Category: Argentina

Argentina’s economy grew by 8% in September, compared with the same month in 2005, and expanded by 0.4% against the previous month of August. The figures for September take cumulative inflation for the first nine months of the year to 8.4%, according to the country’s institute of national statistics, INDEC. Industry, agriculture and construction were the sectors driving growth. Overall, the economy is set to expand between 8% and 8.5% this year.

Argentina’s Perez Companc group has bought one of Chile’s largest meatpackers – Frigoríficos O’Higgins (Friosa) – for an estimated $50 million to $70 million. The move is seen as a strategic one to take advantage of Chile’s worldwide trade agreements and the freedom of its cattle from foot and mouth disease, enabling it to sell boned meat to a wide range of markets. The Argentine company is particularly interested in Chile’s close trade ties with the European Union. Banchile Asesorias Financieras advised on the deal.

Argentine financial press report that the sovereign is likely to issue a second tranche of its Bonar VII dollar-denominated bond to take advantage of current market liquidity and the low spread of its paper. Argentina is said to be ready to issue a further $500 million of Bonar VII, in the next two weeks, to open its 2007 financing. Argentina sold the first $500 million tranche of the bonds, which mature in 2013, in September, as part of a total $1.5 billion program. The bonds were sold to yield 8.45%. The government needs to meet debt payments of $65 million for bonds maturing in January and a further $1 billion of paper due in the first quarter.

Venezuela announced Monday that it had sold $1 billion of its “Bono Sur”, jointly issued with Argentina, in the face of bids totaling $9 billion. The bond, which was sold in Venezuela, and which could be bought in local currency via banks, comprised debt from both countries: $500 million of Venezuelan TICCs (título de interés y capital cubierto) maturing in 2017; $300 million of Argentina’s dollar-denominated Boden 2012 and $200 million of Boden 2015. Once bought, the bonds can be traded separately in the secondary market.

Total Austral, the Argentine subsidiary of French oil producer Total, has sold its 60% stake in local thermal power producer Central Puerto and a 40% stake in hydroelectricity company Piedra del Aguila to Sociedad Argentina de Electricidad (Sadesa) and Merrill Lynch. The sums involved were not disclosed but the sales are thought to be worth around $35 million and $140 million, respectively. The acquisition by Sadesa, comprising a group of local investors, has been lauded in the Argentine press as another sign of the return to national ownership of utility companies, reversing the trend that began in the 1990s with the privatization program. Total, for its part, says it has sold its generating assets in Argentina so that it can focus on exploration and production in the country.

Argentina is hoping to settle its $6.3 billion outstanding debt with the Paris Club group of lenders by 2015, according to reports in Argentina’s Ambito Financiero. The Club lenders are Spain, Germany, Italy, Canada, Japan, Netherlands, Switzerland and the US. The newspaper said that economy minister Felisa Miceli is preparing a proposal for the Club for the beginning of December but has asked IMF president Rodrigo de Rato to talk the lenders into allowing Argentina to repay Spain ahead of that deadline. Spain and Argentina recently agreed a repayment schedule of 2008-2012.

Venezuela and Argentina have finally launched the much-heralded “Bono del Sur”. In the end, it was not so much a jointly issued bond as three bonds grouped together. After much prior speculation regarding its structure, the details of the $1 billion issue as given by Venezuela’s finance ministry seem to show little benefit for Argentina, said market commentators. The bond – which was issued in dollars in Venezuela – is made up of 50% newly issued Venezuelan TICCs (título de interés y capital cubierto) maturing in 2017; 30% of Argentina’s dollar-denominated Boden 2012 and 20% of Boden 2015 (already held by Venezuela). Argentina’s finance ministry confirmed that it had sold a further $420 million of Boden 2012 to Venezuela at “market prices” to make up the issue. Despite talk before the launch that the new Bono Sur would benefit Argentina because of Venezuela’s lower yields, in the end analysts say Argentina effectively sold more dollar-denominated Boden 2012 at 7.7% to Venezuela. In Venezuela the bond can be bought via banks using local currency exchanged at the official rate and, the government hopes, will mop up some excess liquidity.

Merrill Lynch has upgraded its 2006 and 2007 growth expectations for Argentina based on the data published this quarter that suggests no landing in the third quarter. The Bank raised forecasts for 2006 from 8.1% to 8.4% and for 2007 from 6.0% to 7.0%. It said it expected economic activity this year to grow “2.5% on a quarter-on-quarter, non-annualized, seasonally adjusted basis – similar to Q2 and faster than the Q1’s 1.1%”. For next year, it foresees “Chinese-like rates of GDP growth, stable inflation (roughly 10%) and twin surpluses.” However, the Bank warned that, in its opinion, the government’s heavy-handed micro policies would have limited success in the longer term and have negative implications on investment.

Argentina and Spain are to sign an agreement by the start of December setting out the repayment of Argentina’s $960 million debt to Spain. According to Spain, the Latin American nation will repay the debt by 2012. The debt forms part of the $6.5 billion still outstanding to the Paris Club group of lenders. The announcement of the forthcoming agreement was made at the Ibero-American Summit held in Uruguay following meetings between the two countries.

Argentina is awaiting the first infrastructure securitization to come to market later this month, due to be launched by gas companies Transportadora de Gas del Sur (TGS) and Transportadora de Gas del Norte (TGN). The securitization, backed by gas receivables, will total $600 million and will replace original financing from international and domestic oil companies with that of institutional investors. It is being structured by Nación Fideicomisos. Early next year, another infrastructure securitization is expected totaling $75 million – to finance the paving of rural roads. Argentina’s private pension funds (AFJPs) are expected to take a strong interest in investing in the new instruments as they represents a way of investing in the real economy. To date, only a small fraction – around 3% – of the $25 billion the AFJPs manage has been invested in structured finance.