“To settle with the Paris Club facilitates credits for Vaca Muerta”
Sunday, March 16, 2014
By Paola Quain
The first formal meeting to start the negotiations between the Paris Club and Argentina over a debt estimated at US$10 billion, which was confirmed for May 26, could be the point of departure for the reopening of lines of credit that are closed off today for key areas like the energy sector.
According to sources from the Economy Ministry, up to yesterday the formal invitation had not yet arrived for Minister Axel Kicillof and it was not officially confirmed that he will travel in the coming days to France, while they were still analyzing what would be the best strategy to follow.
In January, Kicillof had proposed paying 20% of the debt in 12 months starting with the agreement and extending the payments out 15 years in installments or state bonds, an idea that was rejected. Now, the technical staff are looking at a 20% cash payment on the debt within a year, while the creditors want it in less time.
Even still, it is good news for the government, which is trying to open up a path in the foreign markets for obtaining financing.
On the issue, former Finance secretary Guillermo Nielsen celebrated the progress.
—What are the expectations that this meeting is setting off?
—It’s very good news, the acceptance of sitting down and negotiating an agreement is something that will help Argentina a great deal. One has to take note that this kind of negotiation, once it starts, has to be concluded. This means that, beyond what could be an intermediate picture, what is certain is that they will continue until reaching an end. For that reason, it’s very important to show up well prepared.
—What could be the most immediate effects that could come from reaching an agreement?
—I believe that the most important thing is that it will unblock other lines of credit that are of interest to our country, and that are closed off today, especially from the Ex-Im Bank, which we need from countries like Germany, the United States and other G-7 countries, through which we could access the necessary technology for the development of Vaca Muerta, and also in the area of rail systems.
—What view do you have about the IMF warnings on Friday about Argentina’s delay in showing its data before the entity?
—I believe that the drama needs to be reduced around Article IV, which is about communicating the national economy figures to the multilateral credit organization. It’s something that all the countries do, even France, and while they are criticized, they are a sovereign state.
Economy wants funds and at a lower interest rate than YPF
“The order is to place debt at one point less than YPF,” is the message to bankers these days. They are betting on year’s end.
Sunday, March 16, 2014
Last week, the Finance Secretariat at the Economy Ministry received a group of foreign investors. Also one of the biggest foreign banks that operates in the country. Those who participated said that Secretary Pablo López was anxious to seduce the bankers. He acknowledges that he has the go-ahead “from the top” for placing debt, where the goal is to put together the first operation in the last quarter of the year, and that it only has to comply with one rule: the interest rate has to be one point less than the 8.87% annual that YPF set in December 2013 when it placed US$500 million.
Investors heard the following definitions from Lopez and his advisers: “The economic team has the approval of Cristina Kirchner to place debt;” “The condition is that the rate has to be lower than YPF’s (8.87%);” “The outline of the offer to the Paris Club was accepted by most of the member countries.”
At the Economy Ministry they are optimistic over the progress of the negotiations with the Paris Club. And they believe that the new rate of inflation will not only serve to put the relationship with the IMF back on track. It will also serve to start down the path of recovering credibility. "The economic team will seek a more active approach with the banks in the next meeting of the IMF," has a source who was in one of these meetings, in relation to the spring meeting of the IMF and World Bank that will take place in Washington in April.
But will there be enough time for the economic team to achieve results before the end of the year?
Two experts gave their opinion. One is former Finance Secretary Daniel Marx. "The worst performing countries today are Venezuela, Argentina and Ukraine. You must not make too much out of that lot.” Marx believes that Argentina will get good results from the meeting on May 26 in the Paris Club because once a date is fixed there is a pre-agreement.
"The country could be placing debt at around 8% by the end of the year.”
In turn, Eduardo Levy Yeyati, director of Elypsis and former economist for the Central Bank, believes that the economic team is underestimating the timing around this transaction. "It is not clear what their road map is in this respect and what would bring in fresh resources, except by postponing the possibility of a default.”
At Economy they minimized the rumors about a correction in subsidies in the coming months. And they won’t rule out the possibility of postponing it if economic activity shrinks in the second half of the year. Kicillof was opposed to revising service rates at the beginning of 2012 when, at that time, the economy entered into a six-month recession.
With the devaluation, the monetary contraction, and the resolution for the banks to dump their positions in dollars, Kicillof is betting on going out to the markets.
In Rome and Paris, Cristina seeks to recover the spotlight
After a long time she will make a trip that will link her to relief leaders, like the Pope and Hollande, and will have a positive agenda for the government
Sunday, March 16, 2014
By Mariana Verón | LA NACION
After two complex months on the domestic front, President Cristina Kirchner will resume her international agenda this week with two high voltage political meetings: tomorrow with Pope Francis and Wednesday with French President François Hollande, two meetings that the government already celebrated in advance.
The invitation from the highest authority of the Church to the President will put her back on the world stage and only the predisposition by Francis to greet Cristina Kirchner triggered optimism in the Casa Rosada, where they believe that it will give them a week's respite from the more urgent unresolved issues such as inflation and the collective bargaining with teachers that is still not settled.
The President departed yesterday for Rome for the start of a tour that will take her out of the country for five days. In addition to her first stop at the Vatican and the meeting with Hollande, the head of State will have an appointment with businessmen that was set up against the clock to reactivate her return to the world after long months without foreign trips.
With a tiny delegation, the President will have her appointment with Francis, the third since he took office as the head of the church a year ago, tomorrow (Monday) at noon, for lunch one-on-one at Santa Marta.
With the relationship with the Church more relaxed since the obligatory trip made by Cristina Kirchner to get closer to the Pope, the meeting will seek to reinforce a bond that both have cultivated in private: while the Casa Rosada requested the meeting, the appointment ended up being set almost spontaneously when the President telephoned Francis to congratulate him on his year as Pope, and he invited her, taking advantage of her being in Europe this week. Everything erupted so quickly that the Argentine ambassador to the Holy See, Juan Pablo Cafiero, found out about the invitation once it came together.
"There is an affection and a new relationship both are taking care of," said an official from the Casa Rosada in the midst of the clear enthusiasm generated this week by the departure of the President for the Vatican.
Inside the government they say that the visit will give Cristina Kirchner a framework of "harmony" and "dialogue" in the new phase that she has decided to embark on, after her speech in the Legislative Assembly on March 1 showed her to be more open to the opposition and she even invited a group of lawmakers along on her last trip to Chile, last week, for the inauguration of Michele Bachelet.
The encounter with Francis will have an open agenda, but from the government they suppose that the dialogue could turn to the papal concern over drug trafficking, a problem that the Church has made a central theme in recent days.
This time the delegation will be excessively reduced. Foreign Minister Héctor Timerman, the Secretary of Religion, Guillermo Oliveri, and presidential spokesman, Alfredo Scoccimarro traveled in Tango 01. With access restrictions, the list of those going along was already handed over in advance, but, while the whole entourage will greet the Pope, only Cristina will have lunch with him.
The one that could also be added to the delegation is Guillermo Moreno, the former Secretary of domestic trade and today the attache at the embassy in Italy, who will reunite with the President after his departure from the government. The same Monday, after lunch, Cristina will go to Paris for the second stop on her tour. She will arrive relieved. The timing of her meeting with Hollande, on Wednesday, could not be more positive for the government: it will come just days after the Paris Club announced that it has accepted a start to negotiations by the debt that the Argentina has with the group of countries. While the issue will be part of the meeting, within the economic team they recognized that the decision announced on Friday cleared an open front for the President.
In parallel, while the President was leaving yesterday from Buenos Aires, in the French capital progress was being made on setting up meetings with businessmen, who was still unfinished, for Tuesday, the day off which is located in Paris.
With the intention of showing a new face to the markets and economic sectors after the progress in negotiating with the Paris Club and the payment to Repsol on the expropriation of YPF, Cristina will be seen with businessmen in search of investment. The trip will end with a cultural appointment: the President will speak Thursday during the opening of the Paris book fair, which this year has Argentina as guest country of honor.
The President’s agenda
Cristina Kirchner will meet with the Pope and François Hollande
MONDAY. The head of the state will lunch alone with Pope Francis. It will be their third meeting in Rome.
TUESDAY. She will meet with businessmen after the announcement of the Paris Club, which agreed to negotiate the Argentine debt.
WEDNESDAY. Cristina Kirchner will meet with French President François Hollande.
THURSDAY. She will speak during the opening of the Paris Book Fair, which has the country as guest of honor.