Category: Argentina

Argentina’s consumer prices rose 0.5% in July, bringing the 12-month figure to 8.6% from 8.8%, INDEC, the country’s troubled statistics bureau reported late Monday. Instead of encouraging the market, the figures caused a drop in local assets, according to a Goldman Sachs report. “The low inflation reading was interpreted as evidence that the government will not correct the alleged methodological vices in the calculation of the inflation figures,” says Goldman. INDEC’s first inflation report under new finance minister Miguel Peirano and new director of INDEC Ana María Edwin, was viewed by the market as inconsistent with “anecdotal evidence and alternative inflation indicators,” says Goldman. Local press reports highlights the expectations of private sector economists that point to inflation of well over 1% for the month-on-month period.

Argentina’s Banco Galicia said Thursday that its capital increase has fallen short of expectations. A 100m share issue saw demand for just 93.7m units, the bank said in a statement.

Argentine steel company Siderar has pulled an issue of ADRs. In a terse statement to the local exchange, no reason was given for the decision.

Argentina and Venezuela are heard to be readying their third Bono del Sur tranche sometime in August. According to market sources, the size will be between $500m and $1bn, slightly less than the last issue. As with the first two tranches, this offering will combine Venezuela’s TICCs (título de interés y capital cubierto) and Argentina’s dollar-denominated Boden. Local investors can buy the packaged bond and then resell the Argentine paper element to obtain dollars. The bond sales are an attempt to control Venezuela’s foreign exchange rate on the black market by satisfying demand for dollars, which is otherwise restricted by tight capital controls.

INDEC, Argentina’s national statistics agency, has confirmed June’s industrial output figures. Year-on-year, production rose 5.0%, while on a monthly basis it contracted by 0.1%. Figures were less than expected by economists but reflect the effects of the extreme cold weather and resulting energy shortages, according to the agency.

Argentina’s new economy minister Miguel Peirano appointed Ana Maria Edwin the new head of INDEC, the statistics bureau that measures, among other things, inflation. She replaces Alejandro Barrios, a political appointee of Felisa Miceli, Peirano’s deposed predecessor who was forced to resign following a scandal involving a bag full of cash in her office restroom. Barrios was named director when INDEC’s former chief Lelio Mármora resigned, citing health reasons. The real reason, say local reports, was the government’s forceful replacement of his head of CPI Graciely Bevilacqua in February with a political appointee Beatriz Paglieri, reportedly because of a disagreement on the methodology used to measure Argentina’s double digit inflation. Ana Maria Edwin, Barrios’ deputy, is seen as a strong statistician with a good technical background. She may not be enough to rebuild confidence in INDEC data.

Following a strong depreciation of the Argentine peso, from ARP3.10 to the dollar last Thursday to ARP3.18 yesterday, the central bank is believed to have intervened in the FX market to keep the currency from depreciating further. Going forward, “the central bank is expected to intervene to prevent the ARS from weakening beyond ARP3.20,” says Goldman Sachs. “A weaker peso in the near term would exacerbate inflationary pressures and weaken domestic sentiment ahead of the presidential election,” adds Credit Suisse. This supports further sales of dollars by the BCRA in the near future.

Credit Suisse this week issued a bearish report on holdout Argentine debt, which it says has held up well in the current sell-off, outperforming performing Argentine bonds by a large margin. But it is not optimistic of a settlement for holders of roughly $20bn in defaulted debt. “Our valuation analysis assumes that the Argentine government will invite holders of untendered debt to restructure the bonds on terms equal to or less favorable than those of the 2005 restructuring,” says the shop. “In our most conservative scenario, we assume that, in a new bond restructuring, the government would not include the GDP warrants or accrued interest on the new bonds.” Assuming a restructuring into new discounts, Credit Suisse says the potential returns on the untendered debt look inadequate, at 5.5% to 7.3%. “Dollar untendered bonds no longer look attractive compared to the performing debt,” the shop adds.

Argentine steelmaker IMPSA is looking to sell $250m worth of 2017 amortizing notes to refinance outstanding debt. The company plans to buy back its series 8 and 9 bonds issued in May 2002, worth $134m, at the call price of 85%. It also hopes to cancel the series 9 and 12 notes, worth $12.2m, issued in November 2002, and repay $100m in bank debt and privately placed bonds. Fitch rates the notes single B, and A minus on a local scale. Merrill Lynch is heard to be leading the offering.