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Mittwoch, 13. November 2013

Lead Articles: Clarin: “Seeking to announce agreement with Paris Club before the end of the year” El Cronista: “‘Being creative before the holdouts would be important’” Ambito Financiero: “‘There are unsustainable policies that will require adjustments’”

Seeking to announce agreement with Paris Club before the end of the year
That is the goal of the Economy Ministry.  The IMF would not intervene.
Wednesday, November 13, 2013
By Tomas Canosa
The government hopes to be able to announce before the end of the year that it will pay the Paris Club.  The economic team dismisses being able to close a definitive deal in 2013, but are confident in being able to finalize all the details for the balance that comes to US$9.6 billion during 2014.  They assure that the IMF would not intervene and that the payment plan would not require large disbursements in the first years.
Economy Minister Hernán Lorenzino is working all the machinery for the government to be able to make an announcement related to the Paris Club before the end of the year.
“If there is something I have done throughout most of my professional career it has be to restructure debts,” he always says before economists and businessmen that visit him in his offices.
Clarín reported last week that the President asked him to move forward in this direction and in the Ministry they rule out making a payment with reserves in cash, as had been proposed in September 2008.  This project was abandoned after the sparking of the international crisis.  An important official on the economic team said, in a dialogue with Clarin, that the government is aware of all the restrictions on it for negotiating, and one of them is the level of reserves.  The Central Bank’s assets were US$47.008 billion in September 2008 and yesterday they closed below US$33 billion.  For this reason, the schemes circulating in the Palacio de Hacienda contemplate no large disbursements during the first years.  
Why is the government insisting on paying the Paris Club?  The economic team argues that an agreement in this direction would translate into the arrival of greater investments because companies from the creditor countries (United States, Germany, Japan, France and others) would be able to get lines of cheap financing in their countries to be able to invest in Argentina.  If the Club is not paid, the companies will not be able to get subsidized credits.
If the government effectively gets to close a deal with the Club, this would in principle translate into a larger outflow of hard currency through debt payments.  According to statistics published Monday by the Economy Ministry, the public debt in June 2013 reached US$196.143 billion and is equal to 43.6% of GDP.  This means that the balances went down compared to December, when it was 44.9% of GDP, but increased if the comparison is made with June 2012, when the balances represented 41.5% of GDP.
The agreement with the Paris Club is part of the international agenda that Lorenzino is carrying out and it complements the negotiations with the World Bank and the ICSID.  The official even is one of those in charge of negotiating with the IMF for the new Consumer Price Index (CPI) at the national level and which according to sources close to the minister, will begin to be published in the first quarter of 2014.
El Cronista
“Being creative before the holdouts would be important”
Interview with Guillermo Mondino, Emerging Markets analyst for Citibank
Wednesday, November 13, 2013
-Can the negotiations between the restructured bondholders and the holdouts have a good result?
-I hope so.  The positions are very different and the available resources are very limited, which makes it a great challenge.  If the state had to make an additional contribution, it should be looking toward the next 10 years, given the international context.  To be creative would be important.  
-Is it a good moment for betting on Argentine assets?
-They have risen a lot, in my judgment, today they are expensive and I wouldn’t recommend them to my clients because they’ve already risen too much.
-Will Argentina go in the same direction as Venezuela?
-It still is not in those circumstances because it’s still mounted in a relatively favorable context.  To give you an example, in Venezuela 98% of exports are oil and in Argentina we don’t have a concentration of that magnitude, by which we are not so vulnerable.
Ambito Financiero
“There are unsustainable policies that will require adjustments”
Guillermo Mondino, researcher at Citibank, says that Argentine assets are expensive, and that he would not recommend them today.  
Wednesday, November 13, 2013
"Argentine assets are expensive; I wouldn’t recommend them to my clients, because they have already risen a lot.  Three months ago I would have said something else.”  So argued Guillermo Mondino yesterday, an Argentine economist that works on Wall Street, in the research area of Citibank.
Mondino participated yesterday in one of the panels of the Annual Conference of FIEL.  In an interview with this newspaper, after his speech, acknowledged that he expected the “speed of depreciation of this year would be greater” in Argentina.
While he was reticent to talk about the country, as his work as a researcher focuses on emerging markets in general, he didn’t avoid talking about the need for adjustments, the dollar, and the negotiation of the debt with the vulture funds.  “A split currency rate system rarely turns out well.  My recommendation would be to try to have all the currency rates to converge, with clear intervention of the state, but leaving it to the market,” he said.
Reporter: In her speech you said that China will grow less and this will reverberate in Latin America and in Argentina in particular.  
Guillermo Mondino: The region benefited a lot from the external situation that has prevailed since the international crisis, which I summarize in three factors: strong growth in China, the rise in international trade and very low international interest rates.  These three conditions will change, which will make the situation more uphill.  The current accounts of different countries of the region are already in deficit.  The response is that the scenario will be more complex, more uphill, but not in crisis with the world falling in on us.  
R.: How is the region prepared for facing this new situation?
G.M.: Some are much better than others.  Venezuela is one of the most vulnerable, as 98% of its exports are oil.  A context in which international prices go down will not help.  With Brazil, we imagine that the global context will not contribute to make it grow like it has until now.  In Argentina there is a crossroads of policies that appear unsustainable over time and will require adjustments.  These threads will weave together into a less favorable external context.   
R.:  Argentina also depends quite a bit on commodities exports.
G.M.: Yes, and we also depend a lot on interest rates, which affects the entire capital market.
R.: And so it will make it more difficult to access external financing.
G.M.: It’s not a hostile context for Latin American companies, while it is indeed more difficult.  We have been seeing a stronger dollar, but firm.  This is a challenge for countries in the region where currencies are more free to float tend to depreciate a bit, some more than others.
R.: You spoke of adjustments in Argentina, in what core aspects?
G.M.: The inflation rate is a problem, it lost its fiscal anchor, and has to moderate its monetary and currency exchange policy.  It’s necessary to change a series of factors that is much easier to do when there is a tail wind, despite that at that moment there is no upside to doing it.
R.: In the official dollar in Argentina, while there is no free floating, there is an increasingly greater rate of devaluation.
G.M.: In Argentina the rate of depreciation of the currency is a political decision taken by the Central Bank, which is at times a little difficult to interpret.  It was expected that the speed of depreciation this year would be greater.  We are seeing in recent weeks a speeding up, which I imagine will last over next year.  But it’s difficult to know until where and how much, that is a very particular decision of the Central Bank of Argentina, not the market.  
R.: Some sectors in the government are talking about a split currency rate.
G.M.: I don’t follow the Argentine situation in detail, but in principle one would say that a split currency rate system rarely turns out well.  The most extreme example is in Venezuela’s restrictions.  My recommendation would be to try to converge upon a single exchange rate with clear state regulation, but leaving it to the market, but I can’t speak about the specific case of Argentina.
R.: Do you believe, like some, that Argentina will turn into a country similar to Venezuela with that step?
G.M.: I hope that Argentina doesn’t make the same mistakes in economic policy that Venezuela committed during all these years.  If so, it is stuck in dead ends.  I believe that we are not in that situation.  I hope that we could avoid that as a country.  In all cases, Argentina is now a country that has some macroeconomic imbalances and will require corrections.  It is still built upon a context that continues being relatively favorable for the country.  In Venezuela, 98% of exports are oil.  In Argentina we don’t have a concentration of that magnitude.  We are not so vulnerable.  In Venezuela, the parallel exchange rate is 8 times greater than the official rate.  The policies are similar, but there are very big, marked differences.
R.: In market terms, is it a good time to buy Argentine assets?
G.M.: They’ve risen a lot in recent months.  There is still a lot of ground ahead in the world that will be changing things.  Argentine assets are expensive; I wouldn’t recommend them to my clients, because they’ve risen a lot.  Three months ago I would have said something else.  I am not saying that the Argentine market doesn’t have greater value in the coming 15 years, simply that that they have risen a lot in recent months.
R.: How do you see the negotiations with the creditors?  Can they lead to some result?
G.M.: I hope so.  The positions are very different and the resources are very limited, which makes it a big challenge.  It would be good for everyone if that is resolved, above all if there is an agreement between private parties.  If the state had to make an additional contribution, by Argentina, in light of the next 10 years, it would be good to move forward in resolving it, given how the world will be.
R.: Can the “Gramercy solution” manage to work out?
G.M.: I believe that the final solution will be a cocktail between proposals circulating, if there is to be a final negotiated solution.  The positions are very different; it’s difficult.
Interview by María Iglesia

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