, where the peso fell to 13.1 per dollar from 12.2 at the start of the session. The drop suggests that the official rate still overvalues the currency.
The devaluation could hardly come at a worse time for Mrs. Kirchner, who succeeded her husband as president in 2007. He died in 2010. Mrs. Kirchner underwent brain surgery last year. The devaluation came a day after her first public speech in six weeks.
The country was rocked by widespread looting and violence that left around a dozen dead in December. The looting started after a police strike in an interior city, but it spread to other provinces. Scenes of crowds stripping store shelves bare were reminiscent of looting during the last economic crisis.
For ordinary Argentines, the market turbulence of the past few days has revived memories of past crises and made Argentines even more wary of Mrs. Kirchner’s ability to fix the problems.
“My salary is worth less every day and inflation is unstoppable,” said Carlos Delia, a 45-year-old bank employee. “If the government doesn’t do something fast . . . we’re going to have a problem similar to the one we had in 2001.”
The Argentinian peso was one of several emerging-markets currencies hit Thursday after weak economic data out of China heightened worries about the developing world’s ability to weather the end of easy-money policies.
But the flare-up in Argentina’s currency market was the most dramatic — and serves as a warning that conditions for many developing countries have worsened since commodities prices ended their decadelong climb.
The shift is particularly dangerous to Latin American countries like Argentina and Venezuela that used the boom to embark on a spending spree, allowing inflation to surge and adopting currency controls and other unorthodox economic policies.
The Kirchners came to power in 2003 after the last economic crisis brought down former President Fernando de la Rua and set off a chaotic period that at one point saw five presidents in about a week.
Nestor Kirchner’s policies helped the economy recover and made him enormously popular. He was barred by law from seeking another re-election in 2007, so Cristina ran instead. She won election handily.
But the turnaround in commodities prices and growing strain from years of overspending that stoked inflation have gradually weakened Argentina’s economy — and Mrs. Kirchner’s grip on power.
Her ruling coalition failed to pick up enough seats in October’s midterm congressional election to change the constitution so she could seek a third term in 2015. While she still wields considerable power, her lame-duck status leaves her open to challenges from rival politicians in the ruling Peronist party.
This week, the government continued to crack down on imports and the online purchase of foreign goods in a bid to prevent a scarce supply of U.S. dollars from leaving Argentina. On Tuesday, the government started requiring people to submit tax forms before making online purchases at foreign retailers. The government then limited such purchases to two a year.
“They don’t have much of a choice any more because they’ve been burning their foreign-exchange reserves for some time and the capital flight hasn’t really stopped,” said Caglar Somek, a portfolio manager at New York frontier-markets fund manager Caravel Management.
“With limited foreign-exchange reserves, they can’t afford to keep defending the currency. They just can’t sustain it,” he added.
Critics said Argentina’s government has been slow to respond to the crisis, especially given Mrs. Kirchner’s recent absence from the public spotlight. That is a sharp turnaround for a president known for flamboyant speeches and constant Twitter messages, even about the television series “Game of Thrones.”
After a big drop in the peso Wednesday, many Argentines hoped that Mrs. Kirchner would address growing concerns about the currency and other economic problems. Instead, in her first speech since early December, the president avoided mentioning the economy and defiantly defended her policies, including the state’s role in redistributing wealth.
And rather than take steps to cut government spending and reduce inflation, Argentina has tried to underreport price increases, according to economists. The government says the inflation rate was 10.9% last year, but economists estimate it was closer to 25% to 30%.
3. ARGENTINA’S CURRENCY FALLS SHARPLY AGAINST THE DOLLAR, STIRRING INFLATION FEARS (The New York Times)
By Simon Romero
January 23, 2014
RIO DE JANEIRO — Argentina’s currency, the peso, plunged more than 8 percent on Thursday against the dollar after the country’s central bank tried to stem a decline in international reserves. The sharp decline, with the peso dropping the most since Argentina’s 2002 financial crisis, raises concerns that inflation could accelerate even further.
Since the start of the year, the Argentine peso has weakened 18 percent, ranking it among the world’s worst-performing currencies against the dollar. President Cristina Fernández de Kirchner’s cabinet chief, Jorge Capitanich, insisted on Thursday that the plunge was not a devaluation but the result of the forces of supply and demand.
Still, local news media said the peso closed at 7.75 to the dollar, after weakening earlier on Thursday to about 8.24, with the central bank intervening late in the trading session. Argentina’s international reserves have been tumbling, hitting a seven-year low last week of about $29.5 billion.
Though Mrs. Kirchner has vowed not to devalue the peso, the central bank has let the currency slide gradually in recent months. But there was a change in approach this week, said Gastón Rossi, a former deputy economy minister under Mrs. Kirchner.
“Depreciating in stages was causing the reserves to contract further,” Mr. Rossi said. “The government has said, ‘We’re deliberately not going to sacrifice the reserves anymore.’ ”
With the authorities tightening currency controls in an effort to reduce capital flight, Argentines have resorted to buying dollars illegally, in the black market. The so-called blue dollar rate reached 13 on Thursday, according to the Argentine news media.
With Argentina’s currency weakening, concern is growing that inflation could climb as imported goods become more expensive. The authorities in Argentina say inflation in 2013 was 10.9 percent, while private economists contend that consumer prices actually climbed more than 28 percent last year.
The prospect of abrupt shifts in Argentina’s economy sent tremors into the financial markets of other Latin American countries. In neighboring Brazil, which has the region’s largest economy, the currency weakened more than 1.2 percent to 2.40 reals to the dollar, and the country’s main stock index fell almost 2 percent.
4. OVERHEARD (The Wall Street Journal)
24 January 2014
Argentina is going from bad to worse. Again. The peso slid Thursday as traders said the central bank stopped defending it — a sign foreign-currency reserves may be running low.
Carmen Reinhart and Kenneth Rogoff’s history of booms and busts shows most Argentine recessions since the late 1800s were linked with financial crises rather than being part of the normal business cycle.
Exactly what Argentina’s economy looks like now is unclear. Official data show gross domestic product adjusted for inflation rose 5.6% year on year in the third quarter. But few people believe official price data. Those put year-over-year inflation in December at 10.9%. The Billion Prices Project, which collects prices from online retailers globally, says inflation was more than twice that. Another crisis-induced recession already may be well under way.
5. ARGENTINA’S CIRCULAR RUINS (WSJ Blog)
By Justin Lahart
23 January 2014
Argentina is going from bad to worse. Again.
The peso slid sharply against the dollar Thursday, as traders said the central bank stopped defending the currency – a sign it may be plumbing the bottom of its foreign-currency reserves.
It’s familiar ground. Harvard University economists Carmen Reinhart and Kenneth Rogoff’s history of booms and busts shows most Argentinian recessions since the late 19th century were associated with financial crises rather than being a normal part of the business cycle.
Exactly what Argentina’s economy looks like now is unclear, thanks to uncertainty around its economic statistics. Official figures show real gross domestic product –adjusted for inflation — was up 5.6% versus a year earlier in the third quarter. But few people believe government inflation statistics.
Those pegged the year-on-year increase in consumer prices in December at 10.9%. According to the Billion Prices Project, which collects prices from online retailers globally (and which was co-developed by the son of a former Argentine central banker and finance minister), prices were up more than twice that. Another crisis induced recession may already be well under way.
6. ARGENTINA: BAD TO WORSE (WSJ Blog)
By Chris Dieterich
23 January 2014
Trouble is brewing in Argentina, and some are wondering about the potential for the country’s woes to spill outside its borders.
Worries about the country’s thinning foreign-exchange-reserves helped spark a more than 15% decline in Argentina’s currency, the peso, on Thursday.
Turbulence in the currency market spilled over into stocks. U.S.-listed shares of energy giant YPF SA tumbled 12% Thursday, adding to an 8.9% decline on Wednesday.
“Things are rapidly coming unglued,” says Dave Lutz, head of trading at Stifel Nicolaus.
Marc Chandler, global head of currency strategy at Brown Brothers Harriman, voiced worry that Argentina’s woes may spread across the developing world:
While many investors have stayed clear of these two problem countries, we highlight the risk of contagion.
Brazil is the most exposed to Argentina with regards to trade flows, but those risks have declined. Argentina is Brazil’s third largest trading partner behind the US and China, in both exports and imports. Through 2005, Argentina was Brazil’s number two trading partner but was then supplanted by China. As a side note, China supplanted the US as Brazil’s number one trading partner in 2009. So, any collapse in Argentine GDP and/or equities should not have a huge spillover on Brazil. However, given the overall negative bias on EM in general, there will likely be some collateral impact on EM as a whole.
BBH also notes that the MSCI Argentina stock index was the best performer in the emerging world in 2013, up 64%. But things have taken an abrupt turn lower:
With a big devaluation in the works as well as a potential debt crisis, we do not see how Argentine equities can continue to perform well. We see a sharper and deeper correction ahead for this market.
Rising inflation and government controls have stirred social unrest in the country in recent months. President Cristina Kirchner failed to assuage those concerns on Wednesday, sidestepping the growing economic problems in her first public comments in six weeks.
7. ARGENTINE PESO FALL THREATENS GOVERNMENT (Financial Times)
By Jonathan Wheatley
January 24, 2014
Argentines will await the opening of currency markets on Friday with more nervousness than usual after Thursday’s 10 per cent fall in the peso against the US dollar. Analysts said the central bank appeared to have abandoned the currency to its fate and that the episode could hasten the end of the government of president Cristina Fernández de Kirchner.
“The chickens of populism have come home to roost,” said Arturo Porzecanski of the American University, a former head of emerging markets research at ABN Amro. “This is the beginning of the end of Kirchnerism in my view.”
The peso fell as much as 15 per cent in thin trading on Thursday after the central bank suddenly and silently removed its support. It recovered to close down about 10 per cent after the bank reappeared towards the close, selling about $100m, analysts said.
The bank’s late intervention left investors in the dark about how it would behave when trading reopened on Friday.
“That’s what happens in markets,” said Siobhan Morden, Latin America strategist at Jefferies in New York. “Pressure builds, and when the central bank backs away, everyone starts to panic.”
She said investors would look to data on monetary deposits in Argentine banks, due to be published on Friday with a one-week lag, for any evidence of capital flight.
The peso has come under mounting pressure since November, when Mrs Fernández announced cabinet changes that undermined confidence in her government’s ability to address problems including runaway inflation and a sharp deterioration in public finances. The currency, already struggling under a worsening trade account, has lost about a quarter of its value against the US dollar since then.
Argentina has been criticised by the International Monetary Fund for the unreliability of its data on inflation, which the government says is about 10 per cent a year but which private economists say is closer to 25 per cent.
The government is faced with either a further confidence-shattering loss of reserves or a further confidence-shattering devaluation of the peso. All the good options are gone
- Arturo Porzecanski, the American University
The country has been able to weather such high rates of inflation thanks to a comfortable trade surplus generated by exports of commodities such as wheat. Until recently, the private and public sectors were able to grant pay rises big enough to more than compensate for rising prices and the central bank’s main task was to buy dollars entering the country, printing pesos to do so and in the process expanding the money supply by more than 30 per cent a year for the past four years.
But faced with rising imports and falling exports, coupled with a surge in demand for dollars among a population that appears to have lost faith in the peso, the bank has had to defend the currency by selling dollars, running down its foreign exchange reserves to dangerous levels. Meanwhile, the government has introduced unorthodox measures to try to stop Argentines buying dollars, including restrictions on purchases by tourists, credit card purchases and, this week, internet purchases.
“It’s become clear that all those fingers in the dike are not enough,” Mr Porzecanski said. “The government is faced with either a further confidence-shattering loss of reserves or a further confidence-shattering devaluation of the peso. All the good options are gone.”
He said losing control of the currency, after the government appeared to lose control of the streets during nationwide protests last month, was a “very significant moment” for the Fernández administration.
8. CARRY THEORY STEAMROLLERED IN ARGENTINA (Financial Times)
By James Mackintosh
January 23, 2014
Peso plunges more than 15% in a few hours.
Argentina is a throwback to the glory days of emerging market investing. On Thursday its peso plunged more than 15 per cent in a few hours after the central bank appeared to withdraw support for a currency plagued by exchange controls, runaway inflation and made-up government statistics. Yes, it was 1997 all over again.
This time the rest of the emerging world is in a better situation. However, the Turkish lira continued falling and is down more than 6 per cent this year, with South Africa’s rand off 5 per cent. Emerging markets and the closely-linked commodity currencies of Canada and Australia were the worst performers on Wednesday on the foreign exchanges.
The intriguing question is whether investors willing to close their eyes to politics and volatility should play the carry: buy riskier currencies in the hope of pocketing enough interest to more than cover exchange rate losses.
In 2013 this carry trade worked beautifully with the peso. Argentina had the worst-performing currency, falling a quarter against the dollar (next worst was Indonesia’s rupiah, down 21 per cent). Yet, the equivalent of interest on the non-deliverable forwards used to trade pesos offshore would have more than offset the loss, leaving a total return of 20 per cent, according to Bloomberg data. Even after Thursday, interest still more than offset peso losses over 12 months.
Carry theory says countries that need to attract foreign capital have to pay a risk premium, generating a return for investors, on average.
Carry traders aim to diversify enough not to care too much when one trade goes sour. Yet, since 2007 carry has been disappointing. The FTSE FRB5 index of carry trades among the five main currencies earned 8.4 per cent a year from 2000 to 2007. Since then it has lost 4 per cent a year. What carry traders discovered over the past five years, and anyone focused on the peso has just found out, is that carry trading is like picking up pennies in front of a steamroller: every now and then you get flattened.
9. ARGENTINE GOVERNMENT ADOPTS HANDS-OFF APPROACH AS PESO SLIDES (Financial Times)
By John Paul Rathbone in London and Jonathan Gilbert in Buenos Aires
January 23, 2014
It is getting hot in Buenos Aires, and not just because the temperature is a steamy 44 degrees centigrade. On Wednesday, the Argentina peso fell to a record low; on Thursday it took another dive, dropping 15 per cent against the dollar in a day.
The sudden drop has unnerved citizens of a country with a history of abrupt devaluations and hyperinflation. Indeed, Thursday’s intra-day fall is the steepest single-day decline since the country’s 2002 economic crisis, a moment seared into the Argentine consciousness.
Nonetheless, any worries about the peso’s fall are being trumped by greater government concerns: Argentina’s fast declining international reserves. To stop an outflow of dollars that has totalled more than $1bn this year, bringing reserves at the start of the week to $29bn, the Argentine authorities appear to prefer to let the peso slide.
“This is not a devaluation initiated by the government,” said Jorge Capitanich, cabinet chief. “For those who love the market, what you [have seen] in the market is the result of the offer and demand for dollars.”
Traders corroborated the stance. “The orders to purchase dollars are the same as those over the past few days,” one trader said. “The difference is that if the central bank doesn’t appear [to supply dollars] there’s nobody who can put the brakes on.”
The government’s hands-off approach seems clear from the top down. On Wednesday, Cristina Fernández, the Argentine president, made her first public appearance in six weeks, when she unveiled a back-to-work programme for unemployed youth and defended her government’s record.
However the 60-year-old head of state, who underwent surgery in October to remove a bloodclot from her brain, made no mention of the problems more pressing on many Argentine minds, the falling currency, Argentine inflation – privately estimated at 28 per cent a year but officially recorded at 11 per cent – or a recent spate of blackouts and police protests over pay.
The following day, Mr Capitanich defended Ms Fernández’s speech, saying: “A president cannot cover all topics in one speech . . . She also didn’t speak about the record levels of tourism . . . or the automotive industry . . . or the new trains that will improve the railway network.”
All but cut off from international financial markets following its almost $100bn sovereign default 12 years ago, Argentina desperately needs to conserve its foreign reserves to make debt payments on its restructured bonds, fund public spending and pay for imports.
In that vein, the government this week continued its crackdown on imports by limiting the online purchases of foreign goods.
Although the devaluation will increase the peso value of Argentina’s agricultural exports, economists are dubious that the policy of letting the peso slide will work in isolation.
If the flight to dollars is being caused by high inflation, cutting inflation means also cutting public spending and the money-printing used to finance it – which Ms Fernández’s left of centre government is loath to do.
The steps taken so far “can give the impression that the authorities do not have a clear picture of how to manage the situation”, Luis Secco, a Buenos Aires-based economist, said.
Ms Fernández’s popularity has suffered but not collapsed. Her approval rating stands at 44 per cent, according to a Poliarquia poll released on Thursday, versus 75 per cent after she won a landslide re-election in 2011. Ratings for economic management stand at 35 per cent, versus 60 per cent in 2011.
Many economists have wondered how the Argentine economy would fare should commodity prices fall and western central banks tighten monetary policy. The strains seem to be making themselves apparent now.
Only a year ago Ms Fernández firmly rebutted calls for a weaker exchange rate. “Anyone who is hoping to make money via a devaluation whose costs the people will have to pay for are going to have to wait until the next government,” sh said. The next presidential election is in October 2015.
10. ARGENTINA DEVALUATION SENDS CURRENCY TUMBLING MOST IN 12 YEARS (Bloomberg News)
By Katia Porzecanski
January 23, 2014
Argentina devalued the peso the most in 12 years after the central bank scaled back its intervention in a bid to preserve international reserves that have fallen to a seven-year low.
The peso has plunged 12.7 percent over the last two days to 7.8825 per dollar at 3:45 p.m. in Buenos Aires, after falling to as low as 8.2435, according to data compiled by Bloomberg. The decline in the peso marks a policy turn for Argentina, which had been selling dollars in the market to manage the foreign-exchange rate since abandoning a one-to-one peg with the U.S. dollar in 2002.
President Cristina Fernandez de Kirchner, who said May 6 that the government wouldn’t devalue the peso, is struggling to hold onto dollar reserves which have fallen 31 percent to $29.4 billion amid annual inflation of more than 28 percent. Reserves are the government’s only source to pay foreign creditors. Since changing her economy minister, cabinet chief and the head of the central bank on Nov. 18, the peso has fallen 25 percent, the most in the world, according to data compiled by Bloomberg.
11. SPECTER OF DEFAULT STALKS ARGENTINA (Business Week)
By Charlie Devereux and Camila Russo
January 23, 2014
For Dominga Kanaza, it wasn’t the soaring inflation or the weeklong blackouts or even the fear that looting would spread from the outskirts of Buenos Aires that frayed her nerves. It was all of them combined. At one point, the shop owner refused to open the shutters protecting her corner grocery more than a few inches—just enough to sell soda to passersby on a sweltering summer day.
“It was scary,” says Kanaza as she yells out prices to customers. The looting broke out days earlier after police went on strike in the nearby province of Cordoba. The walkout left Cordoba to criminals, who spread mayhem all the way to Buenos Aires. Kanaza says it was like nothing she had seen since the rioting that followed the nation’s record $95 billion bond default in 2001.
President Cristina Fernández de Kirchner is running out of time to avert another crisis. The policy that Fernández and her late husband and predecessor, Néstor Kirchner, used to propel 7.2 percent average annual growth over the past decade—higher government spending financed by printing money—is unraveling. An official spokesman turned down a request for an interview with Fernández.
nflation climbed to 28 percent last year, according to opposition lawmakers who broadcast findings of economists operating clandestinely. These academics have been cowed into silence by Fernández’s crackdown on price reports that clash with government figures. The official data collectors say inflation last year was only 11 percent. The peso has fallen 26 percent in the past 12 months, its worst rout since the devaluation that followed the 2001 bond default.
Power outages like the one that plunged Kanaza’s shop into darkness have become more frequent. The power grid was starved of investment as the government kept electricity prices low to contain inflation. The International Monetary Fund, which censured Argentina for misreporting inflation, predicts the economy will grow 2.8 percent this year, about half the 5.1 percent average for developing nations.
The biggest financial problem is the loss of foreign reserves. They’ve dropped 44 percent in the past three years, to $29.5 billion, as prices for soy and wheat exports slumped and Argentines changed pesos to dollars and stashed them abroad. The government says it will shore up reserves in 2014.
STORY: Argentines Hold More Than $50 Billion in U.S. Currency. Here’s How We Know
The country remains locked out of international debt markets as it haggles with billionaire hedge fund manager Paul Singer over lawsuits stemming from the 2001 default. Argentina’s attempt to link its currency to the dollar in the 1990s throttled the economy, leading to its default. Singer wants full reimbursement on the defaulted debt his fund holds, having rejected restructuring terms that other creditors accepted. Foreign exchange reserves are the government’s main source of dollars to pay holders of $50 billion in bonds.
The country’s average bond yield of 12 percent is the highest among major developing nations after Venezuela. Trading in swap contracts that insure bonds against nonpayment shows a 79 percent probability of default over five years. “We’re seeing some sort of day of reckoning,” says Diego Ferro, co-chief investment officer in New York at Greylock Capital, which has invested in the country’s debt. “The adjustment will have to happen if Argentina doesn’t want to hit a wall before 2015.” He foresees a run on deposits, hyperinflation, and a steep drop in reserves if the government doesn’t change its policies.
In her first day back on the job in November after surgery to remove a blood clot near her brain, Fernández replaced most of her cabinet. The new cabinet has pledged to work with the IMF to improve the quality of economic data. It has started talks to settle $6.5 billion of overdue debt with key creditor nations and unveiled plans to compensate Spain’s Repsol (REP:SM) for the seizure of its local oil business in 2012.
Ferro doubts any of this will be enough to avoid another crisis. Bolder measures, such as reaching a deal with Singer to regain access to overseas markets and lifting currency controls, are needed to win back investor confidence, he says. Fernández hasn’t signaled her next move. She gave a radio address on Jan. 22, breaking a silence that began on Dec. 19.
That’s what angers Argentines like Miguel Llanes the most. While looting spread across the country and the blackouts in Buenos Aires dragged on day after day, Fernández was nowhere to be seen. Llanes, forced by the blackout to keep his curtain shop in downtown Buenos Aires closed for more than a week, finally joined protesters burning tires and garbage in the streets. “Where was the president?” he shouted. And then he raised a question that holders of $50 billion of Argentine bonds are asking, too. “How long will this last? They’ve spent all the money.”
12. ARGENTINE PESO SUFFERS STEEPEST DAILY FALL SINCE 2002 (Reuters News)
By Walter Bianchi
January 24, 2014
(Reuters) – Argentina’s exchange rate on Thursday suffered its steepest daily decline since the country’s devastating 2002 financial crisis, extending the previous day’s losses as the central bank gave up its battle against the peso’s decline.
Having shed more than 30 percent of its reserves last year, the central bank this week abandoned its policy of supporting the peso by intervening in the foreign exchange market.
The new policy set the stage for Thursday’s loss in the value of the currency and increased worries about what is already one of the world’s highest inflation rates.
The peso-dollar interbank exchange rate hit the 8 mark, down 11 percent on the day following a 3 percent decline on Wednesday. Argentina’s black market peso fell 7.25 percent on Thursday to close at 13.1 per dollar.
“Yesterday the central bank neither bought nor sold dollars, which tells you what its position is with respect to the exchange rate,” cabinet chief Jorge Capitanich told reporters on Thursday.
Central bank reserves stood at $29.44 billion.
On Thursday the bank intervened but by an inconsequential $100 million, according to local foreign exchange traders.
Due to local currency controls, the black market is the only way for many Argentines to get their hands on dollars as confidence in Latin America’s No. 3 economy falls and inflation soars. Given the country’s history of repeated financial crises, Argentines like to save in dollars.
According to private analysts, consumer prices rose more than 25 percent in 2013, although discredited official data clocks inflation at less than half that.
Unorthodox policies, from currency controls meant to stop capital flight to heavy stimulus spending unencumbered by inflation targeting, have made Argentina a no-go zone for all but the most risk-hungry investors.
Argentina’s key grains sector has cut exports as farmers hoard their crops rather then expose themselves to the swooning local currency. This has contributed to the scarcity of dollars that is debilitating the peso.
Every time President Cristina Fernandez tightens capital controls in a bid to shore up the country’s wobbly balance of payments, it increases the scramble for dollars. This in turn contributes to the fall in the value of the black market peso and higher inflation.
The new year has begun with analysts expecting a 30 percent rise in consumer prices in 2014. That would be the highest rate since 2002, when millions of middle class Argentines were pushed into poverty by a crisis punctuated by a sovereign bond default and 41 percent inflation.
13. DON’T CRY JUST FOR ARGENTINA (The Economist)
January 23, 2014
TODAY’S plunge in the Argentine peso was the biggest since the devaluation of 2002 following Argentina’s debt default. The peso fell from 6.92 per dollar yesterday to 7.88, a decline of 12%; and at times today the fall was even bigger, with the peso at one point reaching 8.24, according to Bloomberg.
The collapse came as Argentina’s central bank stopped intervening in the currency markets. According to Neil Shearing of Capital Economics, a London-based consultancy, the country’s foreign-exchange reserves fell from a peak of $47 billion in March 2011 to a seven-year low of $25 billion in November 2013. He says that the price of defending the peso had become too great and that the Argentine authorities “have bowed to the inevitable”.
Argentina’s plight has been largely self-inflicted. The government has mismanaged the economy. Rather than tackle inflation it has sought to fiddle the figures. Rather than deal with the causes of capital flight it has tried in vain to suppress it.
But Argentina is not alone in feeling the hot breath of the currency markets. The bond vigilantes may have given up the ghost, certainly in advanced countries where, to the surprise of many, bond markets have rallied this year, especially in the once shunned euro-zone countries of southern Europe. But currency traders remain on patrol.
Emerging economies are their main target. The Turkish lira fell again today, to a new low. The South African rand also declined sharply. Both countries have big current-account deficits, estimated by the IMF to run at 7% of GDP in the case of Turkey in 2013-14 and 6% for South Africa. Turkey has appeared especially vulnerable given the stubborn reluctance of the central bank to raise interest rates and the general loss of credibility of the government.
But the resource-rich advanced countries that did so well out of the commodities boom are also suffering. For example the Canadian dollar has been pummeled this year. Worries about slackening Chinese growth – there was a gloomy report today about the state of China’s manufacturing sector – are reinforcing the aversion to the commodity exporters that once carried all before them. One reason why Argentina did so well for a long time after its trauma of 2001-02 was that its economy was buoyed by global demand for its commodities, such as soya.
Earlier this week the International Monetary Fund issued new forecasts showing a pick-up in global growth from 3% last year to 3.7% in 2014. That was a tonic, but renewed currency turbulence suggests that all is not well in many parts of the world economy. Using the Big Mac index, we explore in more detail which currencies may be particularly vulnerable in an article in this week’s print edition.
14. ARGENTINA’S PESO: FIRST DECLINE, NOW FALL (The Economist Online)
Jan 23rd 2014
ON JANUARY 22nd Argentine President Cristina Fernández de Kirchner appeared in public for the first time in over a month. She may wish she had stayed out of sight. Earlier that day the official exchange rate of the Argentine peso had weakened by 25 cents to 7.14 pesos to the dollar, its biggest daily decline since the crisis of 2002. Since then things have got even bumpier. On January 23rd the peso fell by over 86 cents to 8 pesos to the dollar in the retail market, and by even more in the wholesale market. The Central Bank eventually intervened to stabilise the currency at 7.79 to the dollar, but Argentina has still seen a devaluation of more than 15% in just 48 hours.
The Argentine peso has long been heading for a fall. It has looked overvalued since at least 2011, when the government clamped down on all foreign-currency transactions in an attempt to stem capital flight. With inflation running at 25%, Argentines are desperate for access to dollars. The black-market exchange rate has at times exceeded the government’s artificial rate by as much as 70%.
In a bid to close that yawning gap, the government has been allowing the peso to devalue. The authorities allowed the peso to depreciate by only 12% in 2012 but let the currency drop by 33% in 2013. The rate of decline picked up noticeably towards the end of last year. But this strategy has not worked. The black-market rate has crept higher and higher as Argentines continue to seek out dollars to safeguard against what might come. At the beginning of this year, the gap between the official and unofficial rates remained stubbornly high.
Without any official explanation for the dramatic moves in the peso over the past two days, observers are left to guess what is going on. It is too early to say whether the sudden slump signals a real change in government strategy. But economists agree that there are two likely explanations for this week’s sell-off. The first is that government is making a more aggressive attempt to close the gap between the official and black-market exchange rates. The second is that Argentina’s dwindling Central-Bank Reserves mean that the authorities can no longer spend dollars to support the peso.
For the past two years the Central Bank has consistently liquidated reserves in order to prop up the official exchange rate. Add in the cost of energy imports and debt payments, and foreign-exchange reserves plunged by nearly $13 billion in 2013. Since the beginning of 2013 they have dipped below $30 billion to their lowest levels in seven years. In order to pay for this year’s $15 billion energy bill and settle nearly $10 billion worth of debt, the Central Bank simply cannot afford to maintain the same level of intervention it has in the past.
Although devaluation is necessary, the government’s handling of events is deeply flawed. “The government has made the grave error of devaluing without implementing a comprehensive plan to reduce inflation,” says Luis Secco of Perspectiv@s, a consultancy. Without any transparency about the government’s intentions, or any sign of tighter monetary policy, an accelerated devaluation risks only increased inflation and even greater demand for dollars on expectations of further falls in the peso.
Sergio Berensztein of Poliarquia, a polling firm, believes another risk could be that farmers will sit on their crops in anticipation of further devaluation instead of exporting them—an especially big risk for soy, which is easily stored. Tariffs on agricultural exports contributed nearly $7 billion to government coffers last year, a vital source of dollars.
Josh Rosner of Graham Fisher & Co, a research firm, does not foresee the government revealing its plan (if it has one) any time soon. “When a government is going to intervene aggressively in the economy, it is in its interest to keep people in the dark to avoid speculation.” For now all Argentines can do is sit tight and hope that Ms Fernández and the Central Bank know what they’re doing.
15. ARGENTINA ECONOMY: QUICK VIEW – THE PESO WEAKENS SHARPLY (Economist Intelligence Unit – ViewsWire)
23 January 2014
With reserves dropping below US$30bn, the Banco Central de la República Argentina (BCRA, the Central Bank) decided not to intervene in the foreign-exchange market on January 22nd, and allowed the peso to depreciate by a nominal 7% in one day-the largest daily fall since the 2001-02 crisis.
The authorities are desperately trying to stop the foreign reserves from continuing their fall. In 2013 the reserves dropped from US$43.3bn to US$30.6bn amid a weakening current account and continuing capital flight. Under its new Central Bank president, Juan Carlos Fábrega, the monetary authority appears to be changing tack. Controls are still being tightened (the government recently announced cumbersome restrictions on international internet purchases), but the Bank is clearly more prepared now to accept a more rapid nominal depreciation of the peso under the heavily managed float in order to protect the reserves from falling to dangerously low levels (import cover has already fallen from over 11 months in 2009 to 3.9 months in 2013). From Ps6.5:US$1 at the end of 2013, the exchange rate has weakened to Ps7.14:US$1 on January 22nd.
At this rate, the peso is finally also weakening in real terms, and could begin to provide a boost to manufacturing export competitiveness. However, it will also pass through into inflation, which is already above 20% and rising. A renewed weakening of the economy evident in the latest available indicators could help reduce demand-side price pressures and contribute to a much-needed adjustment. However, it will be politically difficult for the government to negotiate through a period of still-high inflation and weak (or negative) GDP growth, and there is a strong chance the government will backtrack on adjustment.
To help bolster the reserves and preclude the need for a harsh adjustment, the government is now trying to make amends rapidly with international investors and creditors. Most recently, Argentina has reopened talks with Paris Club creditors with a view to obtaining dollars in the form of new bilateral credits. But the latest negotiations will be difficult and probably lengthy, and any new credits will not come in time to reduce speculation of a sudden sharp currency devaluation, which is now rife.
16. LA SALADA: STALL STORIES (The Economist)
25 January 2014
Inside South America’s largest informal market
Ii is five o’clock in the morning, but shoppers in La Salada market in Buenos Aires are already going home. They drag rubbish sacks full of T-shirts, trainers and pirated DVDs across the car park to board waiting coaches. Some have come to stock their shops, others to fill their wardrobes. They started shopping when the market opened at 3am, and have travelled from as far as Neuquén, a Patagonian city 15 hours away.
La Salada is thought to be South America’s largest informal market. Around 30,000 wire-mesh stalls spill out of three warehouses in an unsavoury neighbourhood on the outskirts of the capital. Its administrators reckon that on Tuesdays, Thursdays and Sundays, when the market is open, more than 250,000 shoppers browse its stalls. Tens of thousands of people help keep La Salada running–selling, protecting, cleaning and supplying the market. At the Punta Mogote warehouse, where most stalls are underground, so many people faint that an ambulance is kept on site.
Hard numbers are impossible to come by but administrators estimate that vendors sell 150m-300m pesos ($22m-$44m) of goods every day La Salada is open. According to Jorge Castillo, who manages Punta Mogote, vendors pay up to $100,000 in cash for a stall measuring four square metres–more than they would for space in a former Hermès store on Avenida Alvear, the main shopping street in Buenos Aires.
La Salada has its murky side. In one bizarre case a man who bought a poodle puppy at La Salada claimed he was duped into bringing home a fluffy angora ferret on steroids. Nacho Girón, a journalist who has written a book on the market, insists that this story is itself one of La Salada’s fakes. Piracy is undeniably rife. Stalls in Punta Mogote sell copies of Tommy Hilfiger shirts for 110 pesos. At street level, vendors hawk Nike knock-offs and flimsy “Ray-Ban” sunglasses.
Mr Castillo is engagingly open about the dubious merchandise sold by some of his vendors. La Salada’s merchants, he acknowledges, may not follow the rules when it comes to intellectual property “but this is Argentina. Nothing is ever just black or white.”
Taxes are certainly a grey area. All shopping is done in cash, leaving ample room for fudging the accounts. Tax officials have trouble enforcing their writ: in one 2009 tax raid vendors from Punta Mogote lobbed thousands of eggs at agents until they fled. The police are reckoned to be more complicit, demanding bribes in exchange for ignoring contraband goods.
Given La Salada’s popularity among Argentina’s poor, the government has long understood that attacking it would be politically risky. According to Mr Girón’s book, Néstor Kirchner, a former president, privately described the market as “a social phenomenon of Argentina in crisis”. “Shoppers love us because we allow them to buy what they need and also have a little left over to treat themselves,” says Mr Castillo. “Vendors love us because we don’t take their hard-earned cash.”
That ethos stretches back to the market’s foundation in 1991 by a bunch of struggling Bolivian clothing producers. Sick of being exploited by factory bosses who paid them poorly and late, the manufacturers gathered enough money to buy the site of abandoned thermal baths. The market was an immediate hit. Mr Castillo, who had been a women’s shoemaker, began buying stands in La Salada’s second warehouse in 1994, before leading the way in opening Punta Mogote in 1999.
Ferreting out the bargains
Competition is at the heart of La Salada’s model. When the market was founded the Argentine peso had just been pegged to the dollar, making imported textiles far cheaper than Argentine-made fabrics. To succeed, vendors had to cut prices right back. Competing with imports is no longer a problem, thanks to currency controls and heavy taxes: the government’s latest wheeze is to require shoppers to pick up goods bought from foreign websites at customs offices so taxes can be collected. But with so many stalls next door to one another, competition at the market remains cut-throat. “The good and the bad of Argentina are embodied by La Salada,” Mr Girón reflects. “It is at once a display of Argentine creativity, intelligence, resilience and grit, and an exhibit of Argentine cunning and corruption.”
17. ARGENTINA’S DECEMBER TRADE SURPLUS $272 MLN VS $835 MLN (Dow Jones Institutional News)
By Ken Parks
23 January 2014
Argentina’s Trade Surplus Drops 67% in December on Lower Exports
BUENOS AIRES–Argentina’s trade surplus fell 67% on the year to $272 million in December amid a plunge in exports that month.
Exports decreased 13% to $5.45 billion last month, due to a 10% drop in volumes shipped and a 4% decline in prices, the national statistics agency, Indec, said in a report Thursday.
Imports fell 5% to $5.18 billion, as a 7% drop in volumes offset a 2% rise in prices.
The trade surplus for the full year fell to $9 billion, from $12.4 billion in 2012 partly due to rising fuel imports, Indec said.
The energy deficit–the difference between Argentina’s energy exports and imports–more than doubled to $6.2 billion in 2013.
Argentina relies heavily on exports of farm products like soybeans and soyoil to earn the foreign currency it uses to pay creditors and purchase imported goods ranging from sports cars to natural gas.
However, inflation north of 25% has spurred some Argentines to seek the safe haven of the U.S. dollar. President Cristina Kirchner has managed to stave off a full blown run on the central bank’s foreign currency reserves by limiting imports and rationing dollars for travel and trade.
Even so, reserves dropped to $29.4 billion Wednesday, their lowest level since November 2006.
18. ARGENTINA IMPOSES HEFTY TAX ON INTERNATIONAL ONLINE SHOPPING (NPR: Morning Edition)
By Lourdes Garcia-Navarro
23 January 2014
STEVE INSKEEP: Although, maybe not so many people subscribing in Argentina, that country has just imposed a heavy tax on international online shopping and it is restricting international online purchases to two per year.
NPR’s Lourdes Garcia-Navarro reports on the government’s attempt to shore-up dipping reserves of foreign currency.
LOURDES GARCIA-NAVARRO: Online shopping is supposed to be about convenience – order by your computer, sometimes tax free, and bam, it’s delivered straight to your door. But in Argentina, new rules have put in place a whopping 50 percent tax on orders above an annual $25 allowance. And you’re only allowed to order internationally twice a year. To make sure you pay what you owe the government, your goods won’t be delivered to your home, but rather to your local customs office, where it can take hours and lots of paperwork to get your boxes out.
Add this to the other economic restrictions already in place and you have an economy that analysts say is struggling. Argentines already have a quota for buying dollars that has given birth to a currency black market. Inflation has also skyrocketed, so many Argentines are struggling to even buy basic goods. Foreign credit card transactions, too, face a 35 percent tax.
Argentina though says it’s been forced to take drastic measures. The country’s hard currency reserves have fallen 30 percent in a year.
In 2001, its economy crashed and the government had to devalue the peso resulting in $200 billion default. Since then Argentina has had trouble securing international loads. It’s used its foreign reserves to service its debts.
19. ARGENTINA’S PETCHEM SECTOR INVESTING IN SHALE PLAYS TO BOOST FEEDSTOCK SUPPLIES (Platts Commodity News)
By Charles Newbery
23 January 2014
Buenos Aires (Platts)–23Jan2014/205 pm EST/1905 GMT Argentina’s petrochemical sector plans to step up investment in developing oil and natural gas supplies from shale plays like Vaca Muerta, helping to boost feedstock supplies to expand production capacity, a senior government official said Thursday.
“This sector is getting involved in the investment process of Vaca Muerta to secure the resources that they need as raw materials,” Industry Minister Debora Giorgi said in a televised press conference.
Of the six biggest polymer and plastics producers, “at least two” have started investment plans for shale development, she said after meeting with sector representatives.
The first was Dow Chemical. It entered a partnership in September with Argentina’s state-run YPF to develop a pilot production project for shale gas on the El Orejano block. They will invest a combined $188 million in the first year to drill 12 wells for shale gas resources, targeting the Lajas, Sierras Blancas and Vaca Muerta plays.
The companies estimate peak production could surpass 3 million cubic meters/day.
With the additional supplies of gas, Giorgi said petrochemical companies would be able to increase production and expand capacity at their plants, helping to reduce imports of gas, gas-based feedstock and petrochemicals. Polymer producers, for example, have been increasing imports of ethylene as feedstock, in particular during the May-to-September cold season when gas shortages peak.
Dow plans to use the additional gas supplies from its partnership with YPF to boost gas feedstock supplies at its plants in Bahia Blanca, which have capacity to produce 700,000 mt/year of ethylene and 600,000 mt/year of HDPE, LDPE and LLDPE.
Dow buys gas-based ethane feedstock for these plants from Compania Mega, in which Dow, YPF and Brazil’s state-run Petrobras are the main shareholders. Mega processes the gas at a plant in Bahia Blanca and sells the ethane as well as supplies of butane, propane and natural gasoline to makers of petrochemicals and other finished products.
Giorgi said another two petrochemical companies are in talks to launch shale development projects, without naming them.
The target is Vaca Muerta, which holds the largest chunk of the country’s 802 Tcf of shale gas resources, according to estimates by the US Energy Information Administration.
State-run YPF has started producing the first supplies from the play, with output running at 13,000 b/d of oil equivalent, most of it light crude, in third-quarter 2013. YPF has teamed with Chevron on a $1.5 billion pilot production project, while other companies like ExxonMobil, Shell and Total are starting to drill for supplies.
YPF has said shale development will help turn around a decade-long decline in oil and gas production.
The decline coupled with rising demand has sparked shortages in a country that relies on oil and gas to meet about 90% of its energy needs.
Faced with the shortages, petrochemical producers have had to scale back production even as the country has ramped up imports of Bolivian gas and LNG, which averaged 30 million cu m/d in 2013. Argentina had been exporting as much as 20 million cu m/d of gas as recently as 2004.
Giorgi said the lack of gas and other feedstock has prevented petrochemical companies from running plants at higher capacity.
According to analysts, Brazil’s Braskem hasn’t been able to build a polyethylene plant in Argentina because of the lack of gas feedstock. Dow Chemical and Basell Polyolefins’s Petroken face the same problem for polyethylene and polypropylene products, respectively, analysts have said.
“Argentina is importing nearly $900 million worth of petrochemical products a year,” she said.
By developing Vaca Muerta and other shale plays, the petrochemical companies will have more feedstock to increase production, helping to reduce the imports, Giorgi said.
She said that by 2020 the production of shale gas should be sufficient to replace imports of gas and some petrochemical products.
20. ARGENTINA NOV OIL OUTPUT FELL 1.7% YEAR, GAS PRODUCTION SLIPS 2.1% (Platts Commodity News)
By Charles Newbery
23 January 2014
Buenos Aires (Platts)–23Jan2014/1106 am EST/1606 GMT Argentina’s oil production fell 1.7% and natural gas output dropped 2.1% in November compared with the year-earlier period, an industry report showed Thursday.
Crude production dropped to an average of 543,218 b/d in November from 552,376 b/d in November 2012, and was down 0.6% compared with 546,753 b/d this past October, the Argentine Oil and Gas Institute (IAPG) said without specifying reasons for the changes.
Part of the year-on-year decline was a response to changes in the calculation of crude production. By government orders, natural gasoline was stripped out of the calculation of total crude production, effective January 2013. The industry group has not adjusted prior data.
Argentina’s state-run YPF produced 38% of the crude in November, trailed by BP-controlled Pan American Energy with 18%, Argentina’s Pluspetrol with 7.1%, China’s Sinopec with 6.9% and Brazil’s Petrobras with 6%, IAPG said.
Gas production, meanwhile, dropped 2.1% to 114.7 million cu m/d in November compared with 117.2 million cu m/d in the year-earlier period, and was up 0.1% compared with the 114.6 million cu m/d produced in October, IAPG said.
France’s Total produced 29% of the gas in November, followed by YPF with 26%, Pan American with 11% and Petrobras with 8.6%.
IAPG said crude processing rose 2.7% to 534,754 b/d in November from 520,911 b/d in November 2012.
Of the supplies processed in November, 9,090 b/d was imported, equivalent to 1.7% of the total processed that month. That compares with imports of 6,281 b/d in the year-earlier period.
Output of RON 95 gasoline rose 11% to 102,353 b/d in November on the year while that of RON 98 gasoline fell 11% to 29,485 b/d over the same period. Production of fuel oil rose 32% to 11,755 mt/d, while that of diesel dropped 2.1% to 202,021 b/d over the same period, IAPG said. Naphtha production fell 5.3% to 44,759 b/d over the same period.
The leading refiners are state-run YPF trailed by Shell, Axion, Oil Combustibles and Petrobras.
21. NOTICE OF AVAILABILITY OF EVALUATIONS OF THE FOOT-AND-MOUTH DISEASE AND RINDERPEST STATUS OF A REGION OF PATAGONIA, ARGENTINA (Department of Agriculture Documents)
23 January 2014
Animal and Plant Health Inspection Service
SUMMARY: We are advising the public that we have determined that a region of Argentina, consisting of the areas of Patagonia South and Patagonia North B, is free of foot-and-mouth disease. We are making that determination, as well as an evaluation we have prepared in connection with this action, available for review and comment. In addition, we have prepared an evaluation assessing the rinderpest status of South America, which includes Argentina, and have determined, based on our evaluation, that rinderpest is not present in the entirety of Argentina. We are also making that determination, as well as our evaluation, available for review and comment.
DATES: We will consider all comments that we receive on or before March 24, 2014.
ADDRESSES: You may submit comments by either of the following methods:
* Postal Mail/Commercial Delivery: Send your comment to Docket No. APHIS-2013-0105, Regulatory Analysis and Development, PPD, APHIS, Station 3A-03.8, 4700 River Road Unit 118, Riverdale, MD 20737-1238.
Supporting documents and any comments we receive on this docket may be viewed at http://www.regulations.gov/#!docketDetail;D=APHIS-2013-0105
or in our reading room, which is located in Room 1141 of the USDA South Building, 14th Street and Independence Avenue SW., Washington, DC. Normal reading room hours are 8 a.m. to 4: 30 p.m., Monday through Friday, except holidays. To be sure someone is there to help you, please call (202) 799-7039
FOR FURTHER INFORMATION CONTACT: Dr. Silvia Kreindel, Senior Staff Veterinarian, Regionalization Evaluation Services, National Import Export Services, VS, APHIS, 4700 River Road Unit 38, Riverdale, MD 20737-1231; (301) 851-3308
SUPPLEMENTARY INFORMATION: The regulations in 9 CFR part 94 (referred to below as the regulations) govern the importation of certain animals and animal products into the United States to prevent the introduction of various animal diseases, including rinderpest and foot-and-mouth disease (FMD). The regulations prohibit or restrict the importation of live ruminants and swine, and products from these animals, from regions where rinderpest or FMD is considered to exist.
Within part 94, SEC 94.1 contains requirements governing the importation of ruminants and swine from regions where rinderpest or FMD exists and the importation of the meat of any ruminants or swine from regions where rinderpest or FMD exists to prevent the introduction of either disease into the United States. We consider rinderpest and FMD to exist in all regions except those listed in accordance with paragraph (a)(2) of that section as free of rinderpest and FMD.
Section 94.11 of the regulations contains requirements governing the importation of meat of any ruminants or swine from regions that have been determined to be free of rinderpest and FMD, but that are subject to certain restrictions because of their proximity to or trading relationships with rinderpest- or FMD-affected regions. Such regions are listed in accordance with paragraph (a)(2) of that section.
The regulations in 9 CFR part 92, SEC 92.2, contain requirements for requesting the recognition of the animal health status of a region (as well as for the approval of the export of a particular type of animal or animal product to the United States from a foreign region). If, after review and evaluation of the information submitted in support of the request, the Animal and Plant Health Inspection Service (APHIS) believes the request can be safely granted, APHIS will make its evaluation available for public comment through a notice published in the Federal Register Following the close of the comment period, APHIS will review all comments received and will make a final determination regarding the request that will be detailed in another notice published in the Federal Register
In 2003, the Government of Argentina submitted a request to recognize the region located south of latitude 42 [degrees] south, known as Patagonia South, as free of FMD. In 2008, Argentina expanded its request to include the region immediately north of latitude 42 [degrees] south, known as Patagonia North B. These two areas are referred to below as the Patagonia Region of Argentina.
In response to this request, APHIS has conducted a qualitative risk assessment to evaluate the FMD status of the Patagonia Region of Argentina. Based on this evaluation, APHIS has found that FMD is not present in the Patagonia Region and that the surveillance, prevention, and control measures implemented by Argentina in the area under consideration as a region free of FMD are sufficient to minimize the likelihood of introducing FMD into the United States via imports of FMD-susceptible species or products. However, because of its proximity to or trading relationships with FMD-affected regions, APHIS has determined that it is necessary to impose certain restrictions on the importation of meat of any ruminants or swine from the Patagonia Region of Argentina.
Rinderpest has never been established in South America. No South American country has ever reported the disease except Brazil, which had an outbreak in 1921 that was limited in scope and quickly eradicated. Furthermore, the global distribution of rinderpest has diminished significantly in recent years as a result of the Food and Agriculture Organization Global Rinderpest Eradication Program. The last known cases of rinderpest worldwide occurred in the southern part of the “Somali pastoral ecosystem” consisting of southern Somalia, eastern Kenya, and southern Ethiopia. In May 2011, the World Organization for Animal Health (OIE) announced its recognition of global rinderpest freedom.
Based on the foregoing conclusions, APHIS has found that the Patagonia Region of Argentina is free of rinderpest and FMD.
Therefore, in accordance with SEC 92.2(e), we are announcing the availability of our evaluation of the FMD status of the region under consideration, as well as an evaluation assessing the rinderpest status of South America, for public review and comment. We are also announcing the availability of an environmental assessment (EA) entitled “Recognition of Patagonia Region in Argentina as Free of Foot-and-Mouth Disease,” which has been prepared in accordance with: (1) The National Environmental Policy Act of 1969 (NEPA), as amended (42 U.S.C. 4321 et seq.), (2) regulations of the Council on Environmental Quality for implementing the procedural provision of NEPA (40 CFR parts 1500-1508), (3) USDA regulations implementing NEPA (7 CFR part 1b), and (4) APHIS’ NEPA Implementing Procedures (7 CFR part 372). The evaluation and the EA may be viewed on the Regulations.gov Web site or in our reading room. (Instructions for accessing Regulations.gov and information on the location and hours of the reading room are provided under the heading ADDRESSES at the beginning of this notice.) The evaluations, as well as relevant information used in the review process, are available by contacting the person listed under FOR FURTHER INFORMATION CONTACT. Information submitted in support of Argentina’s original request for recognition may also be viewed on the APHIS Web site athttp://www.aphis.usda.gov/import_export/animals/reg_request.shtml
by following the link for “Previous regionalization requests and supporting documentation.” Information submitted in support of the expanded request may be viewed on the Regulations.gov Web site (see ADDRESSES above for instructions for accessing Regulations.gov).
After reviewing any comments we receive, we will announce our decision regarding the disease status of the region of Argentina under consideration with respect to FMD and rinderpest and the import status of susceptible animals and products of such animals in a subsequent notice.
Authority: 7 U.S.C. 450, 7701-7772, 7781-7786, and 8301-8317; 21 U.S.C. 136 and 136a; 31 U.S.C. 9701; 7 CFR 2.22, 2.80, and 371.4.
Done in Washington, DC, this 16th day of January 2014.
Administrator, Animal and Plant Health Inspection Service.
Notice of availability.
Citation: “79 FR 3775″
Document Number: “Docket No. APHIS-2013-0105″
Federal Register Page Number: “3775″
22. CHANGE IN DISEASE STATUS OF THE PATAGONIA SOUTH REGION OF ARGENTINA WITH REGARD TO RINDERPEST AND FOOT-AND-MOUTH DISEASE (Department of Agriculture Documents)
23 January 2014
Animal and Plant Health Inspection Service
SUMMARY: We are withdrawing a proposed rule that would have added that portion of the Patagonia region of Argentina located south of latitude 42 [degrees] south (Patagonia South) to the list of regions considered free of rinderpest and foot-and-mouth disease (FMD). The proposed rule would also have added that region to the list of regions that are subject to certain import restrictions on meat and meat products because of their proximity to or trading relationships with rinderpest- or FMD-affected regions. We are taking this action because we have prepared an updated risk analysis relative to Argentina that is being made available in accordance with a newer process for recognizing the animal health status of regions.
DATES: The proposed rule published on January 5, 2007 (72 FR 475) is withdrawn, effective January 23, 2014.
FOR FURTHER INFORMATION CONTACT: Dr. Silvia Kreindel, Senior Staff Veterinarian, Regionalization Evaluation Services, National Import Export Services, VS, APHIS, 4700 River Road Unit 38, Riverdale, MD 20737-1231; (301) 851-3308
On January 5, 2007, we published in the Federal Register (72 FR 475-480, Docket No. APHIS-2005-0096) a proposal /1/ to amend the regulations in SEC 94.1 by adding that portion of the Patagonia region of Argentina located south of latitude 42 [degrees] south (referred to below as Patagonia South) to the list of regions that are considered free of both rinderpest and foot-and-mouth disease (FMD). We proposed this because there had been no outbreak of FMD in the Patagonia South region of Argentina since 1976 and there was no evidence that there were any species infected with FMD in Patagonia South at that time. In addition, because rinderpest has never been diagnosed in Argentina and is not endemic to that region of the world, we also proposed to recognize Patagonia South as free of rinderpest. Finally, we proposed to amend the regulations in SEC 94.11 by adding Patagonia South to the list of regions that are subject to certain import restrictions on meat and other animal products because of their proximity to or trading relationships with rinderpest- or FMD-affected regions.
We solicited comments concerning our proposal for 60 days ending March 6, 2007. We received 45 comments by that date. Based on the comments we received and other considerations, we concluded that it was necessary to reexamine the risk analysis. We have completed an updated risk analysis covering the Patagonia South region, as well as the Patagonia North B region, in Argentina that we will be making available for review and comment. However, as discussed in more detail below, since the publication of the proposed rule, we have changed the process by which we recognize the animal health status of regions. Therefore, we are withdrawing the January 5, 2007, proposed rule and will make the new risk analysis available in accordance with the current process.
In a final rule /2/ published in the Federal Register on January 10, 2012 (77 FR 1388-1396, Docket No. APHIS-2009-0035), we removed lists of regions classified with respect to certain animal diseases and pests from our animal and animal product import regulations in 9 CFR parts 92, 93, 94, 96, and 98. The lists are now posted on APHIS’ Web site, rather than published in the Code of Federal Regulations. These lists are maintained on the APHIS Web site at http://www.aphis.usda.gov/import_export/animals/animal_disease_status.shtml
. Copies of the lists are also available via postal mail, fax, or email upon request to National Import and Export Services, Veterinary Services, Animal and Plant Health Inspection Service, 4700 River Road Unit 38, Riverdale, Maryland 20737.
The regulations in 9 CFR 92.2 contain requirements for requesting the recognition of the animal health status of a foreign region or for the approval of the export of a particular type of animal or animal product to the United States from a foreign region. If, after review and evaluation of the information submitted in support of the request, the Animal and Plant Health Inspection Service (APHIS) believes the request can be safely granted, APHIS will make the evaluation available for public comment through a notice published in the Federal Register . Following the close of the comment period, APHIS will review all comments received and will make a final determination regarding the request that will be detailed in another notice published in the Federal Register .
In accordance with this process, we are announcing the availability of an evaluation of the FMD status of a region of Patagonia, Argentina, in a notice published today in the Federal Register (Docket No. APHIS-2013-0105). The concerns and recommendations of all the commenters on the January 5, 2007, proposed rule have been considered in the development of the new evaluation.
Authority: 7 U.S.C. 450, 7701-7772, 7781-7786, and 8301-8317; 21 U.S.C. 136 and 136a; 31 U.S.C. 9701; 7 CFR 2.22, 2.80, and 371.4.
Done in Washington, DC, this 16th day of January 2014.
Administrator, Animal and Plant Health Inspection Service.
Proposed rule; withdrawal.
CFR Part: “9 CFR Part 94″
Citation: “79 FR 3741″
Document Number: “Docket No. APHIS-2005-0096″
Federal Register Page Number: “3741″
23. EXPOSING THE LEGACY OF OPERATION CONDOR (NYT Blogs)
24 January 2014
In 1975, six South American military dictatorships conspired to concoct a secret plan to eliminate their left-wing opponents. Not only would the intelligence services of Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay trade information with each other and kidnap, disappear and kill their own domestic foes, they would also cooperate in identifying and killing exiles from partner countries who had taken refuge elsewhere.
By the time Operation Condor ended in the early 1980s, as many as 60,000 people may have been killed. Precise numbers are hard to come by, because of the clandestine undertaking, and in the years since, political amnesties, the destruction or decay of public records and the reluctance of survivors to revisit the trauma of their imprisonment and torture have impeded the compilation of a definitive history.
But those were only some of the challenges that the Portuguese photographer João de Carvalho Pina, 33, faced a decade ago when he began a project to document Operation Condor. The torture and detention centers themselves have also been largely abandoned or converted to conventional uses, and there was a larger overarching conceptual problem for Mr. Pina to solve: how to illustrate something that by its very nature was both abstract and hidden.
Still, Mr. Pina, who has worked for The New York Times and The New Yorker, Time, Newsweek and other magazines, kept at it, and his labors are now bearing fruit. He has a book coming out this year, and he will be exhibiting about 100 of his photographs in a multimedia show at the Paço das Artes in São Paulo beginning in late September.
From Jan. 29 through Oct. 3, he will also be one of five photographers exhibiting recent work at the Open Society Foundations in Manhattan as part of its “Moving Walls” documentary photography project. This month Mr. Pina talked with Larry Rohter by telephone from Portugal about the origins and objectives of “Shadow of the Condor.” Their interview has been edited.
You were born in 1980, as Operation Condor was winding down. What drew you in?
Well, it comes from my own idiosyncrasy and my family’s history. I’m the grandson of two political prisoners in Portugal, and those memories were present from a very early stage in my life. My granddad died before I was born, but my grandmother, when we were on vacation we would listen to these amazing stories and adventures, first clandestinely for the Portuguese Communist Party and then as political prisoners. So I was born with all that baggage and had to deal with it. But my friends, they had no clue about it because in Portugal, as in Brazil, there isn’t much conversation about the subject. As a result, when I started to work in the early 2000s, I decided to go after the subject here in Portugal.
And that’s what led to your first book, “Por Teu Livre Pensamento” (“For Your Free Thought”)?
Right. And in 2002 I started to work a lot in Latin America, where the political prisoner question was an issue and still is. When I made my first trip to Argentina, the military dictatorship [which had ended in 1983] was still a big thing, a big trauma. That was 2004, also the year of my first trip to Brazil. So I slowly started to understand what had been the reality in South America.
Eventually, I did go to New York to do photojournalism and documentary photography at school. This was after I had already produced my work in Portugal, and people in New York and elsewhere were slightly amazed by it. Like, “Wow, this happened in Portugal? Nobody knows about this.” That encouraged me to continue this type of work.
I’d like for you to talk about methodology, about the practical problem of trying to document as a photographer an operation that is long over and even when it was taking place was shrouded in secrecy.
Well, my first concern is who do I want to represent here? What’s my goal? Who do I want to address and who do I want to talk about? That was my main goal: how do I link all six countries together? So the first thing I did was to understand the history of each country and to select victims, meaning people who survived, families of people who disappeared, which is a big issue in the region, as you know, and the places where things happened — the concentration camps, the different places where torture was practiced, the places where a person was last seen. I also had places where people think other people are buried, like in the Araguaia [River region of the Brazilian Amazon] or the Atacama [desert of northern Chile].
I wanted to show these fairly normal places, some of which are actually pretty creepy because they have been abandoned for a long time. The idea was to share those places and show the memories that are still there. So when I went there, I tried to think how a victim felt. How was it to be locked up here for three months? I tend to spend a lot of time in those places, and sometimes pictures come to me and other times I went and talked to people.
Can you give an example of a picture that came to you in a torture center?
There’s a particular photograph of a floor in Chile. I was talking to someone there, who said, “Well, the survivors recognized this place because of the floor.” They could do that only because when they were walking in with blindfolds on their eyes, they could glance down and see the black and white tiles on the floor, leading to a wooden stairway. So when they walked in, they saw the floor, measured the number of steps to the stairway and said, “It’s here.” I would never think about that, but suddenly I looked at the floor, I saw the tile and photographed the tile. To me it was obvious that that was a picture.
When I see your work online, I notice that there is always comment about your unusual choice of equipment.
I’m very comfortable working in medium format, with a Hasselblad with one type of film that I’ve developed with one developer for the past 15 years. So it’s a very natural language to me. One thing I particularly like about that camera is that you don’t put it in front of your face. You look down, so I can interact with the people I am photographing much easier than if I had put this huge camera in front of my eyes, and having me and them and a big camera in the middle.
And then I really love the square format. So I did the project in black-and-white film because that’s what I wanted, and also because I couldn’t afford a digital camera. So it was all for very simplistic reasons. I didn’t intellectualize it.
So you were working with a shoestring budget?
The first five years of this project I did self-funded. I was very lucky that the International Center of Photography, the school I went to, has this amazing darkroom. Every time I would gather more than 100 rolls of film, I would fly to New York, they would give me access to the lab because I studied there. I would develop the film, and it would be much cheaper than sending it out to a lab in Portugal or Argentina.
In this project, you are both a creator and a curator, since you have also included archival photographs from the countries involved in Operation Condor.
It was interesting, because Elisabeth Biondi, who used to be the visual director at The New Yorker, she started following this work from an early stage. One day we were looking at the pictures and she said, “Look, you have the representation of the past, you have the present, what’s going on now, but you’re still missing the past.” And I was thinking, Hell, it’s true. I should go and look at archives. And she asked, “Is that accessible?” I said I would ask around and manage something, and that’s what I did. I made two more trips to the countries involved and started asking local photographers and at courthouses and public archives.
I started looking at these amazing images — Paraguay has thousands and thousands of images from this period. Argentina, Brazil, Uruguay, all of them had either local photographers or law enforcement documenting all these things. Though a lot of them are accessible, others are secret, unknown. That was the most fascinating part: going to courthouses, explaining to judges what I’m doing, and looking at their archives for what I could reproduce. It was really incredible.
What was the reaction when you asked to see official archives, either military or civilian? Were the bureaucrats cooperative or resistant?
I had a bit of everything. (Laughs.) It depended on the country and the specific situation. Paraguay was the most open, by far. I was talking to people, they’d call up the director of the archive, and he’d say, “Yeah, come on over,” and two hours later I was there, and he’d say, “Sure, do you want to start now?” To which I’d say, “Don’t I have to write a letter and get approval?” and he’d say: “What? No, you can do it.” So I came back with my tripod, and they were really, really helpful.
You mention local photographers. I imagine that for many of them the reaction was, “Great, somebody is interested, so this is not going to be forgotten.”
They were all very supportive of someone interested in this subject, and photographing the present looking for the past. They all agreed that I could use some photographs free of charge. I think that people who lived through this understand very well what I am doing. It really helps that when I go there, I show them photographs I’ve already done, I tell them why I’m interested in this. No one really says no, neither victims nor the people around them.
And what qualities are you looking for in the archival photographs?
I’m looking for the historical, really. Latin America has always had incredible photographers, so I know the quality and the information is going to be there. What happened in this particular place, that has or has not been documented, and how can I show this, that’s what I was after.
Those before-and-after mug shots you found in the Paraguayan archives are very powerful. They remind me a bit of the notorious photographs from the Tuol Sleng torture center that the Khmer Rouge maintained in Cambodia.
I give a lot of play in the book to those pictures. They also reminded me of the Nazi period; they show people with hair and without hair. It made me think of concentration camps. They are all very scared-looking and miserable, they had pretty much all gone through torture. They have 11,000 files there, of each prisoner. My editor in Spain is saying we should go there and do a book, reproduce all 11,000 images to do a little book.
These guys were not amateurs, they knew what they were doing. The fact that it is public and very well organized, with the little resources that Paraguay has, is really amazing. The bureaucrats are always good that way. In 50 years we’ll see all the Homeland Security photos somewhere, and it will be really fascinating when they are declassified.
The Open Society Foundations’ “Moving Walls” Exhibition will open on Wednesday, Jan. 29, at the society’s New York headquarters in Manhattan, and remain on view through Oct. 3.
24. A SKYLARK WHO SANG TRUTH TO POWER IN ARGENTINA (The New York Times)
By Stephen Holden
24 January 2014
Bereaved but resilient, the sound of the monumental Argentine folk singer heard in Rodrigo H. Vila’s biographical documentary ”Mercedes Sosa: The Voice of Latin America” conveys eons of suffering and survival. You don’t have to understand Spanish, Sosa’s primary language, to be moved by an instrument that expressed the sorrows and hopes of the world’s poor and downtrodden with a profound empathy.
Sosa, who died in October 2009 at 74, applied her gift to the politically charged music of the Nueva Canción (New Song) movement in the 1960s that challenged dictatorships in Latin America and Europe. She was truly a voice of the people.
With her Indian features and straight black hair, she had the kind of face that might have been etched on a coin. Although her voice was lower, her purity of tone and intensity of emotion were not unlike those of the young Joan Baez, her closest American counterpart.
Despite the glorious singing heard in archival footage from various periods of her career, the film is frustratingly sketchy. Several audio and television interviews with Sosa are included, but they are haphazardly inserted and hastily introduced. The main interviewer is Sosa’s son, Fabián Matus, who reminisces informally with relatives and friends.
The lack of background information and connective tissue makes the film feel incomplete. The most intimate personal moments deal with Sosa’s depression, which once led her to stop eating.
A chronicle of her fraught relationship with Argentina’s military dictatorship and her painful exile abroad in the ’70s are recalled, often in her own words, but there is no overview.
When Sosa returned to Argentina in 1982, the dictatorship, though still in power, had weakened, and she was welcomed as a national symbol of freedom. But the story, as related in the movie, has little narrative force.
The most consistent outside voice belongs to David Byrne, who talks as if he were trying to explain the political power of folk music to a younger generation: how singing protest songs could get you jailed, tortured or killed.
The Voice of Latin America
Opens on Friday in Manhattan.
Written and directed by Rodrigo H. Vila; narrated by Fabián Matus; directors of photography, Mariano Cúneo, Hans Bonato and Ariel González; edited by Luciano Origlio; music by Diego Vila; released by First Run Features. At the Cinema Village, 22 East 12th Street, Greenwich Village. In English, Spanish, Portuguese and French, with English subtitles. Running time: 1 hour 33 minutes. This film is not rated.