Category: Argentina

Argentine cement-maker Loma Negra is to issue $100 million of bonds to help refinance debt and increase working capital. The bonds are due in 2013 and will likely yield between 9% and 9.25%, slightly above the sovereign risk of 8.5%-8.75%, according to analysts. This is the first time the company has gone to the international capital markets since it was bought by Brazilian conglomerate Camargo Correa last year in a deal worth just over $1 billion. Correa plans to use the moneys raised to cancel Loma Negra’s remaining debt.

Spanish firm Telefónica has said it is dropping the lawsuit against Argentina brought before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) for $2.8 billion. Telefónica was suing the Republic of Argentina for losses incurred as a result of the freeze in tariffs imposed by the government in 2002. In dropping the claim, Telefónica announced it had signed a memorandum of understanding with the Argentine government allowing it to renegotiate its pricing in the country in return for investment and maintaining most of its tariffs unchanged. It said it plans to invest $326 million in Argentina this year.

Argentina’s economy expanded by just over 9% last year, according to the country’s National Institute of Statistics (INDEC). A benign global environment of low inflation, buoyant trade and prudent fiscal management helped towards Argentina’s growth. Argentina boasts one of the world’s fastest growth rates, after Venezuela and China. Economy minister, Felisa Miceli, forecast in December that the economy would expand more than the 8.5% originally projected. Meanwhile, inflation last year reached 12.3%, fuelled by the hot economy.

Venezuela’s state-owned oil company PDVSA has bought a 46% stake in the Argentine subsidiary of Uruguayan national oil company ANCAP. PDVSA has agreed to pay $15 million for its share in Petrolera Cono Sur, as the subsidiary is called, which operates 178 service stations in Argentina under the name Sol Petroleo. The move is part of Chávez’s strategy to invest in the region’s energy market.

Argentina has sold another $308 million of dollar-denominated Boden 2012 “at market prices” – according to the finance ministry — to its largest investor, Venezuela. Venezuela has now bought over $2 billion of Argentine sovereign paper, although the exact amount currently held is something of an uncertainty, with up to $600 million of the bonds sold on to Venezuelan banks. Critics claim that opaque secondary trading of the Argentine paper is allowing certain local investors to circumvent Venezuela’s strict foreign currency restrictions by on-selling the paper.

New cases of foot-and-mouth discovered in cattle in Argentina’s northern Corrientes Province has led to most countries in the region closing their borders to Argentine meat imports, including Chile, the third-largest importer of Argentina’s product. The disease was confirmed yesterday, Wednesday, by Argentine authorities and provoked an immediate and swift reaction from its export markets. Argentina is the world’s fifth-largest beef exporter, with exports accounting for $1.6 billion last year. The ban on beef is likely to last at least six months and will have an important effect on Argentina’s beef industry as prices slump. Ironically, it may help the government’s fight against inflation.

Argentina’s consumer prices for January hit government targets of 1.3%. The government says the figures are a vindication of its strategy of price agreements, which it began implementing in December. However, many economists are dismissive of the policy, criticizing it for being short-termist and accuse the government of failing to address the roots of the country’s inflation. Last year, Argentina saw its highest rate of inflation since 2002, at 12.3%. This was the second-highest rate in South America, topped only by that of Venezuela at 14.4%.

Argentina’s government continues to push ahead with its policy of price agreements, finalizing a deal with the country’s largest supermarkets to continue to hold prices stable on over 200 products. The economy minister, Felica Miceli, is said to be negotiating with the textile industry and private school sector in an effort to broaden the price agreements. And the government is celebrating early indications that January’s inflation will come in at around 1.4%, a sign, say the government, that its anti-inflationary strategy is working.

Argentina’s central bank reserves are nearing $20 billion, just one month after the country used $9.8 billion to make an early repayment of its entire IMF debt, taking reserves down to $18.5 billion. The build up of reserves was helped by the $250 million purchase last month by Venezuela of more dollar-denominated Boden 2015 paper. On Tuesday, the Bank intervened in the foreign exchange market to buy $30.5 million and €4.5 million ($5.4 million) pushing up reserves to $19.927 billion. Critics of President Néstor Kirchner, who is behind the drive to build up reserves, are warning that the increased money in circulation will increase inflationary pressures.

Argentina’s foreign exchange inflows last year exceeded outflows for the first time since the country’s currency devaluation in 2001, producing a surplus of $1.2 billion. This follows a deficit in 2004 of $2.8 billion. The figures show increasing foreign investor confidence in the country as well as growing local belief in the economy. The figures show that many locals are returning dollars they had moved abroad or simply kept out of circulation since the peso’s crash. Meanwhile, FDI rose $500 million to $1.45 billion in 2005, compared with the previous year.