Category: Argentina

Argentina’s Senate was due to vote yesterday, Wednesday, whether to approve the proposal by president Nestór Kirchner to be granted the power to allocate around $4.5 billion of budgetary funds without approval from the nation’s lawmakers. Greater flexibility in budgetary allocation is not a new concept for Argentina’s governments but Kirchner’s critics are worried about the increasing control being exerted by the president over the country’s institutions and his tendency to govern “by decree”. The president has countered that greater control is needed if anything is to be done and has accused some lawmakers of holding him to ransom and stopping him from governing effectively.

After almost a month of deliberation, the International Court of Justice in the Hague is set to rule today, Thursday, on the bitter paper mill dispute between Uruguay and Argentina. The dispute centers on two pulp and paper mills being built alongside the Uruguay River, which separates the two countries. The $1.7 billion project represents the largest single foreign investment ever in Uruguay. For Argentina to be successful it must show that the damage to the environment is irreversible and that the threat is immediate.

Ratings agency Fitch Ratings has given Argentina’s provincial bonds BOGAR 2018 and 2020 bonds an “A” rating. The debt securities were issued in February 2002 by the provincial development trust fund (FFDP) as part of the debt swap program for Argentina’s provinces begun in 2001 following the country’s economic meltdown. Fitch said the rating reflected Argentina’s sovereign credit risk, as the state is the ultimate guarantor of the bonds. Following news of the rating Tuesday, the yield on the BOGAR 2018 bond – the most liquid of the two bonds – fell from 6.63% to 6.03%. The credit rating awarded to the securities means that the country’s pension funds (AFJPs) will now be able to invest in the instruments.

Argentina’s Central Bank has said that banks will have to lower the amount of government paper they hold from 40% to 35% of assets by July of next year. The move is aimed at encouraging banks to increase their private loans portfolios. The increase in lending to the private sector and consumers will, in theory, help to stimulate economic growth.

Venezuela is to buy imminently a further $245 million of Argentina’s Boden 2012 US dollar-denominated debt, ahead of the “bono sur” joint bond to be launched by both nations. In the past 18 months, Argentina has sold a total of $3.5 billion of its dollar debt to Venezuela.

Domestic investors in Argentina continue to favor financial trusts (fideicomisos financieros) as their instrument of choice. According to financial services company Gainvest, during the first half of the year, $1 billion of the instruments were traded, a year-on-year increase of 100%. Of the total transacted, $712 million corresponded to securitizations with underlying private risk, with most growth seen yet again in the securitization of consumer loans.

Argentina’s inflation for June is expected to be up at around 0.7%, putting the rate for the first half of the year just above 5%. Prices were driven by a rise in the cost of services, such as rents, education and medical cover. Consumer prices in Chile meantime rose 0.6% last month, more than expected, and took annual inflation to 3.9%. Peru’s inflation headed downwards for a second consecutive month, dropping 0.13% on the back of falling food prices. And prices fell too in Uruguay, declining from 0.63% in May to 0.32% in June. Inflation for the year is now running at 3.88%.

The government of the western province of Neuquén in Argentina has postponed a planned bond issue until next month. The local government planned to raised $250 million from the offering to be spent on infrastructure and development in the province. The delay is due to external economic conditions, said the local government.

Local aluminum producer Aluar was incorporated Monday into Argentina’s Merval Index, with a weighting of 2.49%. Merval is the stock index of Argentina’s leading companies. The index will comprise 12 companies now until the end of September. Steel producer Tenaris continues to hold the greatest weighting, with 31.19%, followed by Petrobras with 12.65% and then Siderar with 11.15%.

Venezuela and Argentina are to launch a bond together, the presidents of both countries announced yesterday, Tuesday, in Caracas. The announcement of the so-called “Bono del Sur” came on the day Venezuela officially joined trade bloc Mercosur as a full member. The bond is due to be launched within the next three months and will reportedly be for $1 billion and is to be the first step towards the creation of a bank of the south to offer regional financing. Some analysts are dubbing the bond a “tropical Brady” as it is effectively a bond guaranteed by Venezuela in the event of default.