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Donnerstag, 21. November 2013

Lead Articles: El Cronista: “Warnings that the new swap with China will not impact the Central Bank reserves” La Nacion: “Bond swap with banks is being negotiated” La Nacion: “Another bet, another match”

El Cronista
Warnings that the new swap with China will not impact the Central Bank reserves
The brand new Economy Minister, Axel Kicillof, confirmed that he plans to swap yuans for pesos, but in the City they said: ‘It doesn’t serve for rebuilding the reserves’”
Thursday, November 21, 2013
By Sofia Bustamante
In his first statements after the announcement of his appointment as Economy Minister, Axel Kicillof confirmed he is seeking an agreement with the Government of China on a swap of pesos for yuan to thereby strengthen the reserves, which yesterday again broke a new psychological barrier. However, in Buenos Aires City, they pointed out that even if the operation is help, a swap of this type would not impact the Central Bank’s coffers.
The economists consulted by the newspaper explained that Chinese currency cannot be booked as part of the reserves, because it is not a currency of a country considered "first rank.”  In fact, they underlined that the coffers of the world's major central banks don’t have yuan.
Monday it came out that the country would be formalizing a new swap with China for US$10 billion to be used in the event the reserves perforate the US$30 billion level. Yesterday, they closed at US$31.9 billion, just US$10 billion less than what was registered at the end of last year.
"The yuan is not a convertible currency. That means that you can’t easily exchange yuan for dollars. Perhaps in 15 years the story will be different, but for the moment this swap will not rebuild the reserves," said Nicolás Dujovne, director of Dujovne & Asociados.
In the same vein, the Chief Economist of Orlando Ferreres, Fausto Spotorno, agreed that this swap would not impact the coffers because the yuan is not a currency of "value" at the global level. Spotorno recalled that currencies that are most commonly used for this purpose are the dollar, euro, yen and the pound sterling.
In 2009, the BCRA agreed on a currency swap plan with China's Central Bank for US$10 billion, which has already expired. At that time it had been taken to prevent an eventual illiquidity, given that global finance was being hit by the subprime crisis.
Four years ago, Martin Redrado carried out the operation as President of the monetary authority, however the former head of the BCRA referred to the "complexity" of returning to an agreement of this type: "Converting the yuan was complex in 2009, today it is impossible.”  He also added: "In 2009, we had the possibility of exchanging yuan for dollars in New York, but in the end it was not necessary.”
At the Buenos Aires market they believe that the only use the swap would have would be to pay China for imports in its own currency, and that Argentina would receive 59 billion yuan in exchange for about 60 billion pesos, and there are few options that the country has to make use of the currency in the Asian giant.
Thus, with the agreement, the approximately US$11 billion that the government will pay this year for Chinese imports could be compensated with yuan, which would avoid a drop in dollar reserves. However, if China does the same, meaning pay for the US$7 billion in soybean exports with pesos, those dollars wouldn’t enter the country, which would throw this option overboard.  
La Nacion
Bond swap with banks is being negotiated
Economy wants to renegotiate the Bocan 2014 to avoid a spreading of inflation  
Thursday, November 21, 2013
by Florencia Donovan  | LA NACION
Aware of the impact on inflation that the heavy emission of pesos to finance the Treasury has had, the Finance Secretary’s office began to negotiate with several banks on a swap of a bond that comes due in early 2014.  It is 17.5 billion pesos that the Treasury, in some other form, will have to circulate into the market in January and that, ultimately, could end up pushing prices up.
According to what LA NACION confirmed, the meetings with banks began last Friday. And, despite the changes in the Cabinet, negotiations continued throughout this week.
Economy’s idea would be to swap the Bocan 2014 (also called Bonar 14), which comes due in January and which had been issued as part of a voluntary exchange of Pre9 and Pr12 bonds that were due in 2009 and 2012. Much of the issue is in the hands of the National Administration of Social Security (Anses), but there are also a significant number in the portfolios of the banks. The bonds should paid 100% of their principal on January 30, which would force the Treasury to disburse 17.547 billion pesos, according to the latest data available at the Economy Ministry.
"This is an action that would be normal in a normal country. All countries carry out an active management of their liabilities," said a banker that asked not to be identified. "Always to the extent that the swap is voluntary and under market conditions," he added.
The banks have offered to Finance Secretary Adrián Cosentino to swap the Bocan 2014 for a new bond in pesos, with a five-year term, and set by the Badlar rate - which is paid in the financial system for a wholesale fixed period -plus an extra payment (‘spread’, in financial jargon) of 3 percentage points. Similar conditions were received at the time by insurance companies who participated in a similar swap, although not with bonds, but promissory notes. In the Economy Ministry, however, they would be pushing for the timeframe to be a little longer. The Bocan 2014 was already paying Badlar plus a rate of 2.5 per cent.
"The conditions are still not a done deal,” another market source admitted to LA NACION. "The banks asked for a rate proposal, but the spreads and timeframes are still being fought over,” he confided.  Asked about it by LA NACION, the Finance Secretary’s office wouldn’t comment.
The City doesn’t rule out that with a successful restructuring of the Bocan 14, there would be a second round.   The Economy Ministry is also seeking to swap the Bocan 2015, coming due in two years. Yesterday, the Bocan 14 traded at 100.30 pesos, accumulating a drop of 0.35% for the month.
La Nacion
Another bet, another match
Thursday, November 21, 2013
by Carlos Pagni | LA NACION
Along the “won decade”, the government has shown that adversity leaves it feeling well.  For Nestor Kirchner and, above all, for his widow, the scarcity of power always was an intellectual stimulant.  Excess, in turn, clouded their judgment.  As in other opportunities where she has seen herself in checkmate, this week the President shuffled the chess pieces and oriented the match in another way.
Her more important innovation was to designate Jorge Capitanich as Cabinet Chief.  The result of this bet needs a lot more to be sure of.  But Capitanich’s arrival to the Casa Rosada has, potentially, the capacity to reconfigure all politics.
Until now, the government has been going backwards on an objective: to revive itself upon its own electoral base to head towards the next administration with its “national and popular project” banners.  Now that it cannot hold onto power, it will reinforce its identity against the predictable “conservative repositioning.”
More than looking at the year 2015, she has 2017 in view.  Incorporating Capitanich contradicts that logic.  The governor of Chaco rose to the platform of the central administration to participate rom there in the succession dispute.  Like for the governors and mayors of Peronism, Capitanich’s political horizon is the presidential election.  For them, power is more interesting than identity.  And they plan on having this expectation shape the life of the government.   
An example outside of Argentina allows one to think better of the new scene.  Impeded from going for another re-election, Lula da Silva made Dilma Rousseff his Cabinet Chief in 2005.  Will Capitanich be Mrs. Kirchner’s “Dilma”?
Like in every comparison, the true service of this is to help in understanding the differences, not the similarities.  Lula tossed up an heiress without political weight, a technocrat, a manager.  Rousseff didn’t even belong to the PT.  Also, her sponsor was in high regard at the time.  In Brazilian officialdom, nobody needed to differentiate from him to win an election.
Between Cristina Kirchner and Capitanich the situation is different.  The Cabinet Chief/candidate requires that his godmother admit to corrections so that her experience can be inherited.  The pathologies are known: inflation, crime, energy deficit, international conflicts.  And the most urgent: the lack of dollars.
Upon the succession from Silvio Berlusconi, Beppe Servegnini described the dilemma in Il Corriere della Sera: "Personality, enchantment, love of self [?] are the qualities that the modern electorate demands.  But those same elements make succession difficult: the charismatic leader sees the heir as the proof of his own political mortality and ends up detesting him.”   
Yesterday, the President spoke with pragmatism: she acknowledged the finance crisis and said she is ready to “listen to the proposals, if they are not mere sketches.”  In turn, if she is obstinate in staying the same way, Capitanich’s run could be ruined.  However, if he would threaten to leave the administration, she would be left on the verge of capsizing.  Who will devour whom?  Or will they manage to square the circle, the change in the continuity?
Capitanich has been the governor who took more risks in defense of the government in very costly disputes, like the conflict with the farm sector or the war against the critical media.  But it’s not a clash in the “culture war.”  He deals with the farm sector; he knows the financial world; he cultivates friendships in the government of the United States; he is capable of defending the Church’s positions ignoring more elemental secularism.  Also, in 2001, when he was Cabinet Chief to Eduardo Duhalde, he navigated the eye of the hurricane together with Jorge Remes Lenicov.
The director of Cippec, Fernando Straface, proposed in a study two models for the Cabinet Chief: one of an autonomous primus inter pares, almost a Prime Minister, or the mere manager that sometimes is spokesman and envoy of the President.  “What style will Capitanich adopt?  Will he call Cabinet meetings?  Will he concoct a federal league to sustain his management?  Will be talk to the media?  Will he negotiate with the business sector?  How he will clear up these unknowns will depend on his role in 2015.  If he manages to give continuity to the current government or if he will only be the instrument of an experiment in fragmentation in how the President ends up departing.  
These puzzles are vital for Sergio Massa and Daniel Scioli. Massa is drawing up his race with the theory that Kirchnerism has dried up its source of power.  Capitanich will try to show that it can survive even without re-re-election.  For Scioli the picture is depressing: he didn’t unit with Massa to be the President’s dolphin and now he finds out that she prefers another.
The designation of Axel Kicillof in the Palacio de Hacienda is another significant change.  The markets were alarmed with the promotion of a statist, trained in Marxism, admirer of Lord Keynes in the style of revisionists like Hyman Minsky.
But the expansion of Kicillof can be deceptive.  It was pointed out two days ago by Javier González Fraga: for the first time this official will report to someone that, like Capitanich, also knows the Economy Ministry and is trained in state management.  Will Capitanich risk his race for the ideological  whims of someone that he also calls “the Soviet”?  Or will he take the running of the economic area in his own hands?  
Kicillof is dogmatic, but not so much.  Joining the government he stopped criticizing the adulterations of the INDEC.  In his diatribes against “Repsol’s” YPF, he bit his tongue before mentioning the Eskenazis, who, as he knows, were really running the company.  And he had no qualms in signing the secret agreement with Chevron, despite his yelling against multinational oil companies.   
What will Kiciloff’s next flexing be about?  Perhaps he gave up on split currency rates.  The President ended up not accepting the idea.  Also, now he will also have to convince Capitanich and Juan Carlos Fábrega, who, as LA NACION reported, delivered the monetary and currency exchange policy over to the bureaucracy of the Central Bank: he named Juan Carlos Isi as director general, an expert in financial regulations who perhaps is not a follower of Minsky.  The debut: two days ago a devaluation of the official dollar of 0.6% was registered, the biggest daily move in the last four years.  
Fábrega was decisive in the other big news: the Roman ostracism of Moreno.  The Commerce Secretary resigned when Fabrega came in at the Central Bank.  The main refuge of power or Moreno was, in recent times, control over the Central Bank’s operations.  Every day he’d get a list with the requests for dollars by companies, and would send it back marked with either green or red check marks.  
Fábrega, who knew of this routine, asked for Moreno’s head.  He was surprised when Cristina Kirchner gave it to him without resistance.  He wasn’t the only executioner: for months, Kicillof was tormenting the President with complaints against the secretary.  He was successful: before La Campora captured that office, he got in with Augusto Costa, his alter ego.  Kicillof disdains the friends of Maximo Kirchner for their clear intellectual inconsistency.  
Moreno’s departure has significance of the first magnitude.  The official parishioners didn’t appreciate that eccentric tinkerer by the results of his policies.  For them his merit had been to embody, with the extravagance of a personality of the Titans of the Ring, the fight against “the enemies of the people.”  At the head of such people – the critical media.  For a group that only knows itself when it enters into conflicts with others, Moreno’s proclivities and pantomimes were a sign of the correct course of history.  Who will play this role now?  Or will cognitive therapy become essential?  
Moreno’s removal was inevitable after the electoral results.  The body to body pressure needs, like economic policy method, the support of the voters.  The dream of eternity shattered by the ballot box, Moreno’s phone bombs to companies ran the risk of wearing out their answering machines.
The secretary’s exile puts Cristina Kirchner before a challenge: perhaps she has to resign herself to running the economy by fixed rules.  An agonizing option for someone that, instead of attributing imbalances to some invisible, impersonal hand, tends to believe in conspiratorial workings.  Should one expect more surprises?  Last night, the rumor circulated in the oil markets that she will create an Energy Ministry for  Miguel Galuccio, who would leave YPF to Fernando Giliberti.
With such an ambitious restructuring, she could even fill the Secretariat of Fighting Drug Trafficking, vacant since March.  For such a reformist wave, it would be just a detail.  

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