Clarin: “Inflexible, Cristina will not make economic corrections”
La Nacion: “US$11.5 billion more will be paid to bondholders by inflating the rise in GDP”
Ambito Financiero: “Argentina will pay US$ 11.5 billion more for the GDP Coupon”
El Cronista: “With less reserves and fewer maturities in 2014, the fund to pay debt is increased”
Clarin
Inflexible, Cristina will not make economic corrections
Friday, September 13, 2013
By Marcelo Bonelli
Cristina Kirchner discouraged all the businessmen present during the private meeting at the Casa Rosada: she told them that she will pay the political cost for corrections that are needed to fix the economy and get to 2015 in an orderly manner.
It was a hard and strong decision: for the first time she referred to the subject and made it clear that she intends to leave for the next President the legacy of adjustments that the policy the Casa Rosada is now carrying forward is breeding. Cristina suggested, moreover, that before correcting her economic mistakes she would prefer to resign and leave the government.
She used an elliptical discourse, but at the same time it was sufficiently clear. The message reached the heart of the chiefs of industry and banking. She said: "I will not end up sitting in the Casa Rosada accompanying an economic policy that I do not share." And she added: "I’m 60 years old, I am a grandmother, I won't apply any measure that they want in order to cool down the economy." This happened after the press had left the meeting and after she’d expressed in public that she was willing to listen to recommendations, something that her statements, now in private, were charged with denying.
Cristina was transformed when the spotlights were turned off and she dedicated herself to criticizing the Industrial Union and the Association of Argentine banks.
She identified to the two entities with desire of businessman that she pay the political cost of rearranging the economy before 2015 and avoid leaving a time bomb for the future President. Cristina said that she will persist with her strategy and that she is not prepared to correct anything, and refused to carry out "a plan of inflation targeting, because that involves cooling the economy and devaluation." That was when she mentioned the UIA and ADEBA, linking them with the groups that are seeking to put the economy in order to clear the path for the future government.
Her anger was a response to the latest statements from Héctor Méndez and Jorge Brito. Both decided to skip the meeting. Mendez scheduled a trip abroad and the banker made a stronger decision: he requested leave at ADEBA to avoid running into Cristina to until the October elections pass.
Thus, without the presence of two strong entities of the business world, the dialogue became a monologue. The AEA was never invited and yesterday its leader, Jaime Campos, claimed: "We approve of the tax rebates, but there can be no more taxes on companies because they affect competitiveness.”
Cristina accuses Brito of working for Sergio Massa. But her analysis forgets that earlier, and with her endorsement, Guillermo Moreno accused him of being a "traitor to the fatherland" and of being responsible for the rise of the parallel dollar.
Mendez railed against the continuous malpractice of Hernán Lorenzino, but in the Casa Rosada they insist that his statements are part of the internal conflicts of the economic team.
Moreno was the one who, from the government, pressed for Méndez to go back and head the UIA. This unleashed a frontal battle with Julio De Vido and is now feeding his moodiness against him.
Axel Kicillof and Hernán Lorenzino himself transmitted to their intimate circles that Mendez came out to attack the Economy Minister at the suggestion of Moreno.
The Commerce Secretary is going through a terrible political time. He has turned into a collector of failures and his zero harvest made him the target of other operations. Even Carlos Zannini launched a tough offensive in an intimate encounter in the Olivos compound: "Moreno has to leave the government." Now from the Casa Rosada, there are tough comments, linking the Commerce Secretary to the discretionary management of the 35 million pesos supposedly donated to help flood victims in La Plata.
Moreno ordered, invoking that end, providing the money to industrialists and bankers, but - a semester later – the funds are still in an account of the CGE and being managed in a manner considered non-transparent. His enemies in the government say that Moreno used these funds for other purposes. The Secretary defends himself and argues he will send the money after the election.
The presentation of Miguel Galuccio at the Petroleum Club was frustrating for the energy business community. He only diagnosed something that has been denounced for quite some time and that the government has hidden. He said: "The energy deficit is serious". The expert María Serenelli reminded him of it: "Years ago, we warned that energy policy was carrying us to the shortages.” But Galuccio did not offer an idea about how the country will resolve a crisis which is affecting the whole economy and the external front. And in fact he acknowledged that his plan was failing: YPF invested US$5.5 billion, 27% less than what was promised in the "Plan Galuccio".
The head of YPF avoided talking about stinging issues and for that he met Oscar Vicente ahead of time. He asked his host not be questioned on the secret contract for Chevron, nor the possibility of a blockade on YPF by the New York courts.
Galuccio commented that there is an Argentine private bank with state participation that was under observation by Thomas Griessa for an attachment.
But the pact of silence was broken by a question from a former Peronist fuel secretary.
Rubén Maltoni touched the issue that most worries investors and was precise: "Is there a plan for the political transition?" Galuccio babbled a response. He said that YPF was a corporation and that preserves its management. But in the end, he had to be sincere: "If there are political changes, my team and I will not have inconveniences in going."
La Nacion
US$11.5 billion more will be paid to bondholders by inflating the rise in GDP
Friday, September 13, 2013
by Martín Kanenguiser | LA NACION
To analyze the budget exhausts analysts of all stripes, who know that the figures are produced without any rigor and that, throughout the year, are modified by means of other rules, or by reality.
But between the criticisms that arose yesterday around of the 2014 budget presented in a rush in Congress, what stood out most is the over-estimation of economic growth by the area led by Vice Minister Axel Kicillof.
This strategy will lead the government to pay US$5 billion in 2014 and US$6.4 billion in 2015 for the GDP coupon, explained economists consulted by LA NACION.
For this year, according to the charts released yesterday, they expected economic growth of 5.1%, curiously, similar to the one reported by the Indec for the first half of the year, which is a performance that is not reflected in almost any of the variables, neither macro- nor microeconomic, except in consumption.
This will trigger the payment of the GDP coupon nxt year (a level of more than 3.2% has already generated it) of US$5 billion, said the director of the consulting firm Analytica, Rodrigo Álvarez. “The optimism of the scenario that the government is setting out is surprising. This would imply that in 2014 the GDP coupon payments would be more than US$5 billion and US$6.4 billion in 2015, before the end of the mandate of the government,"he said.
Therefore, he explained, “they will have to hold on to more than US$11.5 billion just to pay the coupon, of which about US $9.2 billion will be in hard currency." For this reason, yesterday, bonds linked to GDP rose on the markets.
Foreign and local analysts foresee a growth around 2.5% instead for the coming year, although some have a more pessimistic view, like seen in the Bein firm, which is predicting 0%, while ACM stretches it to 0.6%.
On the other hand, average inflation for the analysts will be 28% (ACM mentioned 29.4%), while the government estimates average inflation of 10.4% and 9.9% year-on-year, which confirms that at least in 2014 there will be a straightening out of the price index. "The drawing up of the CPI continues," said Alvarez. Castillo said that "this presentation again reflects the futility of the budget as a tool for coordinating and delineating expectations. Last year, the authorities predicted a primary result of $59.256 billion pesos by 2013, which today they estimate at a surplus of $431 million, even when the evolution of the resources being somewhat better than originally expected.”
In this direction, ACM estimated fiscal red ink for next year of 69.902 billion pesos; the government estimated that the primary surplus will be 83.8893 billion pesos, while the financial surplus would amount to 3.5791 billion. Luciana Díaz Frers, Director for Fiscal policy at the CIPPEC program, said that the inconsistency between reality and the official figures is "enormous, as can be seen in what is projected for this year, with a nearly balanced fiscal result, and what ended up happening, with a drop of 46.686 billion," she explained.
"And the coming year they do the same, because it is impossible that revenue will grow 27% with an inflation rate of 9.9%. The other error is to predict such low growth from spending, because last year they did the same and then they had it to increase by 41%,” said Diaz Frers.
In fact, the forecast of increased primary spending contained in the 2013 budget was 16% (similar to that contained in the draft filed yesterday), but in fact the figure doubles that rate of increase (in fact, in the first half grew by 29%).
Therefore, all are expecting a new DNU to correct the figures for spending before year's end. "Except for 2011, when they projected a deficit, which was 42 billion pesos versus the projected five billion, all the rest of the years they estimated surpluses but they ended up recording fiscal deficits," said Diaz Frers. So, the deterioration in the public accounts will continue, despite the constant increase of the shifting of funds from the Central Bank, ANSeS and other public agencies, to the Treasury, which will grow by 73.8%, compared to this year.
Even an economist belonging to the ruling party was taken aback by these figures: "It is hard to think of growth at 6%, except that one assumes that the difficult forecast of 8.5 per cent of an investment increase comes through," he said anonymously to LA NACION.
In the same vein, he said that average exchange rate of $6.33 seems curious for 2014, because it involves a reduction in the pace of devaluation in half: 15%, in a world more unfavorable to Argentine competitiveness.
"If actual inflation will be placed around 25%, which is the most likely scenario, the government should devalue by around 30%," said Alvarez.
Analysts also expressed their surprise over the figures for the trade balance, which would end up, according to the government, with surpluses of $10.556 billion pesos this year and US$10.124 billion next.
Ambito Financiero
Argentina will pay US$ 11.5 billion more for the GDP Coupon
The Budget presented yesterday projects growth of 6.2% for 2014 that will authorize a new bond payment
Friday, September 13, 2013
The GDP Coupon, an idea designed in 2005 by then-Economy Roberto Lavagna along with his Finance Secretary Guillermo Nielsen, will oblige the government to disburse another US$11.5 billion in the next two years and with that will round out to a total cost of US$20 billion throughout the three presidential terms of Kirchnerism.
The government confirmed yesterday that the country must prepare for a new payment on that financial instrument at the end of 2014 and 2015, suggesting in the Budget that it plans growth of 6.2% next year. An activity at these levels, if it occurs, would trigger the obligation of the National Treasury to pay out about US$7.125 billion to holders of bonds linked to GDP; of which it is estimated that US$5.7 billion that will have to be in foreign currency because they correspond to warrants that are denominated in both dollars and euros. The amount is in addition to the US$4.4 billion that the government will have to pay at the end of 2014 for growth this year which, according to their measurements, will be above the 3.26% referred to in the prospectus. The total amount for these two years, therefore, amounts to US$11.5 billion, of which US$9.2 billion must be made in foreign currency.
The payment will have to be made in a context in which Argentina is suffering the effects of the shortage of hard currency. And in a scenario in which the fall in reserves of the Central Bank is expected to continue. This year, consultants are already estimating that the official entity will have lost about US$8.5 billion. If next year repeats this same performance, only US$25 billion will remain in the reserves.
There are elements that seem to be even more dramatic. At the Analytica consulting firm, they estimated that there is a 3 to 1 elasticity in imports with respect to the level of activity. This indicates that, for every point that the Argentine economy grows, purchases abroad go up by another three. "If the estimated growth 6%, it means that imports should grow by more than 15%. That means a heavy exit of dollars from the country,” chief economist Rodrigo Álvarez of that consulting firm clarified to this newspaper.
The GDP coupon was included in the prospectus of the debt exchange offer to tempt creditors with the idea that they would recover the haircut on nominal principle in 12 years. In accordance with their conditions of issue, requirement for authorizing its payment is that GDP will increase above the projected growth of the baseline scenario, defined in the original exchange offer, and it is placed above that value ($ 287.012 billion, base 1993).
At Econometric, consultant Mario Brodersohn said that to continue with this rate of payments, in 2017 the country will be freed of the debt because a clause which was established in the prospectus will be activated: the disbursements accumulated from these bonds may not exceed the haircut on nominal principal obtained in the restructuring of the debt (some US$36 billion to U$40 billion, according to different estimates).
The path taken is already beginning to get close to that figure. From the first payment until the one to be made in December 2015, the pay-out will have accumulated to US$20.165 billion. It is equivalent, precisely, to 60% of the reserves which the Central Bank has now.
El Cronista
With less reserves and fewer maturities in 2014, the fund to pay debt is increased
The Fund could be used to finance capital spending. Made up of dollars, it also contemplates payment in pesos. Another US$2 billion will go to organizations.
Friday, September 13, 2013
ESTEBAN RAFELE and NATALIA DONATO Buenos Aires
The new edition of the Argentine debt reduction fund (FONDEA), the instrument which the government has used since 2010 to pay maturities of debt with private creditors with reserves from the Central Bank, it will get US$9.855 billion next year, as seen in the 2014 Budget bill yesterday sent by the Executive to Congress.
The figure is US$1.888 billion higher than expected for 2013, while the Executive is handling a lighter scenario of commitments for the next 12 months.
Like last year, article 50 of the bill has to be anchored with reservations and clarifies that "in case of a surplus and provided that they have neutral monetary impact,” the funds could be used to finance capital expenditure.
The provision of US$9.855 billion of reserves for the FONDEA surprised economists.
According to the Bein firm, the government must pay US$ 5.6 billion debt in dollars to private creditors, an estimate that includes the payment of the GDP Coupon in December 2014, according to the expected growth in 2013. For the ACM firm, the commitments could stretch out to US$6 billion.
In any case, there would be around US$4 billion left to allocate for other purposes. Such a difference gave rise to various hypotheses: the financing of YPF’s assets, a possible settlement with the holdouts in the lawsuit in New York or the provision of payment of a negative sentence or until any payments of negative rulings at the International Centre for the Settlement of Investor Disputes (ICSID).
Finance Secretary Adrián Cosentino said yesterday in the Congress that Argentina has "a really very solid debt situation " and explained that maturities with private creditors, including the coupon attached to the growth of the economy, totaled US$5.2 billion in hard currency. At the same time, debt in pesos in the hands of private holders is equivalent to US$4.651 billion in debt. The FONDEA, originally intended to pay maturities in dollars, us now covering all the payments, according to the official explanation.
The official, who accompanied the Economy Minister Hernán Lorenzino, to testify to legislators, said that 28% of the debt is held by private creditors, another 12.7% is with multilateral agencies and 59% of the maturities are intra-state. In total, the Executive expected amortizations for 2014 of US$13.452 billion denominated in pesos and US$13 billion in foreign currency.
The FONDEA will be made up of freely available reserves, a more lax concept since the reform of the Charter of the Central Bank in 2012. In turn, Treasury is sending letters in dollars at ten year terms to the monetary entity.
The US$9.855 billion us equivalent to 29% of the reserves of the Central Bank today. To this figure another US$2 billion is added to pay for maturities with international agencies, something which does not need a law and the government usually does by a simple decree.
So far this year, the Central Bank has lost US$6.612 billion in reserves, or more than double the US$3.085 billion lost over 2012.
Of the total reserves, only 30.4% are liquid, while another 39.5% is made up of government bonds, according to the balance sheet of the institution led by Mercedes Marco del Pont.
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