Category: Argentina

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.

Argentina’s largest gas distributor, Metrogas, has extended its debt swap offer deadline until 15 March to accommodate Italian bondholders. This is the fourth time it has reviewed the closing date for the restructuring which offers to swap $437 million of defaulted debt. The last extension was at the end of December when Metrogas gave investors until 11 January, hoping to increase the number of participating debtholders up from around 80%. Uptake currently stands at 90.56%, according to the company.

Venezuela is set to buy $312.4 million dollar-denominated sovereign debt from Argentina, pushing up its holding of Argentine paper to just over $2 billion and making it by far the largest investor in that country’s foreign debt. In December, Venezuela bought $766 million of the same Boden 2012 bonds. Earlier in the year Chávez’s government sold $600 million of its Argentine bonds, although it is not known exactly at what profit. The sale of the dollar-denominated Boden will help Argentina with its goal of building up dollar reserves following the 3 January payment to the IMF of $9.8 billion to cancel its debt.

The Province of Mendoza, Argentina, is celebrating the decision by a New York Appeals Court to uphold a previous ruling by Judge H. Baer Jr. which found in favor of the province’s Aconcagua debt swap against bondholders Greylock Global Opportunity Master Fund Ltd. and Greylock Global Distressed Debt Master Fund Ltd., who brought a case against Mendoza last September in the US courts. The $250 million Aconcagua bond offering was originally issued in 1997 with a maturity date of 2007. The bond was restructured in 2004 to mature in 2018.

Argentina is reportedly looking at renegotiating its debt to the Paris Club of international creditors following the successful early repayment of its entire IMF loan at the beginning of January. Argentina has yet to restructure its defaulted debt to Paris Club lenders, which totals around $6.5 billion, less than 5.25% of the total assumed debt.

Venezuela has said that it will continue to buy Argentine bonds if more are offered. Venezuela bought $1.6 billion worth of the debt last year, although it later sold $600 million. Argentina is thought to be looking to sell up to $2.5 billion of sovereign bonds to its northern ally to help replace funds used for its early repayment of its entire IMF debt.

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.