1. YPF, DOW TO INVEST $400M-$500M IN ARGENTINA SHALE IN 2016 (The Wall Street Journal)







8. YPF, DOW TO INVEST $500 MILLION IN ARGENTINA SHALE IN 2016 (Dow Jones Institutional News)







1. YPF, DOW TO INVEST $400M-$500M IN ARGENTINA SHALE IN 2016 (The Wall Street Journal)

By Taos Turner

Dec 15, 2015

Companies to unveil details after meeting with President Mauricio Macri later Tuesday

BUENOS AIRES—Argentina’s state-run oil company, YPF SA, and Dow Argentina, the local unit of Dow Chemical Co., plan to invest between $400 million and $500 million to explore for shale gas, a person familiar with the matter said Tuesday.

The companies, which are already involved in a joint venture, are expected unveil details of the plans after meeting with Argentine President Mauricio Macri later Tuesday, this person said.

The transaction will represent the first significant foreign investment in Argentina since Mr. Macri took office last week. His administration is seeking to dismantle key policies of his predecessor and boost investor confidence in a bid to kick-start a moribund economy.

The joint venture between the companies is the leading shale gas project of its kind in Argentina, with production of about 750,000 cubic meters a day. The aim is to triple that next year, raising it to about 2 million daily, this person added.

Back to contents


By Taos Turner

15 December 2015

Leader takes a dizzying pace in trying to jump-start the country’s sickly economy and set a new policy course

BUENOS AIRES—Argentine President Mauricio Macri on Tuesday declared an energy emergency, secured a $500 million shale-oil investment and unleashed a backlash by bypassing the Senate to temporarily appoint two Supreme Court justices by decree.

The day’s activities reflected the dizzying pace Mr. Macri has taken since he took office on Thursday to try to jump-start a sickly economy and overturn a decade of his predecessor’s policies.

In five days, Mr. Macri has begun overhauling Argentina’s discredited statistics agency, eliminated most farm export taxes, cut personal income taxes, replaced the central bank president, and appointed two Supreme Court justices.

“Unfortunately, after a decade in which we’ve become less competitive, we are in a situation of extreme, extreme vulnerability,” Mr. Macri said on Monday in a speech to manufacturers. “That means we’re up against the clock. We have no time to waste.”

This weekend, he met Argentina’s 23 governors and the mayor of this capital city to discuss reviving the economy. The meeting was a jolt to Argentine politicians who had grown unaccustomed to dialogue during 12 years of highly centralized rule by former President Cristina Kirchner and her late husband, Néstor.

“I have been a governor for eight years and I have never been in a meeting like that. Never,” said Salta Province Governor Juan Manuel Urtubey, a member of Mrs. Kirchner’s opposition Peronist party.

Some governors here have long said Mrs. Kirchner called on them to share her ideas, but not to listen to theirs.

The Macri administration has been negotiating with foreign banks to obtain billions in fresh financing, a break from the Kirchner administration, which boasted it had stopped borrowing money abroad. The government also announced it would cut subsidies that make utility bills here among the cheapest in the world.Axel Kicillof, Mrs. Kirchner’s former economy minister, warned Monday that raising utility rates could hurt the poor.

Mr. Macri’s different tack is making an impression on many Argentines. “Cristina appeared on television all the time and spoke constantly. It was overwhelming,” said Leandro Rotberg, 35, an information technology specialist. “Macri isn’t as verbose but he’s making his points. We need to give him time to fix the problems he’s inherited.”

Argentina currently suffers from roughly 25% annual inflation, the biggest fiscal deficit in three decades, a shortage of U.S. dollars needed to pay for imports, and poverty that nears 29%. Argentine exporters also say an overvalued currency makes local goods uncompetitive abroad.

Mr. Macri, who beat Mrs. Kirchner’s candidate in a tightly contested runoff election in November, had just over two weeks to name a cabinet and set up his administration before taking office.Since his inauguration on Thursday, he has named nearly 20 cabinet ministers and traveled to Brazil and Chile to meet Presidents Dilma Rousseff and Michelle Bachelet and discuss trade.

Mr. Macri has already held full cabinet meetings, a departure from Mrs. Kirchner, who didn’t summon gatherings of all her cabinet members.

The new president said he would eliminate currency controls this week, ending a four-year policy that has choked economic growth.

While economists welcome the move, it is widely expected to come with a currency devaluation that could take the exchange rate to around 15 pesos to the dollar from 9.8 currently. That could fuel inflation, which rose faster in the first week of December than it has since early 2014.

“Acting quickly and decisively is very positive for President Macri, and frankly very positive for the country,” said Susan Segal, head of the New York-based think tank Council of the Americas. “The faster he implements some of these measures, the faster we’ll see some of the benefits.”

Not everyone agrees. “Macri is moving too quickly,” said Carlos Ponti, 44, an accountant in Buenos Aires. “He cut export taxes when the country has a deficit. First he needs to balance the books, then cut taxes.”

Alfonso Prat-Gay, Mr. Macri’s newly appointed finance minister, has played down inflation risks, saying retailers have already marked up prices. But other administration officials and economists say there are risks.

Letting the currency depreciate too quickly could destabilize the economy in the short-term, says Goldman Sachs economist Alberto Ramos, while noting that delaying overhauls could raise opposition to them in Congress, making it harder for Mr. Macri to get things done later in the year.

“You want to be careful, but you don’t want to hesitate too much along that strategy because otherwise people start to question if the adjustment was really necessary,” Mr. Ramos said.

Mr. Macri’s energy minister, Juan José Aranguren, on Tuesday said the country’s utilities sector was on the edge of collapse, prompting the government to declare a state of energy emergency through 2017 that lets the government push through conservation policies to fend off the power blackouts that have plagued Buenos Aires and surrounding areas for years.

Mr. Macri’s move on Tuesday to bypass the Senate and temporarily appoint two Supreme Court justices by decree elicited a strong reaction, but the controversy seemed to settle somewhat after the chief justice said he would welcome the new judges to the court.

“This is President Macri’s first and grave mistake,” Congresswoman Margarita Stolbizer said in a post on Twitter. “Appointing justices to the Supreme Court by decree is a terrible institutional setback.”

Meanwhile, Mr. Macri has said his top focus will be the economy.

Early Tuesday, after meeting with chief executives from the state-run oil company, YPF, and the local unit of Dow Chemical Co., he said the companies would invest $500 million in 2016 to explore for shale gas.

It was the first of what he said he hoped would be many private sector announcements to boost investment in Argentina.

“We should be optimistic about the future,” Mr. Macri said, “even though we have a complicated present.”

Back to contents


By Jordana Timerman

December 15, 2015

BUENOS AIRES — Economic crises besiege Argentina with the regularity of earthquakes over a tectonic plate. These crises can be devastating, wiping out family savings, employment and life plans. It seems we’re always recovering from or preparing for some sort of economic shock. Sometimes, our survival strategies can even contribute to the subsequent crisis.

Last month Argentine voters very narrowly opted for a political sea change, voting out the Peronist faction led by Cristina Fernandez de Kirchner (she and her deceased husband governed the country for the last 12 years) and electing the conservative mayor of Buenos Aires, Mauricio Macri, to replace her.

The business-friendly president-elect ran in opposition to a government that has been highly divisive, defined by extensive social spending and statist economic policies that antagonized large business interests and foreign investors. Kirchner leaves office with a high approval rating of about 50 percent, thanks to popular policies such as a per-child conditional cash transfer policy for poor families and a focus on human rights, such as gay marriage. But the economy is stagnant, annual inflation is around 25 percent, and the fiscal deficit could amount to an alarming 6 percent of the country’s GDP this year.

President-elect Macri has promised to shock the highly regulated economy into market-based reality. One element of his approach will be the elimination of strict currency controls put in place to prevent capital flight. The cost could be a devaluation of up to 60 percent. Economists, like gym gurus, always seem to argue that a bright future can only be attained with short-term pain.

The government’s official exchange rate allows you to buy a dollar for about 9.6 pesos. But since 2011, access to dollars has been highly limited in an attempt to keep people and companies from taking money out of the country.

Argentines unsatisfied with their permitted monthly quota of dollars — or unable to justify the provenance of their cash — are forced to turn to the black market, where a buck costs closer to 15 pesos, as established by supply and demand. Though it’s illegal, it’s hardly underground: The euphemistically named “dolár blue” rates are published on the front-page of leading newspapers, updated along with the official rate.

The spread is a window of opportunity for some Argentines who spend a lot of time and effort arbitraging between those two rates, relentlessly scheming over how to get cheaper dollars. Those can then be used to save or lucratively resold on the black market at significant gain. The official exchange rate applies to many transactions, but Argentines desperate to hedge against inflation rail against limitations.

You do have to be on your toes to game the system. Credit card purchases in dollars are charged locally at the official exchange rate. One popular way to access dollars at the official rate is to charge travel to our plastic — hence the crowded flights to Miami. Travelers in line have been heard boasting that they take empty suitcases to the U.S. to fill with cheap consumer goods that can’t be obtained in Argentina or are prohibitively expensive because of import taxes. Chile has become another popular shopping destination for computers and Forever 21 clothes. Smuggling iPhones past Argentine customs is a rite of passage.

Those people flying to such exotic locales often bring with them a stack of debit cards belonging to friends and family members who are eager to withdraw dollars at overseas ATMs. Day trips to neighboring Uruguay with a pile of cards were a brief fashion until the government reduced the permitted withdrawal.

Argentina’s capital controls, or limits on how much foreign currency we can buy with our pesos, have been lax compared to those in some other countries. But using the dollar as a hedge against inflation and currency instability has become engrained in the Argentine middle class DNA over several generations of crises.

Macri’s vow to remove the artificial official rate, and allow the market to prevail, is a move that most warily accept as necessary. The trouble is that the “cure” for terminating the disparity between the two competing dollar rates might trigger a short-term crisis of its own, as people absorb the shock of a sudden, massive devaluation of the peso, and of their living standards. The conundrum Macri will face is akin to what the U.S. Federal Reserve faces (on a smaller scale), knowing that it has to raise interest rates, but worrying about the impact of doing so, or of doing so too suddenly.

We’re all steeling ourselves for Argentina’s abandonment of heavy state intervention in the economy, in favor of free market forces. We desperately hope we are not trading in one fantasy for another.

For now, businesses are stocking up on imports and stalling sales because they’re worried about losing money with payments that might come in after the devaluation. Producers are reportedly holding back stock — flour, pharmaceuticals, steel — instead of selling it; they’re betting that their products will be worth more later. Airlines won’t sell tickets more than three months in advance.

For average citizens, a peso that loses its value (over time or in one dramatic devaluation) only exacerbates the power of inflation to eat away at their savings. Money put away at the beginning of the year will buy significantly less by the end of the next, and so on. So instead it makes more sense to exchange pesos for goods that retain value better: real estate, cars and even consumer electronics. Imagine a dollar burning a hole in your pocket because you don’t know if it will be worth 60 or 30 cents in a few months.

U.S. dollars, with the enduring value they represent, are the holy financial grail. From small wads stuffed under a mattress to a security box filled with piles of cash, dollars are the gold standard for Argentines. Dollars are perceived as the objective measure of value — to the point where property, perceived to have enduring value of its own, is priced in dollars. This national tic, proved right over the past few economic crises, in part explains why the currency controls have been a focal point for so much anger against the current government.

This year’s inflation rate will be between 15 to 26 percent. The fact that we don’t know the exact number, because the very data (both public and private) are politicized and contested, says a lot. Certain desirable models of cars have increased by over 45 percent and private schools have increased by an average of 37 percent this year. On the other hand, government intervention in the market keeps a basic food basket under the inflation rate and salaries tend to keep more or less apace.

Whether it’s failed government policy, as one side argues, or untamed speculative market forces, as the other side does, the never-ending weekly rise of vegetable prices that fall outside the price controls engenders a confused exhaustion. One week I skip buying tomatoes, because they’re just too pricey. The next, apples are so expensive that the tomatoes seem reasonable again.

With Macri and his market-friendly policies, Argentina will be the latest Latin American nation to take a step closer to the worldview of Washington and Wall Street. Along with the half of the country that voted to continue with “Kirchnerismo,” I am concerned that the touted adjustment will come at a high cost to our most economically vulnerable citizens. We are a country of extremes and I hope Macri’s change will not inaugurate a period of excessive austerity and recession.

As for me, I’m trying to delay my payment for this article. It’s not much, but the dollars I get for it might be worth significantly more in a few weeks.

Back to contents


December 15, 2015

Is Argentina’s newly elected president, Mauricio Macri laying the groundwork for the long-anticipated devaluation of the local currency?

That’s the question investors are asking after the country’s central bank late on Monday brokered a deal to rewrite the terms of controversial dollar futures contracts – a move that would effectively decrease the amount of cash the bank would have to pay out should the peso be devalued. In addition, the central bank has also called on financial institutions to get rid of their dollar-denominated positions both in the spot and futures market in a bid to boost liquidity, reports Daniel Politi in Buenos Aires.

Under Alejandro Vanoli, Argentina’s former central bank governor who resigned last week, the bank came under heavy criticism for its attempt to prop up the official exchange rate by selling about $17bn of future dollar contracts at an artificially low rate.

The scheme, under which investors can buy dollars six months ahead for about 11 pesos to the buck, compared to the 15 pesos the contracts trade at in New York, essentially guarantees healthy profits for investors if there is a devaluation before then. However, this also virtually guarantees large losses for the central bank if the peso is devalued.

Mr Macri had vowed during the presidential campaign to lift currency control restrictions – popularly known as the “clamp” on the dollar – from day one of his presidency. Markets have been eagerly awaiting signs of when this will happen. Speaking to business leaders yesterday, Mr Macri said the administration’s goal is to lift the restrictions this week.

Although the official exchange rate is 9.6 pesos to the dollar, capital controls and a dollar shortage means the peso actually trades at about 14.5 per dollar in the black market.

Mr Macri has clear reasons to carry out the long-expected devaluation as quickly as possible: propping up an overvalued peso is becoming increasingly expensive. Central bank foreign-currency reserves have decreased $615m to $24.46bn in the three days since Mr Macri became president.

In a parallel effort to boost reserves, Macri lifted export duties for most goods on Monday.

Back to contents


By Charlie Devereux

December 15, 2015

* Macri announces plans to lift export tariffs, reduce subsidies

* Plans to end currency controls by end the of this week

Argentine President Mauricio Macri has hit the ground running. Less than a week since taking office, he has started to unravel a system of currency controls, trade restrictions and subsidies implemented by his predecessor.

Macri announced an end to taxes on most agricultural exports on Monday and now is moving ahead with plans to reduce subsidies on utility bills, which have contributed to the the country’s widening fiscal deficit. While his pledge to lift currency controls and let the peso float “from day one” has not yet happened, newly appointed Central Bank President Federico Sturzenegger brokered a deal to cut the bank’s liabilities from futures contracts. That move is seen as a first step toward letting the currency trade freely.

Macri is betting that a series of sharp shocks will generate investor confidence and help revive the country’s economy. Argentina has been stifled by a shortage of foreign currency since former President Cristina Fernandez de Kirchner introduced controls in 2011 and began using reserves to pay foreign debt obligations. So far, it seems to be working.

“You have some goodwill at the beginning and they’re tackling a few things that would be complicated to do in the future,” said Diego Ferro, co-chief investment officer at Greylock Capital Management. “They have to look proactive on the domestic front first and they’re doing everything according to the textbook.”

The government is working toward lifting currency controls as early as this week, Macri said. On Monday, the central bank ordered financial institutions to unwind their foreign-currency positions as part of an agreement with the futures exchanges. The central bank wants exchanges to rewrite the terms of some derivatives that may have handed holders a windfall profit and after Sturzenegger’s predecessor, Alejandro Vanoli, sold currency forwards at below-market rates in a bid to prop up the peso. Without that help, analysts estimate the central bank would be liable for about $10 billion of contracts payable in pesos.

The peso, which currently trades at 9.8060 per dollar in a crawling peg controlled by the central bank, may weaken to about 13 per dollar by year-end, Banco Itau BBA said in a report. In the black market, the currency trades at 14.55.

International Reserves

Boosting international reserves is another key point of Macri’s broad plans for the peso. At $24.5 billion, reserves are at the lowest level in nine years. After eliminating most taxes and with free-floating currency, grain exporters may begin to sell dollars to buy crops off farmers in coming days, Agriculture Minister Ricardo Buryaile told Radio Mitre on Tuesday. The tax agency, known as AFIP, estimates that as much as $11.4 billion of soy, corn and wheat are being held by farmers waiting for better conditions to sell.

An additional $500 million investment between YPF SA and Dow Chemical Co. in shale gas was announced Tuesday at the presidential residence after a meeting between Macri, ministers and company executives.

Macri has also moved to fill key positions in government, including a new director of the statistics agency that has come under fire from private economists and the International Monetary Fund for misreporting economic data.

Not all of Macri’s moves were welcomed. The former mayor of Buenos Aires came under criticism, even from his own allies, for bypassing Congress and appointing two new Supreme Court judges on Tuesday.

His government argued that the decision to name Carlos Rosenkrantz and Horacio Rosatti was taken because the Senate is in recess until March 1. Julio Cobos, a senator for the Radical party that formed an electoral alliance with Macri, said the government could have called for a special congressional session to approve the nominations.

Greylock’s Ferro said that while the move doesn’t break the law, it may erode the goodwill Macri is currently enjoying.

“Let’s hope that he keeps these actions limited because a big part of his goodwill comes from the belief that he has a respect for institutions,” Ferro said.

Back to contents


By Carolina Millan and Daniel Cancel

December 15, 2015

* Resolving futures impasse key to proceeding with devaluation

* Banks are ordered to unwind foreign-currency positions

Argentina’s newly elected president moved closer to fulfilling his pledge to let the currency trade freely by ordering a series of steps that will reduce the central bank’s liabilities when the peso depreciates.

Financial institutions must unwind their foreign-currency positions as part of an agreement with the futures exchanges under which they will rewrite the terms of some derivatives that would have handed holders a windfall profit. Critics of the previous administration had said it was selling the currency forwards at below-market rates to prop up the peso, which analysts estimate will fall as much as 35 percent when it floats.

Federico Sturzenegger, the new central bank president, had to resolve the futures impasse before proceeding with lifting controls in order to reduce the bank’s liability stemming from the contracts, according to Rafael Di Giorno, a director at Proficio Investment in Buenos Aires. While the central bank doesn’t publish data on the futures contracts it has on its books, they may total as much as $10 billion, according to consulting firm Elypsis.

“The government has to devalue as soon as possible since they need an inflow of dollars to rebuild reserves, especially from exporters,” Di Giorno said. “If they had devalued without fixing these contracts they would have faced a huge loss.”

The central bank will likely try to repurchase the foreign-currency contracts sold by the banks, he said. Argentine banks have about $1.8 billion worth of foreign-currency holdings that will have to be unwound, according to an official at the monetary authority who isn’t authorized to speak publicly on the matter.

President Mauricio Macri, who took office Dec. 10, told a room full of executives Monday that his team is working to lift currency controls this week as he tries to rebuild the nation’s foreign-exchange reserves, which are at a nine-year low. The scrapping of a crawling peg for the peso will bring it closer to the black-market rate of 14.7 pesos per dollar, from the current 9.8 , and establish a single exchange rate after four years of controls, Finance Minister Alfonso Prat-Gay said ahead of the Nov. 22 elections.

In a regulatory filing late Monday, the Rofex futures exchange said it had agreed to add between 1.25 and 1.75 pesos per dollar to foreign-exchange contracts opened since Sept. 29. While the central bank run by former chief Alejandro Vanoli sold futures agreements due in February at about 10.5 pesos per dollar, offshore forwards trade at 15.13 pesos. Allies of Macri had said the central bank sold the futures at artificially low prices in order to stem expectations for a devaluation ahead of elections the governing party lost.

Trading volume on the Rofex more than doubled from a year earlier to a record in October as investors sought to profit from the growing gap between prices in onshore and offshore markets

“In the context of the situation in the dollar futures market, the Central Bank of Argentina (BCRA) will require financial entities to reduce completely their global net position in foreign currency, that includes spot and future positions,” the bank said in an e-mailed statement.

Back to contents


By Jorge Otaola

Dec 15, 2015

Dec 15 Argentina’s central bank has clinched deals with its trading exchanges to limit its losses on controversial U.S. dollar futures contracts once it starts devaluing the peso, a senior source at the monetary authority told Reuters on Tuesday.

The new government, which took office last week, has accused the former leadership of the bank of selling the derivatives at below market rates. Prosecutors are investigating those claims.

Under new chief Federico Sturzenegger, the central bank had been considering not even recognizing those contracts. Instead it struck a deal with exchanges to raise the rates in the original contracts, according to the source.

This would limit the monetary authority’s losses and the gains of the private sector, which endorsed the deal.

“The negotiations were hard because everyone defended their own interests,” said the source, who asked not to be named.

Former central bank chief Alejandro Vanoli sold March contracts at 10.65 to 10.80 pesos per U.S. dollar while these were trading around 15 pesos in New York. Vanoli quit last week under pressure from Macri.

On Monday Macri had said he would start this week lifting the restrictions to access to U.S. dollars that were imposed by Fernandez. He has not specified the speed at which he will lift the restrictions, known collectively as the “cepo”.

Freeing up capital controls will likely weaken the peso. Local market sources say they expect the official peso rate would weaken to around 13.5 to 15 to the greenback, versus the current rate of 9.8 per dollar.

Such a significant devaluation move would cost the central bank more than $7 billion in foreign reserves if it were to respect the original dollar futures contracts. Some analysts estimate its net reserves simply would not be enough to cover that cost.

“The new team has closed deals in which everyone had to give a little, but with the knowledge that it’s what’s best for credibility and confidence in this new chapter of the economy,” said the central bank source.

The peso’s black market rate was at about 14.5 to the U.S. dollar on Tuesday. Macri has said repeatedly he wants the black market and the official rates to converge.

Back to contents

8. YPF, DOW TO INVEST $500 MILLION IN ARGENTINA SHALE IN 2016 (Dow Jones Institutional News)

15 December 2015

BUENOS AIRES—Argentina’s state-run oil company, YPF SA, and Dow Argentina, the local unit of Dow Chemical Co., said Tuesday they will invest $500 million in 2016 to explore for shale gas.

The companies, which have already invested $350 million in a joint shale gas venture, said in a statement that total investment could reach $2.5 billion in coming years.

The transaction will represent the first significant foreign investment announcement in Argentina since President Mauricio Macri took office last week. His administration is seeking to dismantle key policies of his predecessor and boost investor confidence to kick-start a moribund economy.

The joint venture is the leading shale gas project of its kind in Argentina, with daily production of about 750,000 cubic meters. The aim is to triple that next year to about 2 million.

YPF and Dow have already drilled 19 shale gas wells in Vaca Muerta, a massive shale oil and gas rich region in the province of Neuqué n. They will drill 30 new wells next year and eventually increase that to more than 180 wells in the years ahead.

Argentina ranks second in the world, behind China, in potentially recoverable shale-gas reserves, with 802 trillion cubic feet, according to the U.S. Energy Information Administration. Argentina also ranks fourth in shale oil with an estimated 27 billion barrels.

YPF is also working with Chevron Corp. to produce shale oil in Vaca Muerta. The two companies have invested around $3.5 billion to drill unconventional oil wells, making Argentina the leading unconventional producer outside of Canada and the U.S. The companies could total $16 billion over the next 15 years.

YPF has also joined with with Malaysia’s Petroliam Nasional Bhd, or Petronas, in a deal that could lead to up to $9 billion in investment over the next decade. And in September, YPF signed a deal with Russia’s OAO Gazprom that could lead them to develop shale projects.

Dow, which began working with YPF in 2013, is eager to obtain gas for use as a key ingredient in its chemical business.

“We are seeing extraordinary results, and we’re doubly enthused that a leading petrochemical company trusts us to develop its first upstream project,” Miguel Galuccio, YPF’s chief executive, said.

Argentina’s government sets the price of newly produced gas at $7.50 per million British Thermal Unit, making it a profitable option for some companies in Argentina. In comparison, the spot price for a similar amount of natural gas in the U.S. is close to $2.

After years of divestment by oil and gas companies, Argentina’s government expropriated YPF in 2012 and began a push to raise oil and gas production.

The lack of investment had turned Argentina into a net oil and gas importer and led the government to spend billions of dollars every year to import energy. That, in turn, led to a shortage of U.S. dollars available to import other goods and make debt payments.

Mr. Macri hopes that by reversing his predecessor’s key economic policies, he can boost investor confidence and spur foreign investment.

Back to contents


15 December 2015


Fulfilling one of his campaign promises, the recently inaugurated president, Mauricio Macri, has announced the lifting of export taxes on most agricultural products. Soybeans, the country’s largest agricultural crop, have been excluded, but taxes on soybeans will drop by 5 percentage points, to 30%.


Export taxes were first imposed in 2002, in the aftermath of maxi-devaluation, as a means of capitalising on farmers’ windfall gains from devaluation (which dramatically increased the local currency value of US-dollar earnings). The tax has been extremely unpopular with farmers, and has in the past few years become a burdensome drain on profitability for farmers, who are also struggling with rising input costs and lower international commodity prices. Amid these difficulties, the share of export taxes in total tax revenue has fallen from a recent peak of 10% in 2011 to 5% in the first eleven months of 2015.

The short-term fiscal cost of this measure will be limited by the maintenance of taxes on soybean exports, which currently account for almost 90% of total agricultural export taxes. The government hopes that by removing taxes on other agricultural items (which have until now been levied at rates ranging from 5% to 23%) it can encourage grains output-and recoup lost revenue via a rise in profit tax collection.

Mr Macri will also be hoping that this signal of positive intent towards a sector that was at odds with the last government, encourages farmers to liquidate grains that they have stored over the course of the year. It is estimated that US$6bn-9bn of grains are being hoarded by farmers awaiting better commodity prices and a more favourable exchange rate. For Mr Macri, accessing these potential dollar inflows will be important in bolstering the dwindling reserves, which have fallen to less than US$25bn. In a further gesture, Mr Macri is likely to lift other restrictions on agricultural exports, including export quotas, through which the former government managed the domestic supply of grains in an (unsuccessful) attempt to control food prices.

Back to contents


By Graciela Mochkofsky

December 15, 2015

Mauricio Macri, the newly sworn-in president of Argentina, ran for office under the campaign slogan “Let’s Change,” and his victory has already caused a few reversals. For the first time in Argentine history a self-declared right-wing, pro-business candidate—one not affiliated with Peronism or Radicalism, the country’s dominant political movements—has been freely and fairly elected as head of state, rather than installed by a military dictatorship. Also for the first time, a democratically elected president has put together an administration that is largely devoid of career politicians. Macri has packed his cabinet with veterans of the corporate world. The new finance minister is a former executive at JPMorgan Chase; the minister of foreign relations is a former C.E.O. of Telecom Argentina; the minister of energy is a former president of Shell Argentina; the minister of production is the former C.E.O. of a pension fund; the head of Aerolíneas Argentinas, the national carrier, is a former regional director for General Motors; and the transportation minister used to run his family’s car dealership. “There will never be a more market-friendly government than this one,” Alejandro Rebossio, the author of two books on Argentina’s economy, told me.

Macri’s appointments are in keeping with the technocratic approach to politics that he and his party, Propuesta Republicana (PRO), advocate. “PRO was born, to a large extent, as an attempt to encourage businesspeople to get involved in politics, to make politics more efficient,” Gabriel Vommaro, a sociologist at the National University of General Sarmiento, in Buenos Aires, and the co-author of “Mundo PRO,” a book about the Party, told me. “The C.E.O.s that occupy so many relevant positions are not so much an expression of the direct influence of corporations as of the centrality of a managerial ethos, with which macrismo wants to relaunch the country.” The PRO ethos was apparent even in the initial statements of some of the ministers who do not have corporate backgrounds. Speaking about the national literacy plan, Pablo Avelluto, the new culture minister, said, “I don’t know the details, but I agree that such a plan should exist.” The new environment minister, a rabbi named Sergio Bergman, was similarly sanguine. “I have no technical knowledge of the environmental area,” he told a reporter. “I will use common sense.”

Macri started out as an executive himself. His father, Franco, an Italian immigrant who made his fortune in construction and automotive manufacturing, hired him when he was twenty-four years old. For a time, it seemed as though the younger Macri would follow in his father’s footsteps. Photographs of the two men sunbathing, surrounded by young, curvy women in tiny bikinis, were a summer staple of celebrity-gossip magazines throughout the nineteen-nineties. Eventually, though, their paths diverged. In 1991, Mauricio Macri was kidnapped by a group of rogue policemen, who held him captive for twelve days, before ransoming him for six million dollars. The experience, he has said, transformed his perspective about life in the way that a terminal illness might have. When I interviewed him in November of 2007, shortly after he had been elected mayor of Buenos Aires, he said, “I am turning fifty soon. What am I supposed to do, become like my father?”

In some ways, Macri’s election is an emblem of broader change. “A new kind of right-wing leader is surging throughout the region,” José Natanson, the director of the South American edition of Le Monde Diplomatique, told me. Like Sebastián Piñera, the former president of Chile, or Henrique Capriles, the governor of Venezuela’s second-most-populous state, Macri is a post-neoliberal figure who speaks often of social compassion, and who will occasionally bow to populism. In 2009, when a judge ruled that Buenos Aires City Hall should grant a gay couple’s petition for a marriage license, Macri offered no opposition. He had previously called homosexuality a “disease” and refused to back a proposed marriage-equality law. As mayor, he could have instructed the city’s lawyers to appeal the ruling. He didn’t. Whether or not his convictions had changed, those of his constituents were clear: seventy-three per cent of them supported gay marriage. Macri’s PRO colleagues in the National Congress were divided in their votes on a national gay-marriage law, but he stayed true to the Party’s purportedly nonideological approach to politics—one that often takes polling into account.

It isn’t clear whether Macri will be able to reproduce this sort of maneuver on the national stage, pleasing both his C.E.O.-crowded cabinet, the lenders and investors behind it, and his fellow-citizens. First, there is the economy. In 2011, Cristina Fernández de Kirchner, Macri’s predecessor, imposed a cepo, or clamp, on currency-exchange operations in Argentina. Her goal was to avoid both the flight of capital and a devaluation of the peso. Four years later, the country’s foreign reserves, according to Argentina’s central bank, are at a low of twenty-five billion dollars, less than half what they were when the cepo began. Macri has promised to end the policy, which he believes will encourage Argentine soy and grain exporters to sell, bringing money into the country. But the sudden end of the cepo might provoke an immediate jump of the exchange rate, causing a deep devaluation of the peso and, in turn, inflation—as much as thirty per cent in 2016, up from twenty-three per cent this year, according to some projections.

Macri has also said that he will eliminate most of the energy and public-transportation subsidies that were instituted by Cristina Kirchner and her husband, Néstor Kirchner, who was president from 2003 to 2007. The subsidies account for four per cent of the country’s G.D.P.—the entire fiscal deficit of Argentina being six and a half per cent of G.D.P.—and have meant low utility bills for millions of Argentines throughout the past decade. Although Macri has vowed to maintain subsidies for the poor, who make up twenty-one per cent of the population, this means that many subsidy recipients, in the middle and upper-middle classes, could see an increase of as much as seven hundred per cent in their utility bills.

Dim economic prospects among Argentina’s neighbors will not help, either. The Latin American economy is shrinking for the first time since 2009, with a projected growth for the entire region of half a per cent in 2016. The economy of Brazil, Argentina’s main commercial partner, is expected to shrink by up to two per cent. The strategy that Macri has announced to stimulate his country’s economy involves seeking credit and investment from abroad. He will enjoy an advantage that no president since 1983 has had—the lack of heavy foreign debt, a legacy of the Kirchners. Macri is expected to reëstablish relations with international capital markets and the International Monetary Fund, which were severed during the Kirchner era. “His economic team is very close to the financial markets, which are only interested in fabricating debt,” Rebossio said, noting that Macri increased the debt of Buenos Aires threefold during his time as mayor. This debt, Rebossio added, may serve as a deterrent. “I am hearing private investors say that if there are no austerity measures, they will not invest one dollar,” he said. In one of the first interviews he granted after his electoral victory, Macri remarked that he wanted “a market balanced by a strong state.” But how will that be accomplished when the same market is being asked to fund the needy state?

One way to compensate for economic pressure would be to resort to politics. Here again, though, Macri will meet with several complications. Having won by a narrow margin—2.68 per cent of the popular vote—he has no majority in either congressional chamber, even counting every seat belonging to the electoral coalition that brought him to power. In his cabinet, there is a conspicuous absence of the political groups that helped him win. Although Peronism was defeated in the election, because of divisions among its candidates, it remains the country’s main political force. Macri will have to reckon with fifteen Peronist governors and the powerful Peronist trade-union association. The risk for Macri is that these groups will reunite around one chief, perhaps even a familiar face. Cristina Kirchner is leaving office, after eight years in power, with a popularity rating of forty per cent, the second-highest of any exiting president in the past three decades. (The highest rating belonged to her husband.) A crowd of more than a hundred thousand people gathered in front of the presidential palace to bid her farewell last Wednesday. As leader of her party, she still has influence over forty-three senators and a hundred and seventeen representatives—more than PRO—and the Argentine constitution does not bar her from running for president again.

On Monday, in a token, perhaps, of what may be his way of overcoming his political disadvantage, Macri appointed two new Supreme Court judges by decree, circumventing the usual process of confirmation by the Senate. This has never previously been done by a democratically elected president in Argentina, and it seems to refute Macri’s vow to uphold the country’s “republican institutions.” The move was denounced by some of his supporters, including legal experts within his own camp. As Margarita Stolbizer, a former Radical politician who publicly supported Macri during the second electoral round, put it, “If Cristina Kirchner had done this, it would be a scandal.”

Back to contents


By Linette Lopez

Dec 15, 2015

The drama that is Argentina versus American hedge funds could be set to start up again in full force.

Mauricio Macri this month replaced Cristina Fernandez de Kirchner as president, after running a pro-business, free market agenda meant to end the country’s status as an international market pariah.

Of course, to do that, it has to clear up its old debts with a bunch of holdout hedge funds, but it has already dropped a very clear hint that it’s not going in that direction.

According to Bloomberg and media outlets within Argentina, Argentina is trying to go directly to international banks to raise between $5 and $10 billion. That has the hedge fund holdouts worried, according to one person familiar with their thinking.

“It’s looking like politics as usual in Argentina,” the person said.

Macri said that he would take the country off its dual exchange rate structure and right its economic ship — a complete 180 degree turn from the previous administration. But that’s not what’s happening, according to the person.

“I would not expect the tiger to change its stripes very quickly,” the person said.

For Argentina to get back into the world’s good graces, it has to pay back all of its loans, and this person says that Macri has “made absolutely no progress whatsoever on resolving the situation” since he was elected.

The situation

What Argentina must resolve is the matter of almost $2 billion in debt the country owes investors after they purchased its debt following Argentina’s 2001 default. While most investors took a haircut on that debt, a group of holdouts — led by Paul Singer of Elliott Management — did not. Argentina, in turn, refused to pay them and has been locked out of international credit markets ever since.

The holdouts have pursued this matter in court and won at every significant turn, but that hasn’t changed the Argentine government’s stance on the so-called “vulture funds.” Meanwhile, the economic situation in Argentina has worsened. It’s inflation rate is second only to Venezuela’s, and the country’s Central Bank reserves are at their lowest level in nine years, according to Bloomberg.

That is why Macri entered the presidency with a strong mandate for change. The market hoped that change would come as soon as possible.

“The Government’s honeymoon can be short. Thus they will need to seize the day and act decisively,” wrote economist Claudio Loser in a recent note.

If Argentina settles with the holdouts, it can raise money from creditors all over the world, but it should do this before its economic situation at home spins out of control, Loser said in his note.

The hard way

Instead, Argentina is trying to go directly to international banks to raise funds. The problem with that, though, is that getting a loan from the banks without settling with the holdouts is going to be really expensive.

“This deal is exceptionally expensive to Argentina,” said the person familiar with the holdouts, adding that it was “probably an overall rate of 12-20% for several billion dollars. That’s much more than even the Kirchner administration would tolerate.”

Analysts at Graham Fisher & Co. concluded the same thing and urged Argentina not to take an expensive, potentially harmful deal because of its refusal to settle with the holdouts.

“Sources suggest that some of those foreign firms are recommending that the Argentines take on large debts ahead of any settlement so that Argentina would somehow be in a stronger position to approach holders of defaulted debts. This approach is neither fiscally or legally sound,” said the report.

“Attempting to access capital markets via foreign banks, ahead of a resolution, would only serve to complicate matters. First, the debt will naturally have unfavorable terms and be more expensive than post-resolution capital. Second, it would risk embroiling the new government in the legal problems created and perpetuated by the Kirchner regime and would be a counterproductive approach for a new administration seeking a fresh path.”

Naturally the holdouts want to be paid before such complications arise, and the fact that that they would even run the risk seems like a red flag, according to the person familiar with the holdouts.

“It is a huge mistake to start your administration this way, to signal to the world that you’re going to be too cute about the rules.”

Sometimes when you’re too cute for too long, things start to get ugly.

Back to contents


By Shannon K. O’Neil

December 15, 2015

What economic challenges does Argentine President Mauricio Macri inherit from the Fernández de Kirchner government and how will he tackle them?

Meiman Hock: Critically low foreign currency reserves represent Argentina’s biggest economic challenge. It is estimated accessible reserves stand somewhere between $2 billion and $6 billion at this time. Macri will work toward reaching a settlement with the holdouts in order to access international credit markets, but this will take time. In the near term, he will need to cut deals with the World Bank and the International Monetary Fund (IMF), which will necessitate resolving pending arbitration claims, as well as normalizing Argentine statistics. With reserves at a sufficient level, he will be better equipped to address other challenges: unifying the exchange rate, addressing inflation, loosening price, capital, and import controls, and eliminating most export taxes.

Jones: In addition to anemic foreign reserves, Macri must also deal with a fiscal deficit at 7 percent of GDP this year and growing, and an overvalued peso. Macri will try to rein in rising public employee salaries and reduce expensive energy subsidies to consumers in the city and province of Buenos Aires.

Are there any economic positives for the new president?

Jones: Argentina is blessed with tremendous human capital and bountiful natural resources. If Macri can establish a credible rule of law and economic stability, U.S. and Argentine investors will pour funds into the development of Vaca Muerta and other shale gas deposits in addition to traditional investments in agriculture.

Meiman Hock: The current situation in Brazil is both a positive and negative for Argentina. On the one hand, the economic downturn in Argentina’s largest trading partner will diminish demand for Argentine exports. On the other, if Macri can lay out a clear plan forward and build confidence, Argentina stands to attract investors currently disenchanted with Brazil and with pent-up demand for Argentina.

Who will make up Macri’s government and what is his strategy for working with Congress?

Jones: Macri’s eschewed a European-style coalition or even a president-dominated multi-party one à la Brazil. The government will be mostly made up of members of Macri’s PRO party. His electoral allies, the Radicals (UCR), received only a few second- and third-tier ministry positions.

In Congress, Macri will try to garner some Peronist support to move legislation forward, given the PRO has only a small share of seats. But to Macri’s advantage, former President Fernández de Kirchner’s Frente Para la Victoria party is splintering and he can leverage the financial resources at his disposal to work out agreements with governors and other territorial leaders who possess considerable sway with deputies and senators from their respective provinces. Still, as the midterm elections approach in the second half of 2017, Macri will be watchful of both Peronists (including Sergio Massa), as well as the Radicals (UCR)—who realizing further PRO growth will likely come at their expense—may turn against him.

Meiman Hock: Macri has chosen—at least nominally—to disperse power within his cabinet. Rather than having a traditional super minister of economy, his goal is to have several centers of power, with his trusted advisors in the presidency ensuring that, rather than a solo act, the Macri administration performs more like an orchestra.

How will Macri reshape Argentina’s place in the region?

Meiman Hock: Argentina under Macri will attempt to assert a new role in the region. It is telling that Macri’s first foreign trips, even before his inauguration, were to Brazil and Chile, seeking to build closer ties with the two countries. We can expect that Macri will be tougher on Venezuela, and will also leverage Argentine participation in the G20 to make a splash on the world stage.

Jones: With the United States, Macri will work to reestablish a stronger relationship. Under former President Fernández de Kirchner, things could not have been much worse. But Macri’s team will have to be strategic in the rapprochement as their hands are tied somewhat by public opinion. Over half of Argentines don’t have a positive view of the United States, and even more don’t trust it. Still, the United States will have a stronger ally in Argentina on issues relating to Venezuela, drug trafficking, Iran, and the growing role of China in the region.

This post features Mark P. Jones, the James A. Baker III Institute for Public Policy’s political science fellow and Joseph D. Jamail Chair in Latin America Studies at Rice University, and Kellie Meiman Hock, managing partner and director of the Brazil and Southern Cone and trade practices at McLarty Associates. Latin America’s Moment recently sat down with Jones and Meiman Hock to discuss Argentina’s outlook.

Back to contents


By Damian Ortellado

Dec. 15, 2015

Last month’s runoff presidential election set the stage for a new era in Argentine politics. Mauricio Macri, a non-Peronist candidate, won a stunning victory, representing a marked shift in the political philosophy that defined the 14-year Kirchner era. Now, In an effort to bring governance issues to the forefront as the new administration takes office, a group of civil society organizations — including Asociación Civil por la Igualdad y la Justicia (ACIJ), Asociación por los Derechos Civiles (ADC), Fundación Directorio Legislativo and Poder Ciudadano — have launched the Agenda de Transparencia para Argentina.

The reform agenda for 2016 defines a number of issues that Macri’s freshly elected government will face and proposes an action plan for addressing them in ways that encourage civic engagement with citizens and activist groups alike. The proposal addresses a wide range of issues, from systemic changes for rooting out corruption, to new legislation around openness, to updates that will increase public understanding of the policymaking system.

Argentina has one of the lowest ratings for legislative transparency in Latin America. (Graphic Credit: Transparencia Legislativa)

First, Argentina is one of only four countries in Latin America without a freedom of information law. As a result, developing and passing FOI legislation — a goal that has seen growing demand from civil society internationally — is one of the first proposals on the agenda.

According to reformers, the current infrastructure places incumbent governments in unreasonably advantageous positions. To combat these concerns, the platform is also built around proposals that would mandate reform from within. The coalition is working on building momentum around small steps aimed at forwarding political equity, such as updating the obsolete balloting system as well as proposing long-term goals, such as creating an independent electoral agency and tightening campaign finance laws. Simple fixes like limiting the conflation of party colors, images and names with government agencies could make a huge difference in levelling the playing field for opposition candidates.

The coalition also fears that corruption and secrecy continue to hamper progress in equitable governing. In Argentina, agencies charged with handling corruption and transparency policies, such as the Office of Anti-Corruption, are politically and financially dependent on the majority party. Knowing the impediments that dissidents face in keeping checks on the administration, the platform is intent on giving opposition parties a majority say in appointing government auditors to balance these interests and encourage enforcement of corruption legislation across all parties.

Finally, the platform advocates for more openness at the core of government — the congressional houses that represent the body of decision-making in Argentina. The country currently has one of the lowest ratings for legislative transparency of the nine surveyed as a part of last year’s Indice de Transparencia Legislativa project, and both houses are in legal disputes with civil society groups about the publication of data. The Agenda de Transparencia para Argentina proposes an open budget process, employee and administrative data, as well as access to session and commission meetings. This will foster a more collaborative legislative process aimed at both building public awareness and integrating different sectors of society into the lawmaking process.

The Sunlight Foundation applauds these efforts to demand more equitable and transparent government. We wish reformers the best of luck in achieving the platform’s goals over the next year. You can read more about each of the specific 12 proposals at the newly launched agendatransparencia.org, a portal for the platform complete with updates on the status of its successes.

Back to contents


By Fernando Sdrigotti

15 December 2015

Mired in political chicanery, the presidential handover was not up to the standards of an advanced democracy. But suspicions of maneuvers trying to limit press freedom are much more worrying.

Winds of change are blowing in Argentina. December 10 saw the government of President Mauricio Macri take the baton from Cristina Fernández de Kirchner — a left-leaning government replaced by a centre right one, twelve years of “Kirchnerismo” coming to an end, state-centred populism replaced by free-market utopianism. In typical Argentine fashion half the country welcomes these new airs while the other half regrets them. Time will only tell which half is wrong, not that they will manage to agree among themselves.

Although celebrated in peace the presidential handover was mired in political chicanery. The disagreements began around where to host the swearing-in ceremony — in the Casa Rosada or in the Senate — and they extended over the time at which the departing president’s mandate should end. The latter, after the initiative of the then elected president, was decided by a court injunction that ruled that Fernández de Kirchner would officially end her mandate at 23:59, December 9. The dialogue broke down after this point and CFK, as she is known in political circles, was missing from the official proceedings on December 10, with the provisional president of the senate — Federico Pinedo — tasked with leading the inauguration ceremony.

Half the country blames this farce on Macri, the other half blames it on Fernández de Kirchner, in typical Argentine fashion. The international press meanwhile has been having a field day seeing the “botox queen” walk into her bunker in the Argentine south. Macri’s non-confrontational gospel seem to have pleased editors and creditors the world over.

Now all this — beyond one’s ideological leanings — should be rather anecdotal. What matters here — for any Argentine with memories of president Fernando De la Rúa escaping the Casa Rosada in a helicopter in 2001, or of the four presidents that followed afterwards, in just under two weeks — is that the handover was relatively uneventful, at least in appearance.

For a different type of chicanery, much more serious due to its possible implications, is also being played out right now. Since at least December 1 the Argentine daily Página 12’s website has been under a cyber attack — the paper was only accessible through a mirror site for most of the part of the past two weeks. Since December 12, the same was happening to Diario Registrado’s website. At least in the case of Página 12 everything seems to point to a DoS attack, with the website registering at least twenty times its normal traffic. That both newspapers have been openly supportive of the Kirchnerist administration, that they are opposition papers since December 10, raises many flags.

Argentine organisations have voiced their concern regarding these “interferences”, among these the Association of Journalism Entities of Argentina (ADEPA), the Argentine Journalism Forum (FOPEA), the Freedom of Speech Foundation (LED), and PEN Argentina. The scant coverage in the Argentine press, on the other hand, is a stark reminder of the complex relationship between the Argentine media and the country’s democratic institutions.

The attempt to end the quasi-monopoly of media in Argentina, where a few key names control most of the market, was after all one of the driving forces of the Kirchnerist administration. This attempt was many times painted as authoritarian by the oppositional press and politicians, even if newspapers never “disappeared” during the past twelve years. In this quasi-monopolistic scenario — where most media outlets will be supporting the new administration — the absence of these two oppositional voices, for however long, has been a serious attack to the Argentine press freedom.

At the time of writing, Diario Registrado’s website remained inaccessible. An investigation has been launched into the Página 12 hack and the site has been running without problems, at least when accessed from abroad. The new administration has yet to officially address this matter.

It would be misleading to suggest the Macri government is in any way guilty of these attacks. But it is only sensible to expect some kind of official reassurance that Argentina is not resorting back to the old, dark, tradition of silencing oppositional voices, now by digital means.

Back to contents

Responder Responder a todos Reenviar Más

<img alt="" border="0" src="https://pixel.wp.com/b.gif?host=argentinasalvajizada.wordpress.com&blog=6281912&

Show more