TUESDAY, DECEMBER 8TH PRESS CLIPS
1. NML WON’T PARTICIPATE IN LONDON CASE OVER ARGENTINE BONDS (Bloomberg News)
2. POPE CALLS FOR STABILITY IN ARGENTINA AHEAD OF ELECTION (Reuters News)
3. ANALYSIS – ARGENTINA HOPES BOND SWAP WILL HELP IT BATTLE HOLDOUTS (Reuters News)
4. ANALYSIS – MARKETS QUESTION ARGENTINA BODEN SWAP (Reuters News)
5. INTERVIEW – HIGHLAND CAPITAL MAKES CONCENTRATED BET ON ARGENTINA DEBT (Reuters News)
6. ARGENTINA INFLATION FIGURES: MORE WORK NEEDED, SAYS IMF (Business News Americas)
7. ARGENTINE TAX AUTHORITY INVESTIGATES STEEL FIRM WITH LUXEMBOURG BASE (Reuters News)
8. ARGENTINE VEHICLE SALES SHOW ANOTHER HIGH MONTHLY DECLINE IN NOVEMBER, GOVERNMENT MULLS PROCREAUTO III (IHS Global Insight Daily Analysis)
9. EDUARDO COSTANTINI BRINGS HIS REAL ESTATE EXPERTISE AND LOVE OF ART TO MIAMI (The Miami Herald)
10. ‘WILD TALES’ SPUN FROM CRY OF FRUSTRATION (Daily Variety)
11. WHY ARGENTINA MUST LEARN THE VIRTUES OF ECONOMIC ORTHODOXY (PanAm Post)
12. UK SHIP IN CHILE REVIVES FALKLANDS CONTROVERSY WITH ARGENTINA (PanAm Post)
13. ARGENTINA AMENDS ITS HYDROCARBONS LAW TO BOOST EXPLORATION AND PRODUCTION OF CONVENTIONAL AND UNCONVENTIONAL HYDROCARBONS (jdsupra Online)
14. ANDEAN PUMAS BRING NATIONAL PARK IN ARGENTINA BACK TO LIFE (National Geographic)
1. NML WON’T PARTICIPATE IN LONDON CASE OVER ARGENTINE BONDS (Bloomberg News)
By Bob Van Voris
Dec 8, 2014
A group of hedge funds led by Paul Singer’s NML Capital Ltd. said they won’t participate in a London hearing this month over interest payments on some Argentine bonds, claiming the dispute has already been decided by a judge in New York.
The hedge funds and other creditors seeking $1.7 billion payment on their defaulted Argentine bonds claimed in a letter Dec. 5 that the U.K. proceeding is an improper attempt by holders of euro-denominated bonds, including George Soros’s Quantum Partners and Kyle Bass’s Hayman Capital Management, to relitigate a dispute over 226 million euros ($278 million) in interest payments.
“Our clients do not wish to validate your clients’ tactical and abusive conduct by participating in the English proceedings,” lawyers for the defaulted bondholders said in the letter to Thomas Hibbert, a lawyer for the euro bondholders.
The letter to Hibbert was filed today in Manhattan federal court, where U.S. District Judge Thomas Griesa is overseeing lawsuits involving bonds Argentina repudiated in 2001 when it defaulted on a record $95 billion, roiling international markets and blocking the nation’s access to credit. Argentina exchanged 92 percent of its defaulted bonds for new ones, at a sharp discount, in restructurings in 2005 and 2010.
Restructured Bonds
Griesa ruled in 2012 that Argentina can’t pay holders of the restructured bonds as long as it refuses to pay the $1.7 billion to the NML-led group. Argentina defaulted on its restructured bonds after the U.S. Supreme Court declined to hear the case in June and the nation maintained its refusal to pay.
Groups of restructured bondholders, including the euro bondholders, are seeking court rulings to try to avoid Griesa’s orders blocking the payments. NML and the other hedge funds claimed in their letter that Griesa ruled against the euro bondholders last month and that the U.K. court isn’t a proper forum to reconsider that decision.
The U.K. case is Knighthead Master Fund LP & Ors v. The Bank of New York Mellon & Anr, High Court of Justice, Chancery Division: HC14B03236. The U.S. case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).
2. POPE CALLS FOR STABILITY IN ARGENTINA AHEAD OF ELECTION (Reuters News)
7 December 2014
BUENOS AIRES (Reuters) – Argentines across the political spectrum should work to maintain stability ahead of October’s presidential election, Pope Francis said in an interview published on Sunday by La Nacion, one of the South American country’s top newspapers.
Two-term President Cristina Fernandez’s government is heading into its final year with public discontent rising over heavy-handed currency controls and 40 percent inflation that have hobbled Latin America’s third biggest economy.
As Argentina heads into a steamy Southern Hemisphere summer, there is fear of a repeat of the violent protests over electricity shortages that shook Buenos Aires a year earlier.
“Argentina needs to get to the end of this administration in peace. Breaking with the democratic, constitutional system at this moment would be a mistake. Everybody should work together in this and then elect a new government,” Francis said in what the paper called his first interview with Latin American media.
Inflation of more than 300 percent helped set the stage for a coup in 1976 that ushered in seven years of military dictatorship in Argentina.
To avoid the appearance of partisanship, Pope Francis, who is Argentine, said he would hold no more private meetings with Argentine politicians until after the October 2015 election. The interview was accompanied by pictures of the pope in one-on-one meetings with Fernandez and several possible opposition candidates.
He also told La Nation he plans his first trip to Argentina as pope in 2016.
3. ANALYSIS – ARGENTINA HOPES BOND SWAP WILL HELP IT BATTLE HOLDOUTS (Reuters News)
By Richard Lough
5 December 2014
BUENOS AIRES, Dec 5 (Reuters) – Argentina’s offer to swap or pay early on a dollar-denominated bond due in 2015, if successful, will ease pressure on its foreign reserves and may embolden the government in its fight against U.S. hedge funds suing over unpaid debt.
Economy Minister Axel Kicillof said on Thursday the government planned to issue new dollar-denominated Bonar24 notes worth up $3 billion. It would be the first foreign currency debt sale by Argentina, Latin America’s No. 3 economy, since it defaulted in July.
Kicillof said the offer indicated Argentina’s willingness to repay its debt and should quell speculation that the government will struggle to meet its obligations because of low reserves.
However, the measures may signal Argentina’s reluctance to reach an agreement with the small group of hedge funds ahead of next year’s October 25 presidential election.
“By starting the process of refinancing the Boden15 the government is alleviating pressure (on foreign reserves) and reducing the urgency of finding a quick solution to the holdout issue,” said Argentine economist Miguel Kiguel. Boden15 refers to the notes that Argentina hopes to replace.
President Cristina Fernandez’s government is adamant it will not offer the hedge funds better terms than received by creditors that accepted large writedowns in restructurings carried out in 2005 and 2010. The holdout hedge funds hold debt that Argentina defaulted on in 2002,
Whether the tough talking Fernandez will be forced back to the negotiating table with the holdout investors will almost certainly be determined by how poor a state the recession-hit economy is in.
If the new Bonar24 bonds are absorbed by the market, the resulting inflow of dollars would ease tensions in the currency market and significantly reduce Argentina’s debt obligations in an election year.
“Then incentives to negotiate go down,” said Alejo Costa of Buenos Aires-based investment bank Puente. “The government can be a little more aggressive in terms of the hair cut they demand” from creditors.
Kicillof said the government would owe $6.7 billion to holders of the Boden15 if it paid out on the Oct. 3, 2015 maturity date, a significant strain on reserves now at $28.9 billion.
MIXED REACTION
Argentina will pay 97 cents on the dollar to investors that come forward between Dec. 10 and Dec. 12. That compares with the 107 cents it would pay when the Boden15s mature. Earlier on Friday the Boden15 traded at 98.50, having climbed about 0.75 cent after Kicillof’s announcement.
Costa said it was likely the government had done its homework and was confident the market would take up the $3 billion worth of new bonds, which would mature in 2024. The exercise has though drawn a mixed response from market participants.
Alejo Czerwonko, emerging markets economist at UBS Wealth Management, said the offer would only appeal to large investors wanting to reduce their exposure to Argentina or make a wager on a strong economic recovery after the 2015 election.
“They’ve given investors the option to get out or double their bets,” Czerwonko said.
He said it was unclear how much appetite there would be for the swap, with investors given little time to take a position ahead of the Dec. 10-12 window.
“And they’re not hiring an international bank for this project, which reduces marketability,” Czerwonko said.
Pricing of the swap offer may lessen demand as well.
At Friday’s prices, investors would be giving up more than a dollar on the secondary market price to obtain repayment at $97 and about $0.50 for swapping Boden15 bonds for Bonar24s, said Rune Hejrskov, an emerging markets portfolio manager at Jyske Invest.
“It can still change. The window is Dec. 10-12, but right now it doesn’t look like there will be much participation,” said Hejrskov.
4. ANALYSIS – MARKETS QUESTION ARGENTINA BODEN SWAP (Reuters News)
By Paul Kilby
5 December 2014
NEW YORK, Dec 5 (IFR) – News that Argentina is to carry out a liability management exercise to repurchase Boden bonds drew a mixed response this week as market participants questioned the economics of the trade.
The country is looking to reduce roll-over risk ahead of presidential elections next year and possibly to strengthen its hand in any negotiations with holdout investors, say analysts.
The fact that Argentina is addressing a looming US$6bn-plus payment on its Boden 2015s cheered those concerned about the sovereign’s longer-term ability to service debt.
The trade, which will take place between December 10 and 12, is also well timed given recent government windfalls from the sale of 3G and 4G airwave spectrums, a currency swap with China, a boost from export earnings and the sale of US dollar-linked bonds in the local market.
“These guys feel more comfortable because the reserve levels have stabilised,” said a US-based investor holding Argentina debt.
Michael Roche, emerging markets fixed-income analyst at the Seaport Group, had a similar take. “The reserves are in place, so it makes sense to conduct some type of liability management,” he said. “If they get half retired now, that will lessen the burden of making the redemption in October next year.”
Prices on the Boden 2015s jumped about 3/4 of a cent on Thursday morning to 98.50 after Economy Minister Axel Kiciloff laid out plans to offer holders the opportunity to cash in at 97 cents on the dollar, or swap them into Bonar 8.75% 2024s at a price of 99.70 for each US$100 of the 2015s, plus accrued interest.
“It does show willingness to pay the bond, and that should reduce refinancing risks,” said Siobhan Morden, head LatAm strategist at Jefferies. “That is why I think it went higher.”
Argentina also intends to tap the Bonar 2024s for up to US$3bn at US$96.20, essentially flat to where those securities were trading early on Thursday.
These announcements, along with the sovereign’s commitment to pay interest and principal to holders of the 2015s wishing to cash in at US$107 at the maturity date of October 3, were largely the catalyst for the instruments’ rally.
“The government is being proactive in light of the fact that they have significant maturities next year,” said Jorge Piedrahita, CEO at broker Torino Capital.
Yet while the announcement increased comfort levels, several analysts questioned the economics of a trade that could just as easily be executed in the secondary market and with a better return. Execution may also prove troublesome without the support of any lead banks.
“With the 2015s trading at 98.50 this morning, it makes little sense to cash in at 97. Nor does swapping the bond into longer-dated 2024s, even with accrued interest – at least at the price provided by the government,” said Piedrahita. “You are better off selling to the market.”
Others argued, however, that the exercise may appeal to investors with large positions either wanting to reduce Argentina exposure or double up on the assumption that the credit story will improve after the election.
“The plan fits both profiles. By going into the swap you are getting more Argentine risk by increasing your duration,” said Alejo Czerwonko, emerging markets economist at the chief investment office at UBS Wealth Management.
“And there may be large investors unable to get out of that position without a firm cash offer – at least without moving the market.”
REDUCE EXPOSURE?
International accounts will have to decide if they wish to reduce Argentina exposure in an election year – and while it is unclear if the government will engage with holdout investors.
“They may be able to find some compliant holders who will use this opportunity to have a dollar in their hands now as opposed to an uncertain dollar later,” said Roche.
With the expiration this month of the so-called RUFO clause that prohibits Argentina from paying holdout investors better terms than it pays holders of restructured debt, it has been hoped that the government will be more willing to settle with litigant parties, which are led by NML Capital and Aurelius Capital Management.
But such an outcome is uncertain. Jefferies’ Morden said the liability management transaction shows there was no urgency to cure the default with holdouts and gain access to the international capital markets. “Debt liability substitutes the need for outright financing,” she said.
Yet the government may just be working to negotiate from a position of strength. “They don’t want to negotiate with a gun to their heads, so it makes sense to do something like this,” said a New York-based hedge fund manager.
5. INTERVIEW – HIGHLAND CAPITAL MAKES CONCENTRATED BET ON ARGENTINA DEBT (Reuters News)
By Daniel Bases
5 December 2014
NEW YORK, Dec 4 (Reuters) – Highland Capital Management, a relative newcomer to Argentina’s sovereign debt crisis, placed a hefty bet on a resolution early in the new year by putting more than a quarter of its Global Allocation fund into the country’s bonds.
The fund’s concentration in Argentine debt is the largest, by far, compared with any other single U.S.-domiciled fund investing in the Latin American nation’s restructured bonds, according to data from Lipper, a Thomson Reuters service.
James Dondero, the founder of the Dallas-based investment firm with $20 billion under management, started buying Argentina’s dollar-denominated restructured debt earlier this year, enticed by hefty yields of more than 8 percent.
Argentina earlier this year defaulted on its restructured discount and par bonds for a second time after a judge in New York blocked payment to investors over a legal battle with a small group of U.S. hedge funds suing over nonpayment.
The Highland Global Allocation fund has $1.1 billion in assets, of which $292 million, or about 27 percent, is in U.S. dollar-denominated Argentine sovereign bonds, the firm said.
According to Lipper, none of the 151 funds holding similar debt allocates more than 5 percent. Highland’s Global Allocation A-shares fund is up over 9 percent in the year to date. When looking at the institutional shares, without the fully loaded sales charge, the fund is up 15.26 percent, for the year through Nov. 30, according to Morningstar.
Highland’s other funds hold another $96 million in Argentine debt for a total of $388 million in the fund family.
According to Dondero, a deteriorating economy combined with a weakening currency and rising inflation will force Argentina’s President Cristina Fernandez to agree to terms with holdouts after Dec. 31 in order to reopen its access to international capital markets.
“Things are getting worse. The recession is getting worse … To avoid a currency crisis and get access to capital, I think that is one of the main reasons why she would move sooner rather than later on the debt situation,” said Dondero, who spoke with Reuters on Thursday after returning from a visit to Buenos Aires.
Argentina’s official exchange rate has weakened 30.6 percent so far this year to 8.55 pesos per U.S. dollar. By contrast, the unofficial, or “black market” rate, is about 12.92 per dollar.
The government has been fighting a losing legal battle with holdout creditors who declined to accept onerous restructuring terms after a then-historic default in early 2002 on roughly $100 billion in debt. Efforts to get the two sides to sit down and negotiate a settlement have been halting at best, with last-minute efforts in July failing to stave off a second default.
RUFO DEADLINE
After Dec. 31, the government will be free of the so-called Rights Upon Future Offers clause, known as RUFO, in its restructured bonds. RUFO forbids it from negotiating terms better than those accepted by the 93 percent of bondholders who settled with Buenos Aires in 2005 and 2010.
“I don’t want to say a majority of the people think it happens in the first quarter because that’s not true. But I would say 100 percent of the people are certain it happens as soon as the election is over next October,” Dondero said.
As he sees it, the bonds are accruing interest payments and will pop higher in price once a deal is agreed as this opens a floodgate of potential new money for an ailing, but commodities-rich, economy.
Since the default on the 2033 and 2038 bonds earlier this year, several firms have tried to organize themselves into groups that control enough of the outstanding issues to demand acceleration, a technical term for demanding immediate full payment on their investment.
But no group has so far come forward to announce they have enough debt to demand acceleration.
“I don’t know what (acceleration) gets you. I think you end up trying to grab assets that you can’t get and you end up spending money on legal fees,” Dondero said.
With a year left in office, dwindling foreign currency reserves and holdout investors led by Paul Singer’s Elliott Management and Mark Brodsky’s Aurelius Capital Management fighting their way to court victories, Argentina has scrambled to avoid paying.
“She’s crying on TV. She’s tried everything else,” Dondero said, referring to Fernandez. “She doesn’t have any other cards to play. All of her countrymen know it and currency crises tend to topple governments more than anything else.”
6. ARGENTINA INFLATION FIGURES: MORE WORK NEEDED, SAYS IMF (Business News Americas)
5 December 2014
Argentina’s government has “more to do” on the controversial issue of its inflation figures, IMF managing director Christine Lagarde told press at a regional event in Chile.
Answering a question from an Argentine reporter on the big difference between the official inflation figures and those produced by private sector experts, Lagarde said Argentina had “made lots of progress” but work on the issue was not finished yet.
The nationwide inflation figures published monthly by the country’s statistics agency Indec are also significantly lower than those published by Buenos Aires, the nation’s capital and largest city.
The IMF board will make another assessment of the Argentine inflation issue at a meeting in December, she said, predicting that more work will still be necessary after that meeting.
Lagarde said she hoped that the long-running issue could be finally resolved at a board meeting in February.
The IMF slapped Argentina with a declaration of censure in February 2013 due to the country’s lack of progress in improving the quality of its official inflation and GDP growth figures.
In February this year, Argentina launched a new inflation measure in an attempt to placate IMF criticism, and the gap with the private sector inflation figures have narrowed since then but the difference is still significant.
7. ARGENTINE TAX AUTHORITY INVESTIGATES STEEL FIRM WITH LUXEMBOURG BASE (Reuters News)
6 December 2014
BUENOS AIRES, Dec 6 (Reuters) – Argentina is investigating its biggest steel maker for allegedly avoiding taxes by headquartering its parent company in Luxembourg, the chief of the tax authority, AFIP, said on Saturday.
Ricardo Echegaray did not mention the company by name in a televised interview but said it bases its official business in Luxembourg to skip paying corporate taxes in Buenos Aires.
Argentina’s Techint Group, with headquarters in Luxembourg, owns the world’s biggest producer of steel pipes for the energy industry, Tenaris.
“The main steel company in Argentina has set up its holding company in Luxembourg,” Echegaray said on local channel America.
“The monies that this Argentine company, which develops its activities from Argentina, makes … remain hidden and we don’t tax them,” he added.
Techint was not available for immediate comment.
On Nov. 27, AFIP alleged that HSBC was helping more than 4,000 clients evade taxes by stashing their money in secret Swiss bank accounts. HSBCArgentina rejected the charges.
On Nov. 2 the tax authority said it had suspended Procter & Gamble’s local operations after accusing it of tax fraud. AFIP said then that it had to put an end to “these tricks used by international companies” to avoid tax.
P&G said at the time it did not pursue aggressive tax practices and was working to fully understand the allegations and resolve them.
8. ARGENTINE VEHICLE SALES SHOW ANOTHER HIGH MONTHLY DECLINE IN NOVEMBER, GOVERNMENT MULLS PROCREAUTO III (IHS Global Insight Daily Analysis)
By Stephanie Brinley
5 December 2014
Argentina’s auto sector failed to achieve month-on-month sales gains in November, though exports did pick up. Sales in November dropped 45.3% year on year (y/y), even larger than October’s fall, while production fell 12.3% y/y, a less steep fall than in the previous month.
IHS Automotive perspective
Significance
Argentina’s year-on-year (y/y) declines continued in November, according to manufacturers’ association ADEFA. For the year-to-date (ytd), production, exports, and sales declined 22.7% y/y, 19.7% y/y, and 35.9% y/y respectively. In November, sales for the month dropped 45.3% y/y, one of the largest declines in 2014.
Implications
November’s sales do not indicate that the extension of the government’s ProCreAuto financing programme in September has had the desired effect, though it could be preventing sales from seeing an even sharper decline. Even so, Argentina is considering creating a third version of the programme, which would take over in January 2015.
Outlook
The bright spots in Argentina’s November sales results are that the declines were not as dramatic as in previous months, with exports even picking up somewhat, despite the month having fewer business days than other months. The new taxation scheme, along with an Argentine peso conversion rate of ARS9.7:USD1.0, will force volumes down to 653,885 units in 2014, down 27.4% compared with the same period of 2013. However, despite the financing programme’s extension, sales fell further in November than in October.
Argentina’s automotive industry continued its year-on-year (y/y) sales decline in November, amid ongoing depreciation of the peso and an unstable economic and political situation. Wholesale vehicle shipments declined y/y to 41,380 units in November, according to the latest data released by the Association of Automobile Manufacturers (Asociación de Fábricas de Automotores: ADEFA), including medium and heavy commercial vehicles. Of the total, light-vehicle (LV) sales were 39,161 units in November, including passenger-car sales of 29,590 units, or 75.3% of LV sales, reaching 73.1% in the year to date (ytd). In October, passenger cars’ share of the LV market was 65.6%, while during 2014 the share has varied from 73.4% in January to 65.8% in April, 72.6% in June, and 70% in September.
In terms of ytd group sales, Volkswagen (VW) eclipsed its competitors with sales of 90,192 units through the first 11 months of 2014, although this was a 43.4% y/y decline. With sales of 85,762 units (down 18.4% y/y), Ford was placed second and increased its lead over Fiat, which saw sales of 79,457 units (down 22.3% y/y). In fourth place was PSA (including both Peugeot and Citroën badged products), even as sales declined 39.6% y/y to 79,459 units. PSA remains ahead of General Motors (GM), which sold 69,496 units through the first 11 months, down 44.8% y/y.
Argentine total vehicle production, sales, and exports*
November 2014 November 2013 Change % Ytd 2014 Ytd 2013 Change %
Production 54,557 62,186 – 12.3 576,693 746,085 – 22.7
Exports 39,108 33,733 15.9 28,800 409,690 – 19.7
Sales 41,380 75,724 45.3 561,052 875,400 -35.9
*Includes light- and heavy-duty vehicles, due to ADEFA volume reporting limitations.
For more accurate light-vehicle comparisons, see IHS Automotive’s Argentine Monthly Market Report.Argentina’s exports increased 15.9% y/y in November, compared with double-digit y/y declines as recently as October. For the year to date, total vehicle exports were down 19.7% y/y to 328,000 units in November. Export volumes continued to be affected by trade issues and weak demand in Brazil, a major trade partner. Although a new trade agreement between Argentina and Brazil came into effect in July and will last until July 2015, the constraints of a weak market in Brazil seem to be keeping exports back. Even with the temporary trade resolution, exports to Brazil as a percentage of overall overseas shipments has consistently declined since a level of 87.5% in August, falling to 85.8% in November. In April, Brazil accounted for 89.1% of total Argentine exports, indicating the gain in exports did not necessarily go to Brazil, but was distributed to other trading partners. With exports still down for the year and domestic sales still falling dramatically, production in November dropped 12.3% y/y. This was an improvement, however, compared with October’s 19.7% y/y decline and August’s 34.5% y/y decline. Through the first 11 months of 2014, production was down 22.7% y/y.
Outlook and implications
Sales in Argentina tumbled 35.9% y/y over the first 11 months of 2014 to 561,052 units. However, demand in January and February fared better than expected, because until the third week of February consumers were unaffected by a luxury tax the government implemented at the beginning of the year. Our forecast is currently for sales of 653,885 units in 2014, a 27.4% drop from 2013. While we forecasted that the extension of ProCreAuto would ease the declines and boosted the forecast by 18,000 units based on expectations for the fourth quarter, November’s 45% y/y decline was sharper than October’s 41.5% y/y drop. Further, the Argentine peso’s exchange rate of ARS9.0:USD1.0 strains consumers by making cars even more expensive. The effects of depreciation will last beyond the short term and is likely to hurt sales through the first half of 2016.
Despite unclear results from the first two phases of the ProCreAuto programme, the Argentine dealers’ association, ACARA, and Industry Minister Debora Giorgi are pushing for a third phase to start in January, requesting that it be expanded to include more models. Reports indicate a meeting on the issue will be held soon. One criticism of the programme is that the vehicles eligible have been in short supply, so limiting the impact of the scheme. However, some Argentine government officials have also criticised the industry, claiming that the auto industry is “boycotting” the financing scheme by increasing prices of vehicles.
November’s sales results came in lower than October’s, as well as being notably down on a year-on-year basis (see Argentina: 9 October 2014: ). If the programme’s extension to a second stage in September is having a positive impact, it was not reflected in October’s results (see Argentina: 6 November 2014: ) or November’s sales, with both months showing consecutive as well as sequential declines. It may prove that the end of the first version of the programme pushed up activity in September. The financing programme originally was due to run out on 24 September but ProCreAutoII will now continue to January 2015 (see Argentina: 29 September 2014: ProCreAuto II financing programme kicks off, runs to January 2015 – reports).
The Argentine government has introduced higher taxes on vehicles priced over ARS170,000 (USD25,000) to control imports. An additional 30% is levied on vehicles costing ARS170,000–210,000 and 50% on vehicles priced above ARS210,000. This is having a major impact on vehicle demand, primarily in the C, D, and E segments. We forecast the E segment’s demand will drop 40–45%, followed by 30–40% sales declines in the C and D segments. The taxing scheme, along with a peso conversion rate of ARS9:USD1, will force volumes down to about 630,000 units in 2014. This is assuming the peso does not depreciate past ARS10:USD1.
Although a trade agreement has been settled between Brazil and Argentina, and is set to last through July 2015, it appears not to have had a positive impact on Argentina’s export results, as evidenced by the declining share of vehicles exported to the neighbouring country, in combination with the overall export declines, in part because the Brazilian market is also struggling. The temporary resolution is against a backdrop of sales declining in both markets and this could slow the positive impact of the resumed trade. However, the increase in November’s exports might indicate Argentina is being more proactive about expanding export opportunities.
Argentina’s medium- and long-term outlook for LV demand is complicated by the country’s political situation, which has turned from stable to unsettled. Economically, increasing exports of soy to China provide a driver for medium- to long-term growth. The biggest risk comes from the political sphere, with the Argentine government choosing not to face up to inflation, creating uncertainty with regard to the vehicle outlook. The currency has also been depreciating continually, which makes imported cars more expensive. As imports make up 60% of the Argentine vehicle market, this hurts vehicle demand. This political uncertainty causes us to forecast a compound annual growth rate of 1.5% through 2021, and it is hard to envisage the Argentine market breaking the 2013 high of 900,000 units any time soon. Vehicle prices went up an average of 60% for cars priced above ARS210,000. The downward spiral that began in 2014 will spill into the next 24−36 months and, as a result, we do not see growth reigniting in the market until 2017 for production, exports, or sales.
9. EDUARDO COSTANTINI BRINGS HIS REAL ESTATE EXPERTISE AND LOVE OF ART TO MIAMI (The Miami Herald)
By Ina Paiva Cordle
7 December 2014
In Buenos Aires, Eduardo Costantini has built a community from swampland and founded a contemporary art museum, MALBA. Now, the successful Argentine real estate developer and art aficionado has zeroed in on luxury condominium projects in South Florida.
Dubbed the “Guru” on the cover of Forbes in Argentina in 2013 for his ability to predict art and financial trends, Costantini is the force behind Oceana Key Biscayne and Oceana Bal Harbour — where units sell for $ million to $30 million.
As founder of the firm Consultatio Real Estate in Buenos Aires, Costantini’s residential and commercial developments have ranged from master-planned cities to high-end residential towers and luxury office buildings, with a total value of more than $3 billion.
Costantini has a home in Miami, which he visits several times a year. We reached him in Buenos Aires by telephone, and then emailed him these questions, to which he responded.
Q. Please tell me about your experience growing up in Argentina and how you first got involved in business.
A. I grew up in a house with 13 brothers and sisters (and a cousin) in a town just outside Buenos Aires. My father held three different jobs and was always a strong supporter of education. I completed my undergraduate degree in economics in Argentina and when I was 28, I saved enough money to go to London to achieve a master’s degree in quantitative economics at the University of East Anglia, England.
When I returned to Argentina, I went into the banking field and became a stockbroker. Later on, I invested in and acquired an important equity holding in a prestigious bank, BBVA Banco Frances, of which I became the vice chairman.
Q. How did you then turn to real estate and what was your first real estate investment in Argentina?
A. I was always interested in the real estate market from a young age, but my connection with it was always as an investor. Then, in the 1970’s I started playing with the idea of developing instead of investing, because I like the idea of creating and bringing value to the world around me. My first real estate investment in Argentina was a plot of land I purchased in 1976, which I purchased for $240,000. In just a few months, I was able to sell the same plot for $1 million.
Q. Please tell me more about your projects in Argentina.
A. To date I have developed over $3 billion in residential and commercial real estate projects in Argentina, including master-planned cities, high-end residential towers and luxury office buildings.
I am currently developing what will be the largest per-square-foot office building in Argentina, Catalinas Norte. The glass office building is 33 floors, 800,000 square feet and includes an underground parking garage.
My other projects in Argentina include twin luxury office towers in the Catalinas Norte office park, three residential projects and two master-planned communities.
Q. Please tell me about the master planned communities you are developing.
A. My largest project to date has been Nordelta in Buenos Aires, a city within a city, built from swamp land. After 15 years, Nordelta is Argentina’s first “city-ville” and has over 30,000 residents. The community has more than 10 neighborhoods, five schools, a medical center, shopping malls, five cinemas, four banks, 20 restaurants, sports clubs, and five-star hotels to name a few.
In 2010, I started developing a second master-planned community north of Nordelta called Puertos de Lago that will be 2,700 acres. The project will feature a mix of lots, townhouses, condominiums and offices. We are also building out schools, health care services, a shopping center, restaurants, marinas, golf courses, a lake and more. So far we have sold 1,500 units for 6,000 people and have already completed the first two schools.
These communities are much more than construction projects to me; I always think of each one as a social proposition. I think about how these projects serve the best interest of society as a whole. What is the best solution for the community?
The quality of the site is most important, as well as its sustainability. In the end, a project is a social