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Freitag, 29. November 2013

Lead Articles: El Cronista: “The best tribute is to put an end to the unsupported epic” El Cronista: “The holdout factor expands and erases the effect of “legislation risk”” Clarin: “The government still is not dispelling questions” Ambito Financiero: “Dialogues: Federico Tomasevich” Infolatam: “The negotiations between Repsol, YPF and Pemex: “Pecunia (et petroleum) non olet””

El Cronista
The best tribute is to put an end to the unsupported epic
Thursday, November 28, 2013
By Fernando Gonzalez
Now that all we Argentines must face the cost of the kicking-and-screaming expropriation of 51% of Repsol’s shares in YPF, the best tribute that the government could give to society is that we save ourselves from the punishment of the unsupported epic.  It is not necessary for Axel Kicillof to remind us of Spain’s cruelty in the days of the conquest for its descendants to now have to pay no less than US$5 billion for an asset that, according to the minister, wasn’t worth a penny.
Nor will it be necessary to continue with the diatribes against the vulture funds that didn’t enter the debt swap now that there will also be a payment offer for them.  It will also be wise not to curse the ICSID tribunal because we already promised to send US$500 million to it for five judgments and it’s likely there will be other payouts in the future.
It’s time to end with the put-downs of the Monetary Fund or the Paris Club in the President’s speeches.  That would be gestures of amiability in search of recovering the dollars that are going out from the reserves.  It’s enough that the government concentrate on attacking the big problems of our economy and abandon the overdose of rhetoric that was entombed by the weight of the consecutive electoral defeats.
El Cronista
The holdout factor expands and erases the effect of “legislation risk”
Thursday, November 28, 2013
The gap separating prices and yields on sovereign bonds under local law compared to those subject to New York law ended up disappearing last week.  The settlement of the lawsuit with the holdouts over the debt that remains in default doesn’t seem imminent, by which investors are not now finding any sense in paying less for a bond according to the jurisdiction in which it was issued.
“The continuation of the lawsuit with the holdouts, the result of the elections dispelled a re-re-election scenario for 2015, the agreement with the ICSID and the more pragmatic move that the government seems to be taking in economic policy are helping in understanding the rally that bonds have exhibited in recent months and that continued last week,” said a report from Econviews, the consulting firm led by Miguel Kiguel.
According to the report, the arrival of a new CPI and the recent announcement of a possible agreement with Repsol could continue pushing bond prices in the immediate future.
The notable item, however, is that the bonds under New York law seem to have had an even better performance than bonds subject to Argentine courts.
While yields on the Bonar X fell from 13.48% on average in September to 11.27% last Friday, the Global 17 went from yielding 16.07% to paying 11.47% in the same period.  The Discount in dollars under New York legislation also surpassed the speed in falling by its local peer: 344 basis points versus 297, in the same plaza.
With different speeds but that brings different paper to similar places: what happened, in reality, is that the difference between New York and local law was erased.
“For the first time since the ruling of the Court of Appeals in October 2012, legislation risk has disappeared, now that bonds under New York legislation are yielding the same as those under national legislation,” the report analyzed.
“In effect, there is no different in yield now in favor of the former, which had denoted a greater risk for New York law after the October 2012 ruling,” concluded the Econoviews analysis.
The government still is not dispelling questions
In the first week, the Capitanich-Kicillof tandem didn’t show all its cards.  But it did show that it’s seeking dollars.
Thursday, November 28, 2013
by Ezequiel Burgo
A week passed.  And the new government team didn’t show all its cards yet.  The political decisions of the change in Cabinet were important but not at the economic level, neither Jorge Capitanich, nor Axel Kicillof nor Juan Carlos Fábrega announced a road map for how they are thinking of transiting the most acute problem that the Argentine economy faces today: the fall in reserves.  And much less offer a path to how the fiscal, monetary and exchange rate variables will evolve.   For now, the only official role that offers a review of these numbers for next year continues to be for one along: the 2014 Budget.  But nobody is paying attention tot that yet.
What happened in the first week of the Capitanich-Kicillof tandem?
– The government announced the rise in the surtax on luxury cars, which was then changed.  
– It proposed an agreement to Repsol to compensate it for the expropriation of YPF.
– There was a handful of economic decisions by Capitanich and Kicillof.  They said, for example, that there will be no abrupt measures and that the plans are based on improving profitability of companies without affecting the people’s pocketbooks.  That from the Secretariat of Commerce that Augusto Costa will command, the balance sheets of the companies will be monitored to avoid their marking up prices and thus feeding inflation.
Also, during this first week, the economic leadership revealed the following decisions:
– That the government is working toward salary increases not surpassing 20% next year.
– Economy Minister Axel Kicillof is analyzing the new methodology to measure inflation.  Thus, he will seek to deactivate inflationary inertia.
– The government is moving to an adjustment in public service rates and maintain the rate of devaluation like in recent days (1.3% weekly).
But none of this was enough to dispel old questions.  While it is perceived that the exchange rate is the cheapest price of the economy, and that the dollar could rise, there will be any announcements nor revelations that will produce a concrete results.
Who will sell his dollars if he expects the government to devalue the currency?
Probably, beyond what the economic leadership set the press know that it will do on fiscal and monetary matters, the government will put all its chits into solving the reserves crisis by reopening external credit. The 95 billion dollars in exports that Capitanich put down for 2014 is not enough.  For that reason, the government is betting on the benefits of taking new debt.  Even Kicillof himself, or economist Aldo Ferrer, are in favor of taking loans abroad to exploit the Vaca Muerta deposit in Neuquén.
The agreement with Repsol of Spain would seem to be the first step in unblocking multilateral and bilateral financing.  What comes after remains seated in Washington. 
Ambito Financiero
Dialogues: Federico Tomasevich
"There are instruments for halting the exit of reserves”  
Thursday, November 28, 2013
The reporter dialogues with Federico Tomasevich, president of Puente, who said that there are numerous instruments that can be implemented to contain the exit of reserves like raising fixed interest rates in dollars up to 5% or issuing Lebac in that currency.  He assumes that with new officials, the “political handling of each ministry” is made clear.  
R.: How do you evaluate the changes in Cabinet announced?
Federico Tomasevich: The changes are very positive and above all opportune.   They widely dispel the situation of the political management inside each ministry.  The people named have unquestionable fitness but also administrative control, which at this time is needed for plans to advance that are being thought of for implementation.  Jorge Capitanich was twice a governor and a cabinet chief, has an admirable work capacity, he works 24 hours a day, possesses a knowledge of the situation and much experience as a legislator in financial economics.  He is a central figure in this new play by the government.  In the case of Axel Kicillof it’s important that it is also clear that he is the person that will be in charge of the economic tasks and that he will work in coordination with the Secretary of Interior Commerce.  
R.: Are important announcements expected in the short term?
F.T.: According to the statements that until now were made there will not be big changes but advances on already known issues.  The central question is how to contain the exit of hard currency and they are grabbing the pan by the handle.  For example, in regulating imports of luxury items.  It didn’t make sense for Argentina to lose reserves because someone wanted to have a yacht.  The issues that are being put forth at the start will lower the noise there has been.  In fact, since the announcement of the new officials and their first statements, country-risk has fallen quite a bit.  Since after the primary elections in reality, at least four international investment funds began to look at where to invest in Argentina.  After the resignation of Guillermo Moreno was learned of, the market went back up and also I think it’s positive that Hernan Lorenzino has been instructed to move forward on the conflictive issues like ICSID, Paris Club and the holdouts.  If he manages to begin to close that chapter an important chance opens up for the country to return to the international market.
R.: Will it be a right moment to issue new debt?
F.T.: Why not?  There are no big busts in the Argentine macro-economy by which it could emit debt with single-digit rates.  With this new map of the officials, all of the issues have an owner.  Whether they like it ideologically or not, all those in charge of resolving each issue has the fitness and is well received by the market.  The door is also opening for companies like YPF to do mega-projects that can only be done by entering the international debt market.
R.: What will happen with the exchange rate?
F.T.: Resolving the gap between the official and “blue” exchange rates is difficult.  What they are doing is to speed up the devaluation as quickly as possible to disincentivize importers from bringing in unnecessary goods.  If not then over-charging imports and undercharging exports will continue and that goes against the reserves.
R.: Do you expect that with Juan Carlos Fábrega in front of the BCRA, new instruments will be created to halt the flight of hard currency?
F.T.: He’s a man with knowledge and has good relations with all sectors.  There are many instruments that can be put forth.  For example, the fixed-rate on dollars is very low today.  They could increase it from the current 0.5% to 5% to have more deposits.  Those dollars will go into the reserves.  There would be even more people interested if the Central Bank issued Lebac in dollars.
R.: Will the halt that the capital markets reform suffered have negative consequences?
F.T.: The changes that were planned got complex.  It’s not taking advantage of an important opportunity to professionalize the capital markets that will have to be resolved as soon as possible.  It’s all being talked about too much.  In developed countries, the regulations are agreed to by consensus when they are being put together but afterwards what was planned has to be executed.  If everything is brought to court, there is a constant regression.
The negotiations between Repsol, YPF and Pemex: “Pecunia (et petroleum) non olet”
Monday, November 25, 2013
by Claudio Loser
The facts: on Monday the 25th, the news came out that the governments of Argentina and Spain reached an agreement in principle on compensation for the expropriation of 51% of YPF that happened in April 2012, subject to ratification of Repsol.  The negotiations was apparently strongly pushed by Pemex of Mexico, the second biggest shareholder in Repsol of Spain (10%).
The meeting was handled on the Argentine side by the new Economy Minister, Axel Kicillof, and the technocratic president of YPF, Miguel Galuccio.  The Spanish delegation includes Industry Minister José Manuel Soria; the president of Caixabank (Repsol’s top shareholder, with 13%), Isidro Fainé, and directors of Repsol.  Emilio Loyola of Pemex also participated.
According to the same sources, the final agreement will seek to fix the amount and form of compensation.  YPF, Repsol and Pemex will resign all legal actions that began with the expropriation.  Repsol will come out on this agreement on Wednesday the 27th.
The interpretation: The conjunction of three oil companies in trouble and three countries with a difficult economic situation made economic pragmatism almost inevitable, reflected in the headline of this article.  Despite the almost incomprehensible Marxist rhetoric of Kicillof, the offended posture of Repsol and the traditionally self-sufficient discourse of Pemex, it seems that the powerful gentlemen were the oil, gas and Lord Money, and they helped to focus the attention of the politicians.
For Spain and Repsol it’s important to strengthen relations with Latin America, and the position of an oil company and a financier in trouble, which will require a financial bailout if the problem of YPF is not resolved.  For Mexico, the solution of the conflict will strengthen Pemex at a time when the company is subject to serious and justified criticisms, and discussion is happening about opening the oil sector to competition, even without privatizing the company.
For Argentina this is a desperate step to solve the problems of the energy sector and the pending conflicts with foreign investors and financiers.  Even still, this is the first step, which seeks to attract technology and financing for a sector in crisis.  Certainly the government has much left to do, as without closing an agreement with the Paris Club and with private creditors (“holdouts”) in private debt, investors will have a lot of fear of bringing money to Argentina.
Argentina is fortunate to count on the third highest level of potential unconventional gas reserves, after the U.S. and China, but it doesn’t have either the money nor the knowledge to explore and exploit them.  Repsol and Pemex also don’t have the money and only some of the technology but they can get them both.  While I doubt it, perhaps for the pseudo-Keynesian and pseudo-Marxist Argentine government this is its Deng Xiaoping moment, which carried China to the path of market economy and integration into the world.  However, I fear that for them the market economy exists but it still smells bad to them.

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