Argentine Economy

[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?

[Joe Hernandez]

Since the elections the exchange rate has been stable.

The fiscal surplus has turned in a deficit, let's wait how this will end up

[Damman]

Underground market may improve: exchange rate

BUENOS AIRES (Dow Jones)--In a new bid to tighten control over the foreign-exchange market, the Argentine government will start checking the tax records of every person who tries to buy dollars, the director of the tax collection agency, AFIP, said in a radio interview Tuesday.

"We're focusing our work on tax evasion in all segments," AFIP Director Ricardo Echegaray said.

Echegaray said the government will require individuals to justify their income and prove that they have legally earned enough money to buy a certain amount of dollars or other currencies. He said AFIP has been working with the Argentine Central Bank for months to create a way of determining whether people have the justified "fiscal capacity" to participate in the exchange market.

"If you go buy dollars today, in AFIP we're going to be able to say, 'Oh, this person is buying an amount that surpasses his purchasing power.'" Echegaray said.

Though Echegaray focused on AFIP's tax-evasion aims, analysts said the new measure really aims to help the Central Bank more easily control the peso's value.

"More than anything else, this is to diminish the demand for dollars," said Fernando Izzo, an analyst and currency trader at ABC Mercado de Cambios. "I don't think it'll do much to control the market because it won't affect business demand, but will surely slow the sale of dollars to smaller retail buyers. It will slow sales at bank windows to individuals."

Over the past year especially, the Central Bank has worked with other government agencies to crack down on the market. Banks say government tax officials closely observe their transactions and often imply that if Central Bank orders aren't followed, the banks could face tax trouble.

Central Bank official say they're simply enforcing exchange-rate policies.

The monetary authority has kept tight control over the peso, making sure that its value doesn't fluctuate abruptly as have other currencies in the region.

"For now, the central bank has the currency very dominated in a band that ranges between ARS3.80 and ARS3.81 (to the U. S. Dollar)" Izzo said. "After the recent congressional election, it wanted to send a signal to the market that it could control the exchange rate."

Izzo said the peso is likely to decline slowly in value until it reaches around ARS4 or ARS4.05 by year's end.

[Joe Hernandez]

Does this also mean you can't change peso's to dollars that easy?

[Damman]

BUENOS AIRES (Dow Jones)--Argentina's Central Bank has issued new rules for the foreign exchange market requiring more specific information about who is sending money to and from the country.

All transactions must now carry the full name or company name, address or identification number, and account number, the central bank said in a communique published Tuesday.

The bank said it wants foreign exchange operators to seek the same information from transfers into Argentina.

The authority determined that if the information on a transaction isn't provided within a period of 20 days it must be canceled.

Local newspaper El Cronista said the bank believes the move brings Argentina into line with international norms to counter money laundering.

Foreign exchange sources said it targets tax evasion and exerts more control over currency operators, according to the report.

A representative of the Central Bank wasn't immediately available for comment.

[BA Luvr]

Thanks for the valuable feedback. It's much appreciated.

[El Queso]

Last Thursday, we were asked to wash our hands. The owner of the parilla came around with a squirt bottle of gel alcohol. Places are not crowded. There is a one-tent circus operating out of a shopping center parking lot out here in the burbs that was shut down until next week at least. I didn't realize the theaters were shut down, but I'm not surprised.

Dinner tonight at Palacio Españo was very sparsely occupied, at the busy hour of 10:00 pm there were only about a quarter of the seating used.

[Joe Hernandez]

From the guys on the ground. My cousin's family is planning to visit BA next week and would like some straight info on the effect of the swine flu on tourist venues and activities. Are the theaters and shops closed, are restaurants busy (taking into account it is winter) Will festivals be well-attended, the streets be bustling, museums open? They are also planning side trips to Uruguay and Chile. What is the status there, and is there screening of travelers?

I'd very much appreciate some firsthand information. I told them I had "sources".

As off now theaters are closed, shops are not. Festivals will probally be cancelled, the restaurants are less busy, museums untill now are open.

There is screening with flu-meters and you have fill out forms.

That's how the situation is now, this can change by the minute

[BA Luvr]

From the guys on the ground. My cousin's family is planning to visit BA next week and would like some straight info on the effect of the swine flu on tourist venues and activities. Are the theaters and shops closed, are restaurants busy (taking into account it is winter) Will festivals be well-attended, the streets be bustling, museums open? They are also planning side trips to Uruguay and Chile. What is the status there, and is there screening of travelers?

I'd very much appreciate some firsthand information. I told them I had "sources".

[Joe Hernandez]

If I am correctly investing in Argentina petrol was pretty rewarding in most of the 90's. Maybe those times return with the election of let's say Macri or the Rodriguez Saá clan. Then it's a good time to buy and China has enough bargain power on Argentina to force them to design rewarding legislation for Chinese companies

[Stan Da Man]

Thanks Damman. But, to this investor's eye, that is the perfect time for an investment. If the current owners / stockholders can't see past tomorrow, they'll sell for a low price. If 2011 brings a new administration -- or at least the same administration but one that is more amenable to changing its policies -- then this sort of investment could pay off quite handsomely.

My point isn't that China wants to both buy low and sell high. My point was that China would want to buy low. When an industry is beaten up due to over-regulation, and a new approach may be around the corner, then that's the time to buy. Perhaps China can't negotiate a new approach to oil and gas regulation with the Kirchners. And, perhaps the Kirchners won't be around anymore after 2011. Then, how many of those risk factors and obstacles in the extract below go away? I don't know. But there's a good chance things will change.

Regardless, though, I think China is most interested in locking up sources of long-term supply. If Argentina can help with that, and China has cash, I'm sure a deal can be worked out. We'll see. Should be interesting.

Repsol's annual report does not paint a pretty picture for YPF: reserves and production are declining. I cannot see why anyone would buy this dog other than they know something. Do not think China is a buy and sell deal when it comes to natural resources. The one thing I do know, doing business in Argentina is one big pain in the ass for International Corporations.

BUENOS AIRES (Dow Jones)--Argentine energy company YPF SA (YPF) painted a bleak picture of operating in Argentina in its latest annual report filed with the U. S. Securities and Exchange Commission.

"The Argentine government exercises significant influence over the economy," YPF said Wednesday in its filing.

The firm, which has most of its operations in Argentina, cited a long list of legal, regulatory and operating uncertainties which might damage its finances in the future.

It told investors in its securities it cannot offer assurances that government decisions won't harm its operations and that, as the government seeks to boost a flagging economy, it may take further action that could hurt the Argentine oil and gas industry.

With most economists saying the Argentine economy is in deep recession, YPF said the economy "may not continue to grow at current rates or may contract in the future." Sustained inflation could drive up YPF's operating costs, especially wages, and the firm may not be able to raise prices to keep up, it said.

During the 2001-2002 crisis, the Argentine government devalued the currency and froze utility rates. Oil and gas investment and production slowed, while a number of companies had contracts with overseas customers, which were paying far higher prices than the local market, leading to shortages in Argentina.

As a result, the government decided to "give absolute priority to domestic supply at low, stable prices in order to sustain economic recovery," YPF said. That has become a major source of disruption.

On days when there are shortages, YPF has to cut back supplies to higher-paying customers to ensure deliveries to residential consumers at lower prices, the report said.

YPF has had to cut back some of its exports, leading to legal disputes with overseas customers, it said. The firm said it believes the government intervention constitutes "force majeure" which allows it to break contract terms, "although no assurance can be given that this position will prevail" in court.

YPF said it can't pass on all of the increases in international oil and fuel prices, or increase local natural gas, gasoline and diesel prices even though sometimes it has to import fuels to meet demand.

It faces higher taxes on exports and restrictions on export volumes, to ensure domestic demand is met, which have already harmed its financial position, YPF said.

A law passed in January 2007 transferred ownership of hydrocarbon reservoirs to provincial governments, opening up a new level of provincial as well as federal uncertainty, YPF said.

The company said there aren't any assurances the government won't make exchange and capital controls stricter.

The firm said its reserves and production are declining. Proved reserves fell 18.8% in the last two years, and it replaced about 32.7% of production with new proved reserves during 2008. Daily production last year fell 4.1% from 2007. It's trying to mitigate those declines by improving technology at maturing fields and undertaking deepwater exploration for new fields.

The firm said it's facing "intense competition" in bidding for crude oil and natural gas production areas from a host of new government-controlled companies, including the new federal company, Energia Argentina SA, or Enarsa, as well as companies set up by provincial governments in La Pampa, Neuquen and Chubut.

Labor demands, meanwhile, "are commonplace in Argentina's energy sector" and unionized workers have blocked access to and damaged its plants in the recent past, YPF said.

Spain's Repsol YPF SA (REP) owns about 84% of YPF while local Argentine group Petersen Energia SA owns about 15.5%. Petersen has an option to buy another 10% from Repsol.

[Member #4112]

Perhaps they worry that something similar might happen to them at some point.

Mao said it best, political power flows from the barrel of a gun. Ceasar said the Roman Legions are what make the law legal. It was true then just as it is true now. Food for thought.

[Damman]

China's smart. Buy low, sell high. In all likelihood, it's not going to get any worse than this unless Argentina turns to Chavez-style nationalization, and even then they would be unlikely to mess with the Chinese plus even Chavez pays compensation when he nationalizes.

Repsol's annual report does not paint a pretty picture for YPF: reserves and production are declining. I cannot see why anyone would buy this dog other than they know something. Do not think China is a buy and sell deal when it comes to natural resources. The one thing I do know, doing business in Argentina is one big pain in the ass for International Corporations.

BUENOS AIRES (Dow Jones)--Argentine energy company YPF SA (YPF) painted a bleak picture of operating in Argentina in its latest annual report filed with the U.S. Securities and Exchange Commission.

"The Argentine government exercises significant influence over the economy," YPF said Wednesday in its filing.

The firm, which has most of its operations in Argentina, cited a long list of legal, regulatory and operating uncertainties which might damage its finances in the future.

It told investors in its securities it cannot offer assurances that government decisions won't harm its operations and that, as the government seeks to boost a flagging economy, it may take further action that could hurt the Argentine oil and gas industry.

With most economists saying the Argentine economy is in deep recession, YPF said the economy "may not continue to grow at current rates or may contract in the future." Sustained inflation could drive up YPF's operating costs, especially wages, and the firm may not be able to raise prices to keep up, it said.

During the 2001-2002 crisis, the Argentine government devalued the currency and froze utility rates. Oil and gas investment and production slowed, while a number of companies had contracts with overseas customers, which were paying far higher prices than the local market, leading to shortages in Argentina.

As a result, the government decided to "give absolute priority to domestic supply at low, stable prices in order to sustain economic recovery," YPF said. That has become a major source of disruption.

On days when there are shortages, YPF has to cut back supplies to higher-paying customers to ensure deliveries to residential consumers at lower prices, the report said.

YPF has had to cut back some of its exports, leading to legal disputes with overseas customers, it said. The firm said it believes the government intervention constitutes "force majeure" which allows it to break contract terms, "although no assurance can be given that this position will prevail" in court.

YPF said it can't pass on all of the increases in international oil and fuel prices, or increase local natural gas, gasoline and diesel prices even though sometimes it has to import fuels to meet demand.

It faces higher taxes on exports and restrictions on export volumes, to ensure domestic demand is met, which have already harmed its financial position, YPF said.

A law passed in January 2007 transferred ownership of hydrocarbon reservoirs to provincial governments, opening up a new level of provincial as well as federal uncertainty, YPF said.

The company said there aren't any assurances the government won't make exchange and capital controls stricter.

The firm said its reserves and production are declining. Proved reserves fell 18.8% in the last two years, and it replaced about 32.7% of production with new proved reserves during 2008. Daily production last year fell 4.1% from 2007. It's trying to mitigate those declines by improving technology at maturing fields and undertaking deepwater exploration for new fields.

The firm said it's facing "intense competition" in bidding for crude oil and natural gas production areas from a host of new government-controlled companies, including the new federal company, Energia Argentina SA, or Enarsa, as well as companies set up by provincial governments in La Pampa, Neuquen and Chubut.

Labor demands, meanwhile, "are commonplace in Argentina's energy sector" and unionized workers have blocked access to and damaged its plants in the recent past, YPF said.

Spain's Repsol YPF SA (REP) owns about 84% of YPF while local Argentine group Petersen Energia SA owns about 15.5%. Petersen has an option to buy another 10% from Repsol.

[Stan Da Man]

Analysts seem to be at a loss for why CNPC would be interested in doing business in Argentina and purchasing Repsol YPF: earnings cap of $42 per barrel of oil exported, with any revenue above that amount collected as taxes.

China's smart. Buy low, sell high. In all likelihood, it's not going to get any worse than this unless Argentina turns to Chavez-style nationalization, and even then they would be unlikely to mess with the Chinese plus even Chavez pays compensation when he nationalizes.

The tax right now is for revenue above $42/ barrel. The key words there are "right now" -- with the current, disfavored administration that won't likely retain power after 2011. What would the tax be in 2012 if China bought an oil company and got involved in politicking? Then what would the company be worth?

I'm definitely out of my element here. I don't know Argentine politics very well. Perhaps there's a national attachment to a tax above $42/ barrel. But, experience elsewhere suggests that these things are "lobby-able," especially when money is involved.

Finally, as to the Honduran situation, the Wall Street Journal had a decent editorial piece: WSJ. Com - Opinion: The Wages of Chavismo - http://online.wsj.com/article/SB124640649700876791.html

I'm not usually a big fan of their editorial stuff, but this one was all right.

Finally, finally, thanks to Sid for the article on California's impending default. It will be interesting. I didn't know this, but apparently it is unconstitutional for a State to declare bankruptcy. That will limit California's options even further.