3. THE END OF POPULISM (The Economist)


5. ARGENTINA POLITICS: NEW CABINET TAKES SHAPE (Economist Intelligence Unit – ViewsWire)









By Taos Turner

Nov 30, 2015

Isela Costantini accepted offer from Argentine President-elect Mauricio Macri, sources say

BUENOS AIRES—Argentine President-elect Mauricio Macri on Monday tapped the regional head of General Motors Co. to lead state-run airline Aerolineas Argentinas, according to people familiar with the plan.

Mr. Macri hasn’t yet announced the decision, but two people familiar with Isela Costantini’s plans confirmed she was offered the job and has accepted it. Ms. Costantini had spent about 17 years at the auto maker to become the president of GM Argentina, Paraguay and Uruguay.

Last week, Mr. Macri chose Juan José Aranguren, the former president of the Argentine unit of Royal Dutch Shell PLC, to become his energy minister.

Ms. Costantini, 44 years old, faces a tall task of turning the cash-strapped carrier into a profitable business. The flagship airline, which Argentina expropriated from Spain’s Grupo Marsans in 2008, lost around $87 million in the first half of this year, according to the company’s website.

Argentine President Cristina Kirchner has often called the nationalization of Aerolineas one of her hallmark achievements, and many Argentines favored her government’s takeover of the company. Mr. Macri has pledged to keep the airline in public hands, but to run it more efficiently.

In recent years, the airline has come under scrutiny for doing business with Mrs. Kirchner’s hotel business in the province of Santa Cruz, raising questions about a possible conflict of interest. Airline officials have previously declined to comment on the issue.

A broad-shouldered swimmer who grew up in Brazil and is fluent in English, Portuguese and Spanish, Ms. Costantini rose from the ranks at GM’s regional operations to become its president. Widely respected for her negotiating skills, she also became the head of Argentina’s automotive industry chamber and developed ties with Argentine politicians, including Mr. Macri.

Ms. Costantini’s experience dealing with powerful auto-industry unions will prove critical to her work at Aerolineas, where an unwieldy hodgepodge of six unions representing pilots, mechanics and flight attendants, among other workers, can wreak havoc by delaying flights or causing shutdowns.

“If you want to play in Argentina, you have to understand how to build relationships with the unions and work together with them,” Ms. Costantini said in a recent interview at GM’s headquarters here, before she agreed to take over the company. “That’s the only recipe for success: not to fight but to work together.”

Ms. Costantini will replace Aerolineas’s current President Mariano Recalde, who was chosen for the job in part because of his family’s ties to the labor industry. Mr. Recalde is a member of La Cámpora, a youth political movement loyal to departing President Kirchner. His father was a legal adviser to Argentina’s leading labor group, the General Work Confederation, or CGT, which represents the country’s biggest unions.

Franco Rinaldi, who wrote a book on Aerolineas, said Ms. Costantini may have a tough time turning the company around.

“Aerolineas is not run like a company. Companies focus on things like supply and demand, profit and losses,” said Mr. Rinaldi. “Nobody at Aerolineas thinks about that.”

Mr. Rinaldi said about 30% of the carrier’s workforce is unnecessary, but that it would be very hard to let those employees go.

“Unions in Argentina, especially airline unions, are too strong. And that’s a problem. It will be hard to shrink that labor force,” he said.

Under Mr. Recalde’s leadership, one of the airline’s goals was to offer travel opportunities to Argentines living in remote areas, even when it proved unprofitable. Doing so, he said, helps boost regional economic growth and fosters tourism.


By Dan Bogler

November 30, 2015

The election victory is positive for markets but he will face significant challenges

Investors in Argentina are placing a lot of faith in the ability of its president-elect to turn the country from a high-yielding basket case back into the thriving economy it once was, rich both in physical and human resources.

The Merval stock index has jumped 40 per cent since the start of October, when opinion polls kindled the hope that Mauricio Macri could become the country’s first centre-right president since 1999. The rally in bonds has been even more extreme, with 10-year yields shrinking from 9 per cent to 2.25 per cent over the same period (see charts).

Mr Macri has indeed promised much: a rapid and wide-ranging burst of reforms designed to dismantle the thicket of socialist controls that has sprung up during 12 years of Kirchner rule, first under the late Néstor Kirchner and then under his wife Cristina Fernández de Kirchner, who steps down on December 10.

The incoming president’s first step will be to form an “economic” inner cabinet led by his new finance minister, the well-respected Alfonso Prat-Gay, and also consisting of the energy, agriculture, production, infrastructure, labour and transportation ministers to drive through the changes.

Then, within days of being sworn in, the new administration plans to abolish administrative controls and most of the taxes on exports of agricultural products, including grains, beef and, especially, soyabeans. The hope is that this will stimulate production, which has long been stymied by the Kirchners’ arbitrary application of these rules.

The new government will also have to raise electricity and gas prices in order to reduce a subsidy bill behind a crippling fiscal deficit close to 7 per cent of GDP. While vital to stabilising the public finances, such price increases will only worsen inflation in the near term — and since bringing Argentina’s 20 per cent-plus annual price growth under control is another key campaign promise, it is not clear yet how quickly and drastically utility tariffs can be raised.

Nor is it clear how rapidly team Macri can implement the real heart of its agenda: the removal of foreign-exchange controls and a devaluation of the peso. Both are critical to rekindling exports and investment (foreign and domestic) to return the stagnant economy to growth. According to Medley Global Advisors, a macro research service owned by the FT, the intention is to start dismantling these controls within a month of taking office but Mr Macri and his advisers are aware they may have to do so in stages.

Further fuelling inflation is one concern. An even greater one is that the pent-up demand for dollars could overwhelm the depleted international reserves of the Argentine central bank. Until Mr Macri can seize control of the bank and replace a hostile governor and board, which could take some weeks, he will not know how much is left in the kitty — rumours flying around Buenos Aires suggest liquid reserves may be down to a mere $1bn.


Of course, the new government will also announce a monetary and fiscal programme to anchor expectations as part of its reform package. Nevertheless, without the firepower to intervene in the currency market, its only tool to control a potential currency overshoot will be interest rates — and being forced to raise them sharply would make the bid to restart growth that much harder.

In addition, Argentina’s racing inflation is due to a collapse in the independence of the central bank, which has been forced to print money to finance a fiscal deficit estimated at 7 per cent of gross domestic product.

Mr Macri will try to use the positive expectations he has engendered in financial markets to obtain private financing in order to strengthen reserves and to cushion the impact of the currency, fiscal and monetary adjustments he will be forced to make. As part of that, he may well attempt a quick settlement with Argentina’s “holdout” bond creditors, which would allow the sovereign to return to international capital markets.


That raises the next challenge, however. Any deal with the holdouts will require parliamentary approval and the new president’s Cambiemos coalition does not have a majority in either chamber of congress.

Nor is his mandate that strong, following a relatively narrow run-off victory — he beat the Peronist candidate Daniel Scioli by a 2.8 per cent margin, much less than the polls had predicted. That means Mr Macri’s political legitimacy could potentially be questioned if matters turn difficult. At the very least, he will have to build coalitions and win allies, which will take time and could dilute his reform efforts.

Mr Macri believes he was born for these challenges and that his experience turning around the fortunes of Boca Juniors, Argentina’s most famous football club, has prepared him for managing conflicting demands. One can only hope he is right, because given Argentina’s economic fragility he cannot afford to make mistakes.

3. THE END OF POPULISM (The Economist)

Nov 28th 2015

Mauricio Macri’s victory could transform his country and the region

CAR horns blared. Firecrackers lit up the sky. Yells of “Vamos!” rang out among Buenos Aires’s Parisian-style apartment buildings. The revellers were acting like football fans, but the win they were cheering on November 22nd was political. It was the upset victory of Mauricio Macri, the mayor of the city of Buenos Aires, in a run-off election to become Argentina’s next president. Even more than most presidential transitions, Mr Macri’s triumph will begin a new era for the country, and perhaps for South America as a whole.

He takes over from Cristina Fernández de Kirchner, who together with her late husband, Néstor Kirchner, governed for 12 years with a defiant populism that distorted the economy, made enemies at home and abroad and undermined institutions. Ms Fernández leaves her successor with an economy that has barely grown for four years, dwindling foreign-exchange reserves, inflation of around 25% and a budget deficit of more than 6% of GDP.

Mr Macri’s defeated rival, Daniel Scioli, shared Ms Fernández’s Peronist pedigree and ran as her heir. But even he would have reversed many of her policies; the parlous state of the economy would have left him with little choice. With Mr Macri, the first elected president in nearly a century who is neither a Peronist nor affiliated with the movement’s weaker rival, the Radical Civic Union, reform is likely to be faster and more profound. He campaigned under the banner of Cambiemos (“Let’s Change”), a coalition of mainly centrist non-Peronist parties. After a dozen years of kirchnerismo, he promises a return to economic sanity, diplomatic prudence and a more accountable democracy.

The son of an Italian-born businessman who grew rich on government connections, Mr Macri is an unlikely president, aloof and sometimes almost inarticulate. But he has shown himself to be a good manager and a dogged.

campaigner. Politically, he is a self-made man. He first came to public notice as a successful president of Boca Juniors, the country’s most popular football club. In a decade he has built a party—Republican Proposal—from scratch.

Technocrats to the rescue

Change will be evident as soon as Mr Macri takes office on December 10th, starting with a new way of governing. He is a more collegial executive than Ms Fernández, although he lacks her charisma. At his post-election press conference—itself a sign of greater openness—he suggested he would move quickly to restore professionalism to institutions that the Kirchners had tried to bring to heel. He will shake up the statistics agency, which has been churning out misleading reports on inflation and none on poverty. He plans to replace the governor of the Central Bank, who has been obediently printing money to finance the budget deficit.

Mr Macri has said that he will disperse power away from Ms Fernandez’s super-ministries of economy and production. He is choosing well-regarded technocrats to fill the top economic jobs. Alfonso Prat-Gay, a former Central Bank governor, is to be the head of a still-weighty finance ministry. Federico Sturzenegger, a congressman and economist, will take charge of the Central Bank. Mr Macri’s choice for education, Esteban Bullrich, commands respect for having reduced the number of teachers’ strikes in Buenos Aires. All the city’s teachers have his mobile-phone number.

To reorient Argentina’s diplomacy, Mr Macri has named Susana Malcorra, a little-known UN official, as foreign minister. The new president wants to repair relations with the United States and European countries, which Ms Fernández snubbed in favour of friendship with authoritarian regimes such as those of Russia, Iran and China. Mercosur, a six-nation trade grouping including Brazil, is likely to be more open to agreements with other trade partners than it has been under the Kirchners. Mr Macri will be a bolder advocate of democracy in South America than his fellow leaders are: he has already said that Venezuela should be suspended from Mercosur if it fails to conduct fair parliamentary elections on December 6th and to release opposition leaders from jail.

His most urgent task is to fix the economy. Ms Fernández kept it limping along by means of “patches”, quick fixes such as a currency swap with China to replenish foreign-exchange reserves. These have been depleted by debt payments and by spending to support an overvalued exchange rate, which gives Argentines an illusion of prosperity but throttles exports. Liquid reserves are probably much lower than the $26 billion the government reports. Last week an oil tanker was left tossing for days off Bahia Blanca because the government could not pay for the cargo. “It’s extraordinary that the economy is on the verge of crisis and people don’t feel it,” says Miguel Kiguel, an economist.

Mr Macri faces three big and interlinked tasks: removing economic distortions, balancing fiscal accounts and restoring normal financial relations with the outside world. The immediate priorities are to boost the Central Bank’s reserves, unify the exchange rate and lift exchange controls. An adviser to the new president says that lifting exchange controls and removing export taxes will encourage farmers to sell crops they have hoarded; this could bring in up to $9 billion to the Central Bank, says Luis Miguel Etchevehere of the Rural Society, a farmers’ lobby (see Bello).

Rather than turn to the IMF for support, a political non-starter, the new team will look for other emergency sources of foreign funds. They are expected to try to end Argentina’s isolation from international credit markets by seeking an agreement with bondholders who pushed the country into default last year.

“The challenge is getting the sequencing right,” the adviser admits. Devaluing and freeing the peso without reserves risks an inflationary plunge in its value. But the key to raising reserves is a more realistic exchange rate. In victory Mr Macri was more cautious than as a candidate. Exchange controls will be lifted “once the situation is normalised”, he said.

Raising funds abroad would also give the new government more time to close the fiscal deficit. It will be lumbered with a swollen bureaucracy and indexed spending on benefits which will take time to reform. It can move more quickly to cut energy and transport subsidies which go to rich and poor alike: on average, Argentines pay just $9 a month for electricity. But Argentina has never managed to cut its fiscal deficit by more than one percentage point of GDP per year, notes Luis Secco of Perspectiv@s, a consultancy.

All this will inflict pain in the short-term. Barclays, a bank, expects an economic contraction next year (of 1.1%) before a rebound in 2017. “The big danger is social unrest,” says Mr Kiguel. Mr Macri’s narrow victory means that he will have to build a mandate for radical change. “The first package will have to be more centre-left than centre-right,” says the adviser, acknowledging the political constraints. The Peronists control the Senate; they must be persuaded to repeal laws that prevent a deal with the holdouts.

But the new president has some high cards to play. The Peronist governors, who have influence in the Senate, are a pragmatic bunch; many of them need support from the central government to restructure their debts. Argentina’s isolation from the capital markets means that it is barely indebted. If Mr Macri restores confidence by governing in a transparent and predictable manner, money could emerge from mattresses and flow back home from foreign bank accounts.

He knows it will not be easy. The peroration to his post-election speech at a convention centre on the River Plate was a plea, not a victory cry. “I’m here because you got me here,” he told his cheering supporters. “So I ask you: please don’t abandon me.”


Nov 30, 2015

Argentine President-elect Mauricio Macri said in a television interview that he would place his assets in a blind trust after being sworn in on Dec. 10.

“I am looking for an instrument to provide the most transparency for my asset situation to prove for real that during my term as president I will not make decisions connected to my personal assets,” Macri, of the conservative Cambiemos alliance, told America TV.

“I will try to set up an instrument, a trust fund so that I can distance myself from all of it,” Macri said.

A blind trust, which places investment assets in the hands of an independent administrator and prevents the owner from intervening in the management of the funds, is an instrument that has been used by several U.S. presidents.

Macri, a member of Argentina’s business elite, disclosed assets valued at 52 million pesos ($5.3 million) in his latest sworn statement before the Anti-Corruption Bureau.

The president-elect said he would be strict with his government team and would turn any official suspected of corruption over to judicial authorities.

“Anyone who touches a peso that does not belong to him will have, first of all, a problem with me. This is a non-negotiable issue,” Macri said.

The 56-year-old Macri will succeed President Cristina Fernandez after defeating governing party candidate Daniel Scioli in a run-off election on Nov. 22.

5. ARGENTINA POLITICS: NEW CABINET TAKES SHAPE (Economist Intelligence Unit – ViewsWire)

30 November 2015

The president-elect, Mauricio Macri, who takes office on December 10th, has named his new cabinet, signalling a stark change in policy direction. Although his own close allies feature heavily in key posts, the cabinet also includes private-sector representatives, members of his partner in the Cambiemos coalition, the Unión Cívica Radical (UCR), and even former Kirchneristas. The diverse cabinet may be intended to reduce fears over governability in the Macri government. These concerns will persist, however, given Mr Macri’s minority position in the legislature, and the sheer scale of the economic policy challenges that he faces.

Mr Macri was quick to select his cabinet in the short transition period between the presidential runoff on November 22nd and his inauguration on December 10th. The cabinet is led by a close ally, Marcos Peña, who becomes cabinet chief after serving in the same post in the city government of Buenos Aires, the capital, under Mr Macri. Mr Peña was elected to the Buenos Aires city government when he was just 26 years old, and was, with Mr Macri, one of the founders of the centre-right Propuesta Repúblicana (Pro) party. He is expected to play a key role in the Macri administration and will be at the centre of the most important government decisions. It was Mr Peña, in fact, who announced the new cabinet. Key among its members will be Alfonso Prat-Gay, the new finance minister. Mr Prat-Gay, an economist, was most recently a legislator for the Coalición Cívica. Before that he was president of the Banco Central de la República Argentina (the Central Bank) in 2002-04, a period of post-crisis stabilisation that will provide the necessary experience for the huge economic policymaking challenges that lie ahead.

Although it has not yet been confirmed that the current Central Bank governor, Alejandro Vanoli, will leave his post (which is technically not due to be vacated until 2019), Mr Macri has repeatedly insisted that he expects Mr Vanoli (who is a political ally of the current president, Cristina Fernández de Kirchner, and is currently being investigated for alleged fraud) to step down; Mr Peña has already announced Mr Vanoli’s replacement: Federico Sturzenegger. Mr Sturzenegger is an economist who worked under Domingo Cavallo when the latter was economy minister in 2001. He was more recently president of Banco Ciudad, the bank owned by the Buenos Aires city government, and is now a Pro congressman. In Mr Sturzenegger and Mr Prat-Gay, Mr Macri will be confident that he has a team capable of pushing through fiscal, monetary and currency adjustment measures needed to put the economy on a more solid footing.

Clear signals of policy change

Other key cabinet appointments signal a substantial shift in the policy stance. Among these is the appointment of Susana Malcorra as foreign affairs minister. Ms Malcorra is currently the cabinet chief of the UN general-secretary, Ban Ki-moon, a post that she has held for nearly ten years. Before that she held top posts in private-sector industry in Argentina. This private-sector experience suggests that Mr Macri is looking to Ms Malcorra to improve ties with Europe and the US that have been damaged by trade and investment disputes, to promote foreign investment, and to seek to renew progress on free trade, which has stalled under Ms Fernández.

Another cabinet member to come from the private sector-and who represents a clear shift away from the Fernández administration-is Juan José Aranguren, who has been named as the new energy minister. Mr Aranguren, previously CEO of the Argentinian subsidiary of Royal Dutch Shell (UK/Netherlands), is a well-known opponent of energy policy in the past decade. He famously faced dozens of charges and received over 50 fines from the then-interior commerce secretary, Guillermo Moreno, related to strict government regulations that have kept energy prices at below-market rates, hampered profitability and ultimately restricted private investment. His promotion by Mr Macri sends a clear signal that energy policy reforms to liberalise tariffs and promote investment are on the cards.

Reflecting the difficulty faced by a new and relatively small party such as Pro in finding experienced policymakers among its ranks, there are a few Kirchnerista faces still in the cabinet. These include Lino Barañoa, who will continue in his post as science and technology minister, and Alberto Abad, who was head of the Administración Federal de Ingresos Públicos, the tax revenue agency, in 2002-08 and will return to the post.

Although its alliance with the UCR, a longstanding centre-left party with a nationwide presence, helped Pro (a relatively new party with no political structure outside Buenos Aires) to win the presidential poll, Mr Macri has rewarded the party with relatively few cabinet posts. Julio Martínez will be the defence minister, Oscar Aguad will be communications minister and Ricargo Buryaile takes the post of agriculture minister. On top of this, José Cano, a former UCR candidate for governor of Tucumán province, will be in charge of Plan Belgrano, which aims to boost economic development in the poor Northern provinces. A surprise was the decision of a leading UCR politician-and a major promoter of the UCR’s alliance with Pro-Ernesto Sanz, to reject the post of justice minister offered by Mr Macri. It is possible that Mr Sanz was expecting a more high-profile position in return for helping to seal the electoral alliance.

Questions over governability

Mr Sanz’s decision and, more broadly, the UCR’s relatively low-profile cabinet position, have not produced any serious rumblings of dissent within the party as yet, but Mr Macri has admitted that Mr Sanz’s departure was a blow, and it does highlight the risks to governability stemming from Mr Macri’s minority position in Congress. This will necessitate constant negotiation between Pro, the UCR, the Coalición Cívica, and pro-Macri members of the Peronist party to pass legislation. Ms Fernández’s party, the Frente para la Victoria (FV), will remain the largest party in the Chamber of Deputies (the lower house of Congress), followed by the UCR and Pro. In the Senate, Mr Macri faces an even more difficult scenario, with the FV still holding a majority (40 seats, compared with just 16 for Cambiemos). On top of this, the FV will control 12 of 24 provinces, and negotiations with governors will be another source of potential conflict.

To Mr Macri’s benefit, the executive is strong in Argentina and political loyalties are fickle, tending to swing towards whoever holds power (and the powers of patronage in Argentina’s clientelist political system). There is a possibility therefore, that once Mr Macri is in office some FV members will drift away from the FV and into a potentially more co-operative traditional Peronist fold. On top of this, Mr Macri’s Pro will control not only the national government but also Buenos Aires city and Buenos Aires province-the first time in almost 25 years that the same party has controlled both the presidency and these two key electoral districts, which together account for almost half the population. Successful administration of Buenos Aires will go far in strengthening Mr Macri’s political power and removing doubts over governability in 2016. Nonetheless, with his cabinet appointments mostly signalling that substantial change is on the way, and with these changes set to include politically difficult austerity measures, the potential for political conflict in 2016 will be extremely high.


By Nicole Perlroth

1 December 2015

BUENOS AIRES — Want to learn how to break into the computerized heart of a medical device or an electronic voting machine? Maybe a smartphone or even a car? Thanks to the legacy of military rule and a culture of breaking rules of all sorts, Argentina has become one of the best places on earth to find people who could show you how.

As Silicon Valley’s talent war has gone global, particularly for those skilled at breaking into things, this Latin American nation has become a rich recruiting ground for corporations and foreign governments. Companies need hackers to help defend against online criminals and state-sponsored spies. And as the world’s critical infrastructure moves online and the threat of war moves into cyberspace, governments are desperate to acquire hackers’ tools.

“Cheating the system is part of the Argentine mentality,” said Cesar Cerrudo, an Argentine security researcher who taught himself to hack as a young teenager living in Paraná, a small town in the northeastern part of the country. Mr. Cerrudo recently gained attention for successfully hacking into traffic light systems in cities across the United States.

“Unless you are rich, you grow up without a computer or reading books. To access new software, you have to hack it, and you have to teach yourself everything from the ground up,” he said.

Within Latin America, Brazil has become known in recent years as the world leader in Internet banking fraud. But Argentina’s hackers have a reputation for creativity. In particular, they are known for their ability to find so-called zero-day flaws, which are unpatched holes in widely used technology that can be used to spy on or even destroy adversaries’ computer networks.

Technology companies like Apple, Facebook and Google have encrypted their products and services so that in many cases the only way to monitor a target’s communications is to hack directly into its device. As a result, there is a new urgency among governments in acquiring zero-day exploits.

A mix of executives from around the world, government officials, contractors and — or so it was rumored — spies gathered here in October in an industrial building converted into a cultural center to watch hacking done the Argentine way at the 11th annual EkoParty, the largest hacking conference in Latin America.

It is impossible to say how many hackers live in Argentina, since breaking into computers is not generally a skill that Argentines like to advertise. But EkoParty, which drew 1,600 people this year, is widely known as the best place to find them.

“Argentina put itself on the map as the country to produce the best hackers,” said Sinan Eren, an executive at Avast Software, a security company based in Prague, who has been attending the conference for years.

Long before foreign companies came calling, hacking things was a life skill in Argentina, a way to get by through decades of repressive military rule and a volatile economy.

Argentines have a saying, “atado con alambre,” which translates roughly as “held together with wire,” to describe the inventive nature of so many here who learned to do much with little.

“Those of us who came of age under a military junta — who were told which books to read, which movies to watch, which God to worship — had to learn to move around the laws,” Norma Morandini, a senator from Córdoba province, told a crowd at the conference. “For us, hacking became a way of life.”

The country still has one foot in the tech industry’s past because of stringent import rules. Amazon will not ship to your door here. BlackBerry has more market share here than Apple. A new iPhone costs $2,000 or more on MercadoLibre, an online auction site, but many iPhone owners said they had been able to persuade a friend traveling from abroad to sneak one through customs.

To get their hands on the latest, greatest devices, Argentines often have to think like a hacker — or even become one.

“You make do without resources, without high-end technology, with poor Wi-Fi connections,” said Sergio Berensztein, an Argentine political analyst. “We improvise creative solutions, for lack of other options, and many have applied these same procedures to the technical industry.”

EkoParty began as a small gathering of Argentine hackers who exchanged their discoveries over the web. Today, hundreds of Argentine hackers, ranging from 14 to 45 years old, line up around the block to show off their skills to executives from Silicon Valley start-ups like Synack, a security company, as well as more established consulting firms like Deloitte, and a growing list of government officials and contractors looking to acquire zero-days for their arsenals.

Among EkoParty’s panelists were hackers like Alfredo Ortega, a sweet-natured man from rural Patagonia who calls himself a cybergaucho” and was able to break into a new e-voting system in 20 minutes. Later, over tea and cookies, he demonstrated how to hide malicious code in computer chips.

Mr. Ortega, who now works for Avast Software, is best known for breaking into a computer operating system thought to be invulnerable. His latest work in progress is an X-ray-emitting device that can break into systems that are not even online.

“Almost anything you give him, he will break,” said Federico Kirschbaum, who started the EkoParty conference with a fellow Argentine, Francisco Amato. They are also the co-founders of the security company Infobyte.

Other presenters included Juliano Rizzo, an Argentine security researcher who demonstrated a zero-day flaw onstage that some here estimated would have sold for six figures on the black market.

Mr. Rizzo is among many Argentine security researchers who got their start at Core Security, a company founded 20 years ago by six hackers.

In 1996, Core started working with companies and government agencies to find security holes in their networks. Later, they created one of the first automated attack tools designed to penetrate clients’ systems using actual exploits.

“It was a bold proposition, especially coming from ‘some guys in Argentina,’” said Ivan Arce, one of Core’s founders. Analysts initially said the tool was unethical, but one of Core’s first customers, NASA, helped change minds.

As Core grew, its founders trained the next generation of exploit coders. But those hackers now have far more lucrative options than their predecessors did back in 1996.

Exploits that 20 years ago were discovered out of curiosity, or to defend against criminals, are valuable to an increasing number of governments — 40 at last count — that are developing offensive digital weapon programs.

Governments have already started repurposing Argentine exploit tools as spy tools. Last December, two researchers discovered that an Iranian hacking group was using Core’s penetration testing tool against Iranian dissidents.

“This started out as hobbyists sharing exploits as a game,” Mr. Arce said. “Now exploits are hoarded for profit.”

Sale of a single exploit can make some hackers rich. Zerodium, a zero-day-exploit broker that sells to governments, said it paid hackers $1 million for an Apple exploit in October. In mid-November, the brokerage firm said it would pay hackers $50,000 for an attack that could take over a victim’s machine through a Safari or Internet Explorer browser, and $80,000 for a similar attack through Google’s Chrome browser.

Those dollars go a long way in Buenos Aires, where a high-end apartment in Palermo Soho — a hip neighborhood with a concentration of tech start-ups — rents for $1,000 a month.

But Argentina’s days as the outsourcing capital for hackers may be numbered, Mr. Eren of Avast warns, particularly as the world goes mobile and governments start zeroing in on ways to break into smartphones.

“Argentina may be hitting a peak,” Mr. Eren said. “There’s new competition.” And when it comes to breaking into phone software, he said, “China is the country now making a mark.”


1 December 2015

After nearly a decade of litigation, Sullivan & Cromwell’s Joseph Neuhaus secured an appellate victory on Aug. 31 that clears Argentina’s central bank from having to cover more than $2 billion in defaulted Argentinian bond debt.

Siding with Banco Central de la Republica Argentina (BCRA), the U.S. Court of Appeals for the Second Circuit ruled against investment funds EM Ltd. and NML Capital Ltd. and their lawyers, Gibson, Dunn & Crutcher’s Theodore Olson and Debevoise & Plimpton’s David Rivkin. The decision came in a long-running dispute over bond debt that the Argentinian government defaulted on in 2002.

Looking to collect on a set of bonds that Argentina began issuing in 1994, the hedge funds in 2003 had filed a series of lawsuits in Manhattan, directly targeting the Argentinian government, and ultimately secured judgments totaling $2.4 billion. When Argentina failed to pay, the hedge funds tried to hold BCRA liable.

Under the Foreign Sovereign Immunity Act (FSIA), the central bank would ordinarily be immune from U.S. lawsuits. But the hedge funds, in a declaratory judgment lawsuit filed in 2006, sought to exploit an exception for entities determined to be “alter egos” of the foreign government. Last year U.S. District Judge Thomas Griesa in Manhattan found for the hedge funds, ruling that the state’s control over BCRA made the central bank an “alter ego” of the government, effectively waiving its immunity.

On appeal, BCRA argued that Griesa erred because Argentina’s government didn’t control the central bank’s day-to-day operations. The Second Circuit agreed, while expressing concern that the Argentinian government might continue shirking its debts. The appeals court held that BCRA operated independently enough from the government that it could invoke its own sovereign immunity.


1 December 2015

Moody’s Latin America Agente de Calificación de Riesgo, (“Moody’s”) has revised to positive from stable the outlook for several companies operating in Argentina, while all ratings were affirmed. The companies’ outlook change follows the revision of the Argentine government’s Caa1 rating outlook to positive from stable on November 24, 2015.


Arauco Argentina S.A: the ratings of the senior unsecured notes, guaranteed by Celulosa Arauco y Constitucion S.A. (Baa3 stable), were affirmed at Baa3 in the global scale and Aaa.ar in the national scale. At the same time, Moody’s Investors Service has affirmed Arauco Argentina´s corporate family rating (CFR) at B2 in the global scale rating and the rating of the guaranteed senior unsecured notes at Baa3 in the global scale. The outlook was changed to positive from stable.

Arcor S.A.I.C: the ratings of the senior unsecured local bonds and notes were affirmed at B2 in the global scale and Aa1.ar in the national scale, and the ratings of the senior unsecured global bonds were affirmed at B2 in the global scale and Aa1.ar in the national scale. At the same time, Moody’s Investors Service has affirmed Arcor’s CFR and the rating of the senior unsecured global bonds at B2 in the global scale. The outlook was changed to positive from stable.

Car Security S.A: the CFR was affirmed at Caa1 in the global scale and Baa2.ar in the national scale. The outlook was changed to positive from stable.

Longvie S.A: the CFR and the ratings of the senior unsecured notes were affirmed at Caa1 in the global scale and Baa2.ar in the national scale. The outlook was changed to positive from stable.

Newsan S.A: the CFR and the ratings of the senior unsecured notes and the senior unsecured bank credit facility were affirmed at B3 in the global scale and A1.ar in the national scale. The outlook was changed to positive from stable.

Mirgor S.A: the CFR was affirmed at Caa1 in the global scale and Baa2.ar in the national scale. The outlook was changed to positive from stable.

Holcim (Argentina) S.A: the CFR was affirmed at B3 in the global scale and A2.ar in the national scale. The outlook was changed to positive from stable.

Petrobras Argentina S.A: the rating of the senior unsecured notes, guaranteed by Petroleo Brasileiro S.A. (Ba2 stable), was affirmed at Ba2 in the global scale and Aaa.ar in the national scale. At the same time, Moody’s Investors Service has affirmed the CFR at B2 in the global scale; the rating of the backed senior unsecured notes at Ba2 in the global scale; the rating of the senior secured medium-term note program at (P)B1 in the global scale; and the rating of the senior unsecured medium-term note program at (P)B2 in the global scale. The outlook was changed to positive from stable.

Raghsa S.A: the CFR and the senior unsecured notes ratings were affirmed at Caa1 in the global scale and Baa3.ar in the national scale. At the same time, Moody’s Investors Service has affirmed Raghsa’s rating of the senior unsecured notes at Caa1 in the global scale. The outlook was changed to positive from stable.

Sullair Argentina S.A: the CFR was affirmed at Caa1 in the global scale and Baa2.ar in the national scale. The outlook was changed to positive from stable.

Telecom Argentina S.A: the CFR was affirmed at Caa1 in the global scale and Baa1.ar in the national scale. The outlook was changed to positive from stable.

YPF Sociedad Anonima: the issuer rating was affirmed at Caa1 in the global scale and Baa1.ar in the national scale. At the same time, Moody’s Investors Service has affirmed the rating of the senior unsecured notes at Caa1 in the global scale, and the rating of the medium-term note program at (P)Caa1 in the global scale. The outlook was changed to positive from stable.


The rating outlook revisions for these companies were triggered by the change to positive in the outlook for the Argentine government’s Caa1 rating, supported by Moody’s view that Argentina’s policy stance will become more credit positive after Mauricio Macri was elected Argentina’s president, on November 22nd, for the 2015-2019 term, who will take office on December 10th.

President-elect Macri has consistently and increasingly made clear his administration’s policies will represent a major market-friendly break from those observed during the last 12 years. Moody’s views that a prompt resolution of the holdout saga is a key Macri pledge in this regard, and is required for the government to borrow abroad. In addition, Moody’s expects the new administration to devote efforts to improving the economic and institutional environment over the coming months, through a series of reforms aimed at tackling persistently high levels of inflation and lack of data accountability.

The positive outlook for the affected companies reflects Moody’s view that the creditworthiness of these companies cannot be completely de-linked from the credit quality of the Argentine government, and thus their ratings need to closely reflect the risk that they share with the sovereign. Moody’s believes that a weaker sovereign has the potential to create a ratings drag on companies operating within its borders, and therefore it is appropriate to limit the extent to which these issuers can be rated higher than the sovereign, in line with Moody’s Rating Implementation Guidance “How Sovereign Credit Quality May Affect Other Ratings” published on 16 March 2015, and available on http://www.moodys.com.

The principal methodology used in rating Car Security S.A. was Business and Consumer Service Industry published in December 2014. The principal methodology used in rating Longvie S.A., and Newsan S.A.was Consumer Durables Industry published in September 2014.

The principal methodology used in rating Holcim (Argentina) S.A. was Building Materials Industry published in September 2014.

The principal methodology used in rating Telecom Argentina S.A. was Global Telecommunications Industry published in December 2010. The principal methodology used in rating Sullair Argentina S.A. was Equipment and Transportation Rental Industry published in December 2014.

The principal methodology used in rating MIRGOR S.A. was Global Automotive Supplier Industry published in May 2013. The principal methodologies used in rating Petrobras Argentina S.A. were Global Independent Exploration and Production Industry published in December 2011, and Government-Related Issuers published in October 2014.

The principal methodologies used in rating YPF Sociedad Anonima were Global Integrated Oil & Gas Industry published in April 2014, and Government-Related Issuers published in October 2014. The principal methodology used in rating Arcor S.A.I.C. was Global Packaged Goods published in June 2013.

The principal methodology used in rating Arauco Argentina S.A. was Global Paper and Forest Products Industry published in October 2013. The principal methodology used in rating Raghsa S.A. was Global Rating Methodology for REITs and Other Commercial Property Firms published in July 2010.

Please see the Credit Policy page on http://www.moodys.com for a copy of these methodologies.

Moody’s National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody’s global scale credit ratings in that they are not globally comparable with the full universe of Moody’s rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a “.nn” country modifier signifying the relevant country, as in “.za” for South Africa. For further information on Moody’s approach to national scale credit ratings, please refer to Moody’s Credit rating Methodology published in June 2014 entitled “Mapping Moody’s National Scale Ratings to Global Scale Ratings”.


30 November 2015

Argentine national oil company YPF will remain a majority state-owned enterprise under the administration of president-elect Mauricio Macri.

That’s according to Macri’s future energy and mining minister, Juan José Aranguren, who said in a radio interview that changing the current ownership structure was never on the table.

Aranguren had made comments during the recently concluded presidential campaign that were widely interpreted to mean he would consider re-privatizing YPF, which current President Cristina Fernández de Kirchner nationalized in 2012.

The government holds a 51% stake in the firm, with the federal government controlling 26% and the local governments of the country’s oil and gas producing provinces controlling 25%.

Private and institutional investors control the remaining 49% of YPF, which lists on the New York Stock Exchange.

State news service Télam quoted Aranguren – who spent 37 years at Shell Argentina before leaving to advise then-candidate Macri on energy issues – stressed the importance of developing Argentina’s Vaca Muerta shale deposit and the nearby, gas-rich Los Molles formation.

Aranguren also said the ministry will work to ensure that long-overdue investments in electric power infrastructure are made, in order to prevent supply interruptions that have become routine during the summer and winter months.

Consumer electricity prices do not reflect the true cost of producing power in Argentina on account of prize-freezing measures under the Fernández administration meant to benefit end-users.

The artificially low prices have incentivized power consumption while preventing utilities from making necessary investments in infrastructure to ensure supply, particularly in Buenos Aires.


30 November 2015

A delegation from Argentina’s Neuquén province is scheduled to meet in the US this week with executives from ExxonMobil and subsidiary XTO.

Governor Jorge Sapag, energy minister Alejandro Nicola and the head of provincial state-run oil company GyP Neuquén, Alberto Saggese, planned to discuss the progress of Exxon’s shale projects in the province, according to local state-run news outlet Neuquén Informa.

GyP and Exxon share concessions Bajo del Choique, La Invernada, Parva Negra and Los Toldos, all of which target unconventional hydrocarbons.

Exxon and GyP announced the discovery of shale oil and shale gas at Bajo del Choique in May 2014, and at La Invernada in December of the same year. Both licenses target the country’s flagship Vaca Muerta formation.

Exxon’s Argentina CEO Daniel De Nigris told Platts in October that the firm was still evaluating when and how to shift into the pilot production phase in Neuquén, following “very good” exploration results at Bajo del Choique and La Invernada.

Local media have since reported that Exxon is planning to launch a large-scale shale pilot in the province in 2016, something the company has yet to officially confirm.

GyP said at the beginning of this year it planned to invest US$1.5bn in 2015-16 through more than 50 partnerships with private and state-run operators.

Exxon has operated in Argentina for more than 100 years, and in Vaca Muerta since 2010. Acquired by Exxon in 2009, XTO is focused on unconventional E&P in North America.


By Federico N. Fernández

November 30, 2015

Macri’s “Let’s Change” Coalition Will Live Up to Their Name

The outcome of Argentina’s election will very likely trigger a major political shift both inside the country and abroad. On the one hand, the Peronist party has lost much of its power structure. On the other, Argentina has provided Latin America with a success story on how populism can be contained.

In Argentina, victory for the Let’s Change opposition coalition may be the beginning of the end of Peronism, a wildly influential political and social movement in the country since 1946.

This election not only gave the country a new president, Mauricio Macri, but it also renewed municipal and regional authorities.

Argentina is extremely uneven in the geographical distribution of its population. In the densely populated center, the Peronists have suffered a historical defeat. The province of Buenos Aires, a longtime Peronist stronghold with 40 percent of voters nationwide, is now in the hands of Let’s Change.

Peronism is starting to look like a loose confederation of northern and southern caudillos from backward and deserted provinces. Rough estimates indicate that just 32 percent of voters will be ruled by a Peronist governor, a gloomy picture sharply contrasting the excessive power they enjoyed some years ago.

An effective Macri administration is probably the Peronists’ worst nightmare. Their success has largely relied on what the movement’s founder Juan Domingo Perón himself explained: “It is not that we are good administrators, but that the others are even worse.”

But Peronism seems exhausted. These nationwide elections were a public declaration that the populist emperor, in fact, wears no clothes. While Macri spoke of an Argentina reclaiming its place in the world, making good use of its competitive advantages, and welcoming globalization, ruling-party candidate Daniel Scioli sounded like a fear monger stuck in the past.

Scioli dwelled on issues such as the provision of gas and electricity, which is hardly convincing for the 21st-century constituency that his party has routinely disappointed for over seven decades.

The relevance of Mauricio Macri’s win is perhaps even greater for Latin America as a whole. The single most important message is that populist regimes can be democratically defeated. Argentineans defeated some of Hugo Chávez’s best pupils at the polls at a time when Venezuela is facing a crucial parliamentary election in December.

Furthermore, Macri has already promised that he will make diplomatic efforts to isolate the Venezuelan government from the international community over its human-rights abuses. Lilian Tintori, the wife of Venezuelan political prisoner Leopoldo López, celebrated Macri’s victory with fellow supporters in Buenos Aires on election day.

Moreover, progressive governments, such as the current Chilean administration, may think twice before accelerating their populist agenda. In Brazil, President Dilma Rousseff’s class-warfare rhetoric has backfired, and she is very likely to face impeachment in the coming months.

From the very beginning, Macri’s party, and later his coalition, looked like a very moderate and rational alternative to Peronism. Its leadership seems committed to a combination of rule of law, republican values, and a political economy that gives individual initiative a role, and somewhat reins in state intervention.

One of the Let’s Change coalition’s main objectives was to stop the populist oligarchy that has ruled Argentina for 12 years, and in that they have succeeded. Now Macri’s coalition has to face the harsh realities of a country with rampant inflation, social unrest, and a failed monetary policy.

If they are up to the challenge, Argentina may change forever.


By Belén Marty

November 30, 2015

While Kirchner Has Ignored Demands for 9 Months, Macri Promises Dialogue

The next president of Argentina, Mauricio Macri, will have much more to worry about than tackling the country’s problems related to high inflation, the fiscal debt, and systemic poverty.

For nearly nine months now, 25 representatives from Argentina’s indigenous communities — Qom, Pilagá, Wichi, and Nivaclé — have camped at the heart of Buenos Aires calling for a meeting with President Cristina Fernández de Kirchner to demand the restitution of land they claim once belonged to them.

Located a few blocks away from the Ministry of Social Development and the governor’s mansion, the encampment has a capacity of 50 and is covered by a sky-blue and white tent. The site includes seven portable toilets. Pots and pans with the remains of recently cooked food, worn mattresses, and clothes and bed sheets drying in the sun are easily seen from the street. Banners with inscriptions of resistance and flags with the colors of the indigenous communities also proudly garnish the area.

All of this contrasts greatly with the business suits and dress shoes that quickly pass through the outskirts of the business district at the intersection of May and July 9 Avenue.

The group’s leader, Félix Díaz, explained several months ago that they are at the campsite to demand the government’s return of land stolen from them decades ago. They also request, in reference to the right to self-determination, that the government notify them in matters concerning natural resources and compliance with the United Nations Declaration on the Rights of Indigenous Peoples.

“We want to return [to our community] with an answer. It’s what the women and ancestors of our community want. This encampment doesn’t have a deadline,” assured the spokesman for the Wichi tribe, Jorge Palomo, after completing six months at the site.

He also criticized the current administration: “They kill us with indifference and discrimination.”

Despite the Kirchner administration’s lack of action, the group finds support in ecological and social organizations, and universities.

“The government has searched for a way to divide the people,” Díaz maintains. “In 1979, we were dispossessed, when the province transferred our indigenous territory to the National Parks. We lost 50 hectares of land, which was very critical to us. No one knew how to lead the commission, because the tribe’s chief didn’t know how to read or write. Our chief unknowingly signed some papers, which ultimately transferred a part of our land to the government. He didn’t know what he was doing.”

For the Qom community, November 3 marked an important milestone: then presidential candidate and now President-elect Mauricio Macri visited the campsite and spoke with Díaz about the communities’ problems.

Díaz told Macri that he has tried to meet with President Kirchner for two years, but only managed to meet with officials that “continue to lie with unkept promises.”

According to the indigenous leader, Macri signed a pact stating that if he won the election, he would begin a dialogue with the indigenous peoples without intermediaries, and “leave the Institute of Indigenous Affairs in the hands of its people.”

“The Land Is Our Land”

Narciso Sanagachi, leader of the encampment, spoke with the PanAm Post about its demand for the restitution of land. Two street dogs sat by his side harassing onlookers.

“We’ve been here for a while demanding the land that is ours. Not once has the president met with us,” he says.

Concerning Marcri’s visit, he notes that “he was the only politician that approached us. But we’re not politicians. We come to reclaim our territory and nothing more.”

Sanagachi says that what they request is the government returning the territories that originally belonged to his ancestors. “The territory is ours; it belongs to all of the indigenous peoples. There was 5,000 hectares before the governor of Formosa stole 1,500 hectares in order to sell it. Now they want to take all of our land again to sell it. That’s why we are here. We are fighting.”

He also says that the governor of Formosa province, Gildo Insfrán, wants to make deals “with other countries.”

“We don’t have title to the property [of our territory], because in that epoch the government never gave the tribe’s chief title to the territory. Now, people enter the area without permission, because there is no title. But it was always our land.” Sanagachi adds.

The camp’s leader also says that, in June, they conducted a protest which was attended by representatives of 15 provinces with indigenous peoples. “When the summit finished, we marched in front of the Casa Rosada [presidential estate] to deliver our demand. Cabinet Chief Aníbal Fernández and Minister of the Interior and Transportation Florencio Randazzo were there,” he says. “They spoke for 10 minutes and later said ‘we are going to return,’ and when they left the demonstration, the officials never came back.”

A representative in Buenos Aires said there are instances of “hunger, sickness, and fever that pass through the campsite. He added that children are living at the camp and “are not going to school.”

When asked what the groups need from society, he responded with a pamphlet that they usually distribute to people interested in their cause. The pamphlet reads: “We are searching to add hearts to the defense of a way of life different to capitalism. We look forward to meeting you and hope that you accept us.”

The Solution: Property Rights

Writer and judge Ricardo Rojas tells the PanAm Post that these groups are seeking for a way to have their territories recognized, because they were traditionally part of their lands, but that their communities lacked the concept of property rights.

“I don’t know if title to property is of any interest to them,” he says. “How do we assure them that they can continue living there? I don’t think they want title in order to sell it. The idea is to recognize the territory as theirs. I imagine you could resolve the issue with a land reservation as the United States did, although they created reservations for the purpose of surveying the land. Here, we would do it to guarantee the lands remain with the indigenous people,” Rojas explains.

For Rojas, the problem starts with the lack of a definition of rights, but the magistrate sustains that the original communities have land by tradition.

“They don’t have rights of registered properties. In theory, the lands are public lands, and the Chaco government [and Formosa] has taken it from them. It’s a problem with no easy solution, because the land value has increased. That’s why the only solution they have is to establish rights to property, whether it’s a reservation or granting the land to them individually. Otherwise, the government will continue taking it,” he concludes.

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