Argentine Economy

[Jackson]

A local friend was telling me his wife was refused a cash withdrawal from their bank, a check was offered. There could have been a lot lost in the details between my limited Spanish and his limited English. However, could tell he was tweaked. More than one acquaintance has voiced their concern lately about the government and the banks. Appears they smell something is brewing on the horizon. Wondering if others have heard anything?

I'll tell you how freaky this is getting.

Last week a friend of mine in the US paid a small expense for me out of his own pocket. I wanted to reimburse him in the most convenient way for him, so I decided to simply send him $200 USD by DHL directly to his door. However, at the DHL office the clerks insisted that they needed to inspect every single piece of paper that I wanted to put in the shipping envelope, including the envelope with the two bills and several letters I wanted my friend to drop in the mail.

I thought they were joking, so I sealed my envelopes in one of their shipping envelopes and handed it to them, whereupon they promptly open the shipping envelope and proceeded to open my letters, which I abruptly stopped.

In further conversation, they advised me that the AR Government required all package delivery services to inspect all packages to ensure that no currency was being surreptitiously shipped out of the country.

Needless to say, I withdrew my patronage and ultimately resorted to using Western Union, which involved all the usual showing of ID, registering the transfer of funds, etc.

I guess there's no equivalent issue when you send funds by Western Union, I assume because the currency doesn't actually leave the country but instead gets deposited in the local Western Union franchise holder's bank account.

Go figure.

Thanks,

Jackson

BTW, I assume that this isn't an issue when using the Argentine Mail, presumably because their delivery reliability is so poor that no one would ever think about using them to send anything of any value. Ja, Ja, Ja!

[Damman]

A local friend was telling me his wife was refused a cash withdrawal from their bank, a check was offered. There could have been a lot lost in the details between my limited Spanish and his limited English. However, could tell he was tweaked. More than one acquaintance has voiced their concern lately about the government and the banks. Appears they smell something is brewing on the horizon. Wondering if others have heard anything?

BUENOS AIRES (Dow Jones)--After weeks of staying absolutely still, Argentina's peso slipped for the second consecutive day Thursday, falling to ARS3.83 to the U. S. Dollar.

That puts the peso down from ARS3.82 the previous day.

"There seems to be. Some fear in the market," said Hector Blanco, a trader at ABC Mercado de Cambios. "This is not a fluid market. Whenever you have a market that's hard to get in and out of, this is going to create distortions in the market and that's what's happening now."

Blanco said the Argentine Central Bank has been enforcing "unfriendly" policies, making it hard for banks and other companies to trade in the market.

Meanwhile, exporters are selling few dollars while demand for them remains strong.

Blanco said it is hard to say what will happen next.

"The central bank isn't providing clear rules," he said. "There are those who think it'll intervene to strengthen the peso and those who think it'll let the peso slide further. I tend to think they'll intervene today."

Trading is "practically nothing," Blanco said, noting that only $12 million had been traded by Thursday afternoon.

Most economists expect the peso to slip to around ARS4 by the end of the year.

[Damman]

Liked this line: "In the confusing world of Argentine statistics, investors must make bets based on what they think the government will report, rather than on perceptions of reality."

BUENOS AIRES (Dow Jones)--Credit Suisse recommended buying Argentina's gross domestic product warrants based on the likelihood that the government will report rosier economic growth than most economists are expecting in reality.

"We have revised our real GDP growth forecast for 2009 to reflect what we think the official statistics will show, rather than what we believe is happening with economic activity," Credit Suisse said late Tuesday in a report.

The bank raised its 2009 real GDP growth forecast to 2% from -2.5% previously, "even though we still think that, on average, real GDP will contract 2-3% this year," the bank said.

In the confusing world of Argentine statistics, investors must make bets based on what they think the government will report, rather than on perceptions of reality. The official statistics institute, or Indec, is widely accused of manipulating data, particularly inflation, which is thought to be underreported, and growth, which is thought to be overreported.

The government denies the charges, saying the figures are no less reliable than anywhere else in the world.

The GDP warrants pay out only when economic growth is relatively strong. They've paid out in recent years thanks to an economic boom, but probably won't pay out for 2009, given the sharp slowdown even in the official GDP numbers. Argentina is thought to be in a deep recession, buffeted by the global slowdown, and yet because the official GDP figures aren't expected to reflect that, the warrants could still pay out next year.

"If we value the GDP warrants using the projections of what we think the official statistics will show, these look cheaper (relative to our previous scenario, when we valued the GDP warrants assuming that there would be a -2.5% contraction in 2009)" Credit Suisse said.

Credit Suisse said it expects Argentina to recover in 2010, and kept its estimate for official growth in 2010 at 3% , which is just below the 3.3% benchmark that would trigger a GDP warrant payment. The likelihood is that the 3% figure may be surpassed, it said.

Payments for the GDP warrant occur at the end of each year only if the previous year's real GDP growth and level (as reported by Indec) are greater than the threshold "target" GDP specified at the start of the contract, Credit Suisse said.

"The size of the payments depends on the level of GDP, thus, our upward revision to the 2009 GDP forecast increases the probability of payments in 2011 and the size of potential payments thereafter," it said.

Nevertheless, the bank warned that should its base case scenario materialize, growth in 2009 and 2010 would be too low to trigger a payment.

"We continue to recommend the euro-denominated GDP warrant (USD-denominated warrants look attractive as well) as a leveraged play on the economic recovery in Argentina in 2010, and the likelihood that the official data will continue to overstate the pace of economic activity," Credit Suisse said.

Economy Minster Amado Boudou recently unveiled plans to "strengthen" Indec, although there's still plenty of skepticism that any reforms will lead to a significant improvement in the quality of the data reported.

"The changes to Indec that the government has recently decreed will not lead, in the near term, to a significant narrowing of the large gap between the official data and the actual figures," the bank said

[Tessan]

Argentine Provinces to Sell Debt as Deficits Triple (Update2)

http://www.bloomberg.com/apps/news?p...d=aCK0ruxoeAiY

Cordoba will likely sell most of the bonds to federal social security agency Anses and state-run Banco de Cordoba, Esnaola said. A spokesman for the province’s Finance Ministry didn’t return calls seeking comment.

Taking more pention money, from federal social security, and hitting another bank.

[Joe Hernandez]

Anyone surprised by this? Anyone? Didn't think so.

http://www.guardian.co.uk/world/2009...irchner-wealth

It's a good thing they're lefties and only care about the people. Could you imagine how much looting and pillaging they would have managed if they were cold-hearted, compassionless conservatives?

Most properties they had before they were in power (in Argentina atleast) and sold them now, but atleast they honest about it. There real wealth is probally a lot bigger.

[Stan Da Man]

Anyone surprised by this? Anyone? Didn't think so.

They were elected on the promise of delivering prosperity to Argentina, but statistics showing a stunning economic turnaround have come with a catch.

New figures show that since Nestor and Cristina Kirchner came to power in 2003, they have presided over a remarkable sixfold increase in their own wealth.

The couple have racked up a fortune through property speculation and investments that have thrived even as the economy has faltered. Last year alone their wealth jumped 158% to £7.3m.

Opponents have accused the Kirchners of exploiting political connections in their home state of Patagonia to buy municipal land cheaply and sell it at a vast profit. "It's a scandal," said Patricia Bullrich, a member of congress.

The couple, lawyers by training and leftists in the Peronist movement, denied any wrongdoing and through a spokesman said that being in office did not impede business deals: "That is the essence of capitalism."

In an unusual tandem, Nestor served as president until 2007 when he stood aside for his wife, a veteran senator and politician in her own right, who was elected in the first round over a divided opposition.

They were popular for presiding over a speedy recovery after Argentina's econnomic meltdown in 2001-02. But underlying problems became apparent after "Queen Cristina", as she is known to some, took over.

Analysts said inflation was perhaps triple the official rate of 9% , a figure widely viewed as a product of government fiddling, and a bruising battle with farmers over export taxes was compounded by a drought. After six consecutive years of steady growth the IMF expects GDP to shrink by about 1.5% this year. Industrial activity has slumped.

With their own party riven by in-fighting, the Kirchners lost control of congress in mid-term elections last month. In their Patagnonian fiefdom, however, they have notched up property deals that would have made Donald Trump proud.

According to information the couple supplied to the anti-corruption office, they own 28 properties valued at $3.8m, four companies worth $4.8m and bank deposits of $8.4m. Last year they sold 16 properties, almost tripling their bank accounts, and expanded their hotel business in El Calafate, a tourist magnet. Their debts also jumped because of bank loans.

Local authorities have investigated transactions over suspicions that a mayor had given the Kirchners a bargain price for municipal land, but the case has stalled.

http://www.guardian.co.uk/world/2009...irchner-wealth

It's a good thing they're lefties and only care about the people. Could you imagine how much looting and pillaging they would have managed if they were cold-hearted, compassionless conservatives?

[Damman]

Loan published Monday (7/27) but dated July 7?

Argentina Retroactively Confirms ARS1B Loan From Banco Nacion.

Monday 07/27/2009 11:55 AM ET - Dow Jones News.

BUENOS AIRES (Dow Jones)--The Argentine government on Monday retroactively announced the details of a 1 billion peso ($262 million) loan from Banco de la Nacion to the Treasury, according a resolution published in the Official Bulletin.

The resolution, which was published Monday but dated July 7, says the Treasury will repay the loan in 24 installments beginning in January 2010. The loan is part of a program approved earlier this year in which the state-run bank can lend the Treasury up to ARS 7.3 billion.

Given its lack of access to international debt markets, the government has been increasingly relying on interagency funding to meet its financial obligations.

Last week the Argentine Central Bank said the government should focus on returning to debt markets to ensure it can continue to meet its financial obligations.

Economists have said this internal funding strategy is a ticking time bomb - a case, they say, of robbing Peter to pay Paul - because the agencies providing the loans will themselves at some time need the cash.

The practice of retroactively announcing the loans after they've become effective also makes it hard to track the total value of government debt in a timely fashion.

-By Taos Turner, Dow Jones Newswires; 5411-4103-6728; taos. Turner@dowjones. Com

[Stan Da Man]

The gov. Is starting to run low on cash. They borrowed 1 billion peso from Banco de la Nacion. They will probably need more. If they borrow too much it will weaken the banks.

http://www.bloomberg.com/apps/news?p...d=ajBLZvNqshAk

I thought that the money they took from the pensions would hold them longer. Maybe there holding some of the pension money on the sidelines? Don't know.

Didn't they lose about 1/4 of the pension money to the New York judge who froze it on behalf of the bondholders they stiffed in 2002? I'm not sure exactly how much was frozen, but it was a substantial amount. The idea was: Once the Argentine government nationalized the pension plan, the individuals' funds became the Argentine government's funds, therefore subject to seizure by the stiffed bondholders. It was a rather clever move. At any rate, that may have put a hitch in Kirchner's giddy up.

[Tessan]

The gov. Is starting to run low on cash. They borrowed 1 billion peso from Banco de la Nacion. They will probably need more. If they borrow too much it will weaken the banks.

http://www.bloomberg.com/apps/news?p...d=ajBLZvNqshAk

I thought that the money they took from the pensions would hold them longer. Maybe there holding some of the pension money on the sidelines? Don't know.

[Joe Hernandez]

Check guiaoleo and see if the average price is in the 75-100 peso range

[Joe Hernandez]

I don't have any objective data, but it sure as hell seems a lot higher. In the two years I have been here, some things (cheto restaurants) seem to have gone up 100%.

Why do you go there?

[El Queso]

When I was looking for the house I live in, everyone wanted a built-in 20% increase in the second year. It didn't use to be a standard thing until about two years ago, as I understood the real estate agents. Or maybe it wasn't as big an increase in the second year previously. This is my first actual long-term lease here, so I only have what things were at the time I leased, almost a year ago, to go on.

I believe the 30% number. Over the three years I've been here, I think I've seen a hefty-sized increase in general inflation, but I think maybe the touristy things are a little higher, the local things a little lower, so maybe 30% is the average. Certainly imported items are more expensive, and therefore inflated higher than local items, as the dollar-peso spread increases. I can go to Jumbo and get Cokes, Heinz Ketchup, Hunt's BBQ Sauce, etc, etc. But I stopped doing it when it started costing me $900 pesos a week to do that! That was one time and I was shocked - it had been a few weeks since the last time we visited Jumbo and they must have had a sudden rise in their prices.

For most things here, we can go to a local grocery store, which is about the size of a smallish 7-Eleven in the States. But they manage to pack just about every common daily thing in there, including a small carniceria, fiambreria and quesos in the corner across from the one register - very cramped and usually busy. I can get the local equivalents of everything I get at Jumbo (missing a few things that aren't real common here like peanut butter) for maybe $300 pesos. A trip to the local carniceria (they have a better selection than the grocery store) for maybe another $100 pesos. Another $100 pesos for fruit from the verduleria and and I've shaved 45% off my grocery bill.

I have four people in my house, so that's not bad. Amongst the 5-6 bags of bread products, cleaning products, eggs, milk, pasta, ketchup, etc, is the 4-5 kilos of meat, 8-10 kilos of fruit, and so on. A single person here could eat fairly cheaply still, particularly with the exchange rate.

I would liken the prices in the tourist, upper scale areas in the city to Jumbo out here. The smaller places a bit off the beaten path that don't ahve so many of the "comforts of home" may be cheaper if you're on a budget.

[Schmoj]

There are numbers out there putting Argentina's real inflation rate at 30%.

I don't have any objective data, but it sure as hell seems a lot higher. In the two years I have been here, some things (cheto restaurants) seem to have gone up 100%.

Argentina could be in a fix if the numbers are over the top. But what government does not cook the books concerning inflation rates. US official rate excludes energy and food. Give me a break.

Ha ha, the two things probably most likely to inflate.

[Damman]

Someone tell me: What does it mean when the government says it will "accept the consequences of a revision?" As I recall, Argentina has inflation-linked debt. Are these bonds tied to the rate published by Indec? If so, I imagine the country will owe a fair chunk of change to its creditors holding those bonds. In this case, is that Chavez? Or, were the bonds he bought dollar-denominated and not tied to Indec-tallied inflation data?

Think they are talking about the Boden Bond: (30 billion US) and is indexed to inflation. Payments (US dollars) are a product of the inflation rate and the normal coupon rate. Inflation up, your payments go up. There are numbers out there putting Argentina's real inflation rate at 30%. I cannot believe that number, but if it is, default. Chavez bought Boden paper, 500 million.

Argentina could be in a fix if the numbers are over the top. But what government does not cook the books concerning inflation rates. US official rate excludes energy and food. Give me a break.

[Stan Da Man]

"By Matthew Cowley.

Of DOW JONES NEWSWIRES.

BUENOS AIRES (Dow Jones)--Argentina's government will accept the "consequences" of a revision of consumer inflation data going back to 1999, Economy Minister Amado Boudou said Tuesday.

The revision is part of a broad overhaul of the government statistics institute, or Indec, unveiled Tuesday to bolster the institution's credibility. The changes were issued in a decree signed by President Cristina Fernandez.

There are widespread accusations that the government meddles with the Indec data, and inflation numbers in particular. Officials have always denied the charges, saying the numbers are no less reliable than data presented."

Link: http://online.wsj.com/article/BT-CO-...21-718110.html

It's not surprising that Indec was flawed in its inflation calculus, but it is surprising (to me, anyway) that Kirchner admitted it. There are only two reasons she would do it that I can think of: (1) she really, really needs access to international credit markets and this is perceived as a way to help get there; or (2) someone else made her do it, such as Hugo Chavez.

Someone tell me: What does it mean when the government says it will "accept the consequences of a revision?" As I recall, Argentina has inflation-linked debt. Are these bonds tied to the rate published by Indec? If so, I imagine the country will owe a fair chunk of change to its creditors holding those bonds. In this case, is that Chavez? Or, were the bonds he bought dollar-denominated and not tied to Indec-tallied inflation data?