Category: Argentina

Argentina’s central bank is set to buy euros to help build up its foreign currency reserves after using around $10 billion of the funds for its early debt repayment to the IMF on 3 January. The reserves had fallen from $28 billion to $18.5 billion following the payment. The move towards buying euros away from the long-favored dollar is part of a diversification strategy that has seen the bank buy sterling, yen and gold as well as US dollars.

Alberto Fernández, Argentina’s powerful cabinet secretary, said that last year’s 12.3% inflation rate – twice the rate in 2004 – is a positive effect of economic growth. But he warned companies about their “responsibility” to avoid an inflationary spiral and urged them to be “very prudent and rational” in setting prices.

Prices jumped to a 31-month high in December, driving Argentina’s inflation rate last year to 12.3%. Inflation in 2004 was 6.1%. Economists say a 23% increase in public spending last year triggered higher prices. The government has responded by negotiating deals with leading supermarket chains to hold down prices of about 200 products.

Environmentalists in northern Argentina say they will organize more roadblocks to protest two new paper and pulp projects in neighboring Uruguay. The roadblocks would halt traffic between the two countries during the peak summer tourist season. Protesters say the plants will damage the local environment. Finland’s Metsa Botnia is investing $1.2 billion and Spain’s Ence a further $660 million in Uruguay.

Economy Ministry officials say they are preparing a proposal for bondholders who refused the terms of Argentina’s $81 billion debt exchange last year. About 24% of investors holding about $20 billion in defaulted bonds rejected the government’s original terms. Buenos Aires daily Clarín says holdouts would be offered discount bonds only, worth 33% of the old bonds’ face value. The government will not pay past due interest on defaulted debt. Neither will holdouts receive warrants offered last year that pay out when GDP growth rises above trend rates.

Argentina’s international reserves hit $28 billion, the level targeted by the central bank in order to cover the government’s planned early debt repayment to the IMF on 3 January. This is the highest level since July 2000 and well above the low point of $8.8 billion seen in August 2002. The central bank has built up reserves of around $8 billion this year via interventions in the foreign exchange market; yesterday it bought $70 million to take the level to just over $28 billion.

Argentina’s largest gas distributor, Metrogas, has again extended its debt swap offer deadline, this time until 11 January, hoping to increase the number of participating debtholders up from around 80%. This is the third time it has reviewed the closing date for the restructuring which offers to swap $437 million of defaulted debt.

Argentina’s 2006 budget has been approved by the Senate by 39 votes to 14 after passing through the lower house already. The budget predicts growth next year of 4% and inflation dropping to 8.6%. Primary budget surplus is estimated to reach 3.26% of GDP.

Venezuela bought another $270.4 million of Argentina’s Boden 2012 issue, after buying $495.7 million less than a week ago, and taking its total for the year to $1.75 million. Venezuela’s latest purchase will help towards Argentina’s dollar reserves which the country needs to build up ahead of its 3 January payment to the IMF of $9.8 billion to cancel its debt.

The Bank of America in Argentina has finalized the sale of BankBoston to a consortium led by South Africa’s Standard Bank and local families Werthein and Sielecki in a 70:20:10 split. The deal is rumored to be worth between $160 million and $180 million.