Argentine Economy

I would like to read this one in it's entirety.

Thanks,

Bob

[QUOTE=Sidney]You could Search BA Herald's editorials or The World Economic Forum.[/QUOTE]I do not currently subscribe to the BA Herald on line.

Thanks,

Bob

I think you don't need to be a member to read the editorials.

Prices of appartment in Zona Norte up 17% for new appartments, 23% for older appartments in the last year. Also 13% less appartments on the market.

It seems that at least in Zona Norte the housing bubble is not at it's end.

Report is from UADE

Stock Investors Should Avoid Argentina, Deutsche Bank Advises.

By James Attwood.

March 19 (Bloomberg) -- Deutsche Bank AG said investors shouldn't own any stocks in Argentina, which is the best performer this year among the world's 20 biggest equity markets.

'We continue to recommend a zero weight in Argentine equities,'' analyst Guilherme Paiva wrote in a report today. He cited the 'low'' level of investment in the economy, inflation and the government's 'unorthodox policies'' such as price controls.

The nation's Merval Index lost 3.5 percent in 2008 as of 10:05 am in New York, beating benchmarks in the 19 other largest nations by stock-market value.

You are also the same guy that predicted the Euro had peaked.

There is not enough supply of soy, grains and almost all agriculture products to feed the world and make biofuels.

Unless there is a serious economic crash prices will stay high on the short and middle range time frame.

[QUOTE=Redondo]You will probally start an insult again as nobody has ever teached you to debate.

January 24, 2008 - 1

Copyright © 2008 Earth Policy Institute.

Why Ethanol Production Will Drive World Food Prices Even Higher in 2008

A University of Illinois economics team calculates that with oil at $50 a barrel, it is profitable—with the ethanol subsidy of 51¢ a gallon (equal to $1.43 per bushel of corn)—to convert corn into ethanol as long as the price is below $4 a bushel. But with oil at $100 a barrel, distillers can pay more than $7 a bushel for corn and still break even. If oil climbs to $140, distillers can pay $10 a bushel for corn—double the early 2008 price of $5 per bushel.

Copyright © 2008 Earth Policy Institute[/QUOTE]The U. S., which makes ethanol from corn, imposes an import tariff of 54 cents a gallon on Brazilian supplies and there is a federal 51- cent-per gallon excise tax credit that refiners receive for meeting the federal Renewable Fuels Standard (RFS) mandate.

So Corn based ethanol get 54 + 51 cent = 105 subsidies, that why corn prices are so high. And since farmers can choose to plant corn or something else, it makes other crops go up too. Corn based ethanol does not give much of an energy gain, some people even say its negative, since it cannot be piped, but must be transported by rail, or truck, which use energy. It's a ripe off, set up by mostly Senator form farm states, to help out there voters. Sugar cane is viable though.

That said, it does not mean, farm commodities prices won't come down. They probably will over the short term. If you are long corn or wheat futures, you can have you head handed to you. Another reason the commodities are so high is there has been droughts in Australia and a few other places. As well as the weakening dollar. Part of Australia has had better rain, lately then last year, the other half has not.

[QUOTE=Tessan]The U. S. Which makes ethanol from corn, imposes an import tariff of 54 cents a gallon on Brazilian supplies and there is a federal 51- cent-per gallon excise tax credit that refiners receive for meeting the federal Renewable Fuels Standard (RFS) mandate.

So Corn based ethanol get 54 + 51 cent = 105 subsidies, that why corn prices are so high. And since farmers can choose to plant corn or something else, it makes other crops go up too. Corn based ethanol does not give much of an energy gain, some people even say its negative, since it cannot be piped, but must be transported by rail, or truck, which use energy. It's a ripe off, set up by mostly Senator form farm states, to help out there voters. Sugar cane is viable though.

That said, it does not mean, farm commodities prices won't come down. They probably will over the short term. If you are long corn or wheat futures, you can have you head handed to you. Another reason the commodities are so high is there has been droughts in Australia and a few other places. As well as the weakening dollar. Part of Australia has had better rain, lately then last year, the other half has not.[/QUOTE]A drought in Australia is not a good thing? Argentina has atleast since the devaluation been able to raise production, and they are a country with very few natural disasters and favorable climate, so they will probally continue to do so.

And I think if the USA (and Europe) uses corn to produce biofuels this will be positive for worldprices of corn

[QUOTE=Redondo]A drought in Australia is not a good thing? Argentina has atleast since the devaluation been able to raise production, and they are a country with very few natural disasters and favorable climate, so they will probally continue to do so.

And I think if the USA (and Europe) uses corn to produce biofuels this will be positive for worldprices of corn[/QUOTE]There are long-term trends, and short-term stuff. Right now it looks like a pull back across commodities across the board. On Monday it might or might not go down, but I guess by weeks end, Commodities will be lower, or I am going to loose some serious money. If you are long futures, it counts; the short term can wipe you out, even if your holding futures that do not expire until next crop cycle.

[QUOTE=Tessan]There are long-term trends, and short-term stuff. Right now it looks like a pull back across commodities across the board. On Monday it might or might not go down, but I guess by weeks end, Commodities will be lower, or I am going to loose some serious money. If you are long futures, it counts; the short term can wipe you out, even if your holding futures that do not expire until next crop cycle.[/QUOTE]In a time like this there will be very fluctutations offcourse, good for you prolly to make some serious money but if I was Cristina I would rather worry about:

Inflation.

Farmers strike.

Lack of industry.

Lack of R & D.

Lack of investment.

Dependence on Bolivia on gas imports.

Lack of hydro carbons.

Foreign debt.

I don't think that Argentina should worry a lot about the price for commoties, the stocks of most crops are on a all-time low, the USA and EU are going to convert a serious amount of crops into biofuel, the world population is growing and Argentina does have very few natural disasters

[QUOTE=Redondo]Dependence on Bolivia on gas imports.[/QUOTE]. And cocaine

[QUOTE=Redondo]Still confident?[/QUOTE]I am short oil not ag. I am using puts on the USO, instead of the futures. With the move in the last few days, I am making money. Reason I said that, was that metal, ag, and oil have been moving together. I plan to sell out of the April puts, and buy the July puts, if oil pulls back another dollar or 2. I prefer to use the ETF that tracks oil, instead of the Future, since I cannot get a margin call, if I am wrong. Ag is being affected by weather and what going on with the Argentina farmers strike. [url]http://www.bloomberg.com/apps/news?pid=20601012&sid=aLe.Rs8o2SHc&refer=commodities[/url]

I am confident oil will pull back, since there are no shortages, but the question is when, that why I want to switch out of the April put, and buy they Julys.

Thanks for your explanation, hopefully you will do ok.

I do think that most argiculture products will stay high unless there is a major recession that also drags Europe and far East down.

[QUOTE=Redondo]Thanks for your explanation, hopefully you will do ok.

I do think that most argiculture products will stay high unless there is a major recession that also drags Europe and far East down.[/QUOTE]I think ag will stay high, compared to a few years ago. The reason is China and India. As well as bio fuels. But that does not mean that it cannot drop from where it is here. Agricultural commodity are up over 56% this year, it could pull back 20% and still be very high, compared to the passed prices. I have a feeling it will pull back.

Even with the pull back, Argentina should do ok, since prices are very high compared to historic prices. Argentina has had a gift, with these high ag prices. If not, it's economy would be in trouble. This gov. Likes to micro manages the economy too much, which impedes growth. But they been lucky with ag prices so high.

That was my orignal point as well. If it comes down to argiculture, Argentina is well positioned.

[blue]=============================================

Okay Redondo,

You've been getting too chatty lately, so your next post must be a first hand narrative of an experience you had with a working girl here in BsAs.

Thanks,

Jackson[/blue]

[QUOTE=Redondo]Looking at TN, Cristina and Argentina probally find a way to shoot themselves in the food[/QUOTE]Soybeans in Chicago Rise Trading Limit on Argentina Protest.

[url]http://www.bloomberg.com/apps/news?pid=20601012&sid=ag9PRDGbWREI&refer=commodities[/url]

If farmers plant fewer crops in protest, then they will shoot themselves in the foot.

[QUOTE=Tessan]Soybeans in Chicago Rise Trading Limit on Argentina Protest.

[url]http://www.bloomberg.com/apps/news?pid=20601012&sid=ag9PRDGbWREI&refer=commodities[/url]

If farmers plant fewer crops in protest, then they will shoot themselves in the foot.[/QUOTE]They won't but government will roll back taxes.

[blue]=============================================

Okay Redondo,

You've been getting too chatty lately, so your next post must be a first hand narrative of an experience you had with a working girl here in BsAs.

Thanks,

Jackson[/blue]

[QUOTE=Redondo]They won't but government will roll back taxes.

[blue]=============================================

Okay Redondo,

You've been getting too chatty lately, so your next post must be a first hand narrative of an experience you had with a working girl here in BsAs.

Thanks,

Jackson[/blue][/QUOTE]Redondo will present his on-going "first hand experience" with the escort "Maria Palma" (Mary Palm)

La construcción creció 11,5 por ciento en marzo.

Es según el índice Construya, que cuantifica la evolución mensual del sector según la comercialización de los insumos. De esta manera, subió 2,78 por ciento respecto del mes de febrero último.

La construcción creció 11,5 por ciento en marzo.

Imprimir.

Enviar a un amigo.

Aumentar - Reducir tipografía.

La actividad del sector de la construcción, medida según la comercialización de sus insumos, creció en el mes de marzo 11,5 por ciento de manera interanual why subió 2,78 por ciento respecto del mes de febrero último, según el índice Construya difundido hoy.

El índice Construya cuantifica la evolución mensual del sector a través del accionar de las compañías que conforman la asociación del mismo nombre.

El grupo Construya se creó en el año 2002 why reúne a las empresa Grupo Later-Cer, Cerámica Quilmes, Sherwin Williams, FV, Loma Negra, Cerro Negro, Klaukol, Aluar, Acer Brag, Plavicon, El Milagro, Ferrum, Durlock, Masisa why Dema-Aqua System.

Source: Canal 26

Seems like the construction boom is lasting for a while more.

11% growth in the construction sector from febuary untill march

Had an interesting discussion on Tuesday night with one of the senior Argentinian managers of Amway. For the uninitiated, this is a USA outfit out of Michigan that sells cleaning and personal hygiene products by direct marketing. Operate in all the western world and now in the asian markets. In fact China is their number two market.

Since the 'corralito' of 2001/2, they have been contracting the manufacture of their products to local factories. They now have just-on completed a reverse and are back to sourcing their products out of Michigan. The reason: solely price.

For me this is unbelievable. It is cheaper to ship product produced in the USA to Argentina, go through the bullshit associated with all that Argentinian Customs can throw at you, pay 50% duty plus 21% IVA and still be less than the local cost. This is precisely one of the reasons for the complete collapse of what little manufacturing that did take place before 1995. Imports were cheaper.

Another note on a similiar vein. I have just been in Peru for a few days. Men's shoes there are about 30% of Argentinian prices and of a similiar quality. The shoe industry in Argentina collapsed as far as manufacturing, in the mid 1990's and really only got going again in 2003. If what is true of soap, despite the 50% tarif, is true of all manufacturing, and the shoe comparison is indicating that, industrial Argentina is about to hit a brick wall.

Internal inflation without subsequent adjustments in exchange rates, is a deadly virus in an economy. Eventually the internal wages are so huge that the only industries that can survive are those that are oriented towards services for the local population. So manufacturing, foreign in-bound tourism, ie. Mongering; and all external oriented products including agriculture becomes unprofitable. And it looks like it is just on the cusp of happening.

So despite Jackson's mantra of 'all of a sudden, my favouite place for pussy became a third of the price', as we all know, the cost has since doubled and shows no sign of tapering off.

Hang on!

Argento

It was especially bad here last night. Riding up the Avenida de Julio I could see it thick in the air. The taxi I was in did not know why it was so smoky. This morning from the top of the building here I can still smell it outside and see it. What the heck it it. Anyone know. Do all the peasants burn wood at home to eat and heat water or what!

[QUOTE=Argento]So despite Jackson's mantra of 'all of a sudden, my favouite place for pussy became a third of the price'[/QUOTE]That statement was accurate back in 2002 when I made the evaluation. Now, my assessment is that is costs the same to live in BA as it does in any mid-size city in the USA.

Thanks,

Jackson

Water, gas, electricity, public transport, health care, long term rents, taxi, maid service, telecomunicating, internet are all cheaper

[QUOTE=Redondo]Water, gas, electricity, public transport, health care, long term rents, taxi, maid service, telecomunicating, internet are all cheaper[/QUOTE]I would add food to that list also.

However, electronics, cars, and quality clothing are as much if not more.

[QUOTE=Jackson]That statement was accurate back in 2002 when I made the evaluation. Now, my assessment is that is costs the same to live in BA as it does in any mid-size city in the USA.

Thanks,

Jackson[/QUOTE]I couched your mantra in the past tense. I didn't mean that you were expousing that now. Comparisons are interesting in South America. Per capita Gross Domestic Product for Argentina, Chile and Peru are within U$1000 of each other. Argentina is still marginally cheaper for food than Chile but the quality offered here, meat excepted, is very poor quality. And even the meat is very poorly presented. By the time you trim or throw out the damaged fruit and vegetables here, the price difference would be zilch, the quality and freshness (or should I say the staleness of Argentine produce) much inferior. In comparison, the quality and range of fresh, raw food in Peru is outstanding and half the Argentine price. Pity about the way they destroy it, cebiche apart, when you buy it in the majority of eating houses. The meat, chicken very ordinary; the fish when fresh looks great, but they have never heard of ice or refrigeration. Sashimi, forget it. You would need to be a magician to get it presentable. Quantity before quality is the guiding star.

[QUOTE=Schmoj]I would add food to that list also.

However, electronics, cars, and quality clothing are as much if not more.[/QUOTE]But that is not really related to cost of living. And if you fly back home once or twice a year you can buy most stuff in the USA.

Going out in general is cheaper as well, air travel is probally more expensive (if you are not a citizen)

[QUOTE=Schmoj]quality clothing are as much if not more.[/QUOTE]I paid about 600 dollars for a Daniel Hector suit, tie, leather shoes and leather belt. I can't comment on the quality yet but the same would be about double in Europe.

[QUOTE=Sidney]''To prevent anything untoward from happening between now and 2011, K's need to stop inflation, acquire sufficient energy, placate the angry farmers, and change C's image. These seem impossible. K 's are so used to getting their way that they react negatively towards any opposition! There are never negotiations. How will they act if much of the country turns against them?''[/QUOTE]2011 is just a short time and if the world keep on favoring Argentina with high prices there will be little problems

Tuesday, May 20, 2008

Another Argentina Default?

Argentine President Cristina Fernandez visits a textile cooperative in Jujuy (top) recently and talks with her economy minister, Carlos Fernandez, on Monday (above) (Photos: Argentine President's Office)

Will Argentina default on its debt for the second time in a decade? Three experts share their insight.

BY LATIN AMERICA ADVISOR.

Inter-American Dialogue.

Since Argentine President Cristina Fernandez took office in December, Argentine bonds have fallen 19 percent, increasing speculation that the country could default on its debt for the second time in a decade. Do you think Argentina will default? What must Argentina do to minimize the risk of default?

Miguel Kiguel, Executive Director of EconViews and a former Undersecretary of Finance and Chief Advisor to the Minister of Economy in Argentina: In recent weeks investors have become more concerned about the possibility of a new Argentine default. One critical question is whether these concerns reflect a deterioration in the economic fundamentals, e. G. In the ability to pay, or if instead they are related to a perception that there is less willingness to pay. The financial requirements for this year are only $3.5 billion, a figure that the government can easily raise in the local market. Perhaps the concerns reflect the roughly $10 billion that the government needs for 2009. However, our estimates indicate that it can raise around $5 billion from domestic institutional investors and in a worse-case scenario there is room under current legislation to obtain around $2.5 billion in temporary advances from the Central Bank. Of course, one can get worried about 2010, but to be honest the problem is not the capacity to pay but the perceived willingness to pay. Using almost any measure of creditworthiness, Argentina should be able to meet its financial obligations in coming years. The risks appear in extreme scenarios where Argentina has no access whatsoever to the financial markets for a prolonged period. While the risk of default is not nil, the economic fundamentals are still in good shape, and the spreads appear to have overreacted. They are primarily driven by an intense negative mood that was generated by the manipulation of the official inflation rate and by the stubborn position that the government has taken in the negotiations with farmers. While the rigid attitude could prevail for some time, and hence the spreads could remain high during that period, we expect that the political system will eventually work and that the country will again access international financial markets. It's the politics this time, and the problem is that investors understand the evolution of economic crises much better than political ones.

Claudio Loser, Senior Fellow at the Inter-American Dialogue and former Head of the Western Hemisphere Department at the International Monetary Fund: Argentina's debt has been growing steadily since the country's authorities reached a deal with bondholders in 2005. At present, the debt of the public sector is at about the same level as before the 2001 default, at some $150 billion. Seen from that perspective, there may be serious questions about the sustainability of external indebtedness. However, circumstances are considerably different than they were seven years ago, even as there are serious problems of economic management in other areas. First and foremost, Argentina was able to restructure debt equivalent to about one-third of the total stock outstanding at very favorable terms, specifically a 40-year maturity and low interest rates. In addition, the country has reduced its debt obligations with international financial institutions, like the IMF and the World Bank, and has replaced them with expensive but long-term loans from Venezuela, and also with domestic issuances, that tend to be more stable. Furthermore, Argentina is still recording a trade surplus, reasonably strong (although weakening) public finances, and high levels of international reserves, while the debt burden as a proportion of GDP has been declining and is now at a level equivalent to 50 percent of GDP, well below the 150 percent observed in 2002. Under these conditions it is unlikely that the government considers itself in a situation close to default. Nonetheless, if conditions deteriorate the authorities may be tempted, against good judgment, to move in the direction of a default, although not in the near future.

Vladimir Werning, Vice President at JP Morgan Chase & Co.: The market is braced for a 35 percent probability of a default on hard currency debt considering the 620 basis point (bp) spread over swaps on five-year Argentine CDS contracts. And bonds are trading even cheaper: five-year dollar debt is priced at a spread of 950 bp above US Treasuries, and inflation-linked peso debt trades at a real spread of 1230 bp above US TIPs. While Argentina has ample capacity to pay its debt, market prices are reflecting investor doubts over its willingness to do so for good reasons. The market doubts arise because authorities have 1) hit a budget constraint but eluded the opportunities to reconcile differences over tax policy with farmers; 2) systematically postponed a conventional policy response to high and rising inflation; 3) discarded the use of reliable macro statistics in a way that suggests disinterest in confronting economic reality that entails political and financial costs; 4) repeatedly sacrificed economy ministers that offered ideas that moderately deviated from the policy status quo; and 5) increasingly regulated and segmented goods and financial markets with a mind to controlling the price discovery mechanism, to mention a few issues. The market is also concerned that authorities do not realize that their reliance on market financing is greater than acknowledged: for instance, in 2008 given $5.7 billion of amortizations to private creditors and $3 billion of issuance in the market alongside $6.5 billion of interest indexation and capitalization, Argentine risk held by investors is rising by about $4 billion on a net basis. While local pension fund capacity to fully absorb Treasury debt issuance in 2008 is comforting, higher issuance requirements in 2009 raise market concerns. Of course, with $50 billion in Central Bank reserves, a $12 billion trade surplus, and 3.8 percent of GDP primary surplus, Argentina has a lot of insurance it can tap in order to survive outside the market for a long period of time. Yet this is of limited comfort to investors who require that the credits they invest in not only have contingent strategies during times of financial stress but also an inclination and a strategy to come back to the market to secure minimum financing over a reasonable timeframe—which is what Argentina currently lacks.