Argentina Weekly Report

Inflation and Fiscal Deficit: On Top of the Agenda

May 19, 2017BancTrust & Co. Research & Strategy Team
  • Inflation, fiscal deficit and wages are the main concerns for the “captains of the industry” when looking ahead on the Argentinian economy
  • The government sees the Mining Accord in place by year-end; the agreement that reconciles provincial and federal legislation that will draw larger investments to this sector
  • INDEC figures reveal that inflation rose to 2.6% m-o-m in April, above official estimates, while y-o-y comparisons place inflation at 27.5%

This week, Argentina hosted its Third LatinFinance Financial Summit, an event that gathers government executives as well as businessmen and economists. The event held panels for several topics, from global context and real economy to infrastructure and local financial markets. From the government, Dujovne, Caputo and Frigerio were responsible for addressing main concerns on the economic and political ground. Even though concerns regarding the recovery of the Argentinian economy were on top, the participants showed confidence of the agenda set by the government and shared most of the same issues regarding what to do next.

Argentina Weekly Report

Boosting the Buy-Side

May 12, 2017BancTrust & Co. Research & Strategy Team
  • Financial institutions may now decide the levels and use of the General Exchange Position (PCG, in Spanish) while the Central Bank raised the limit of the Net Foreign Currency Position to 30%
  • A new General CPI is on the pipeline to track nationwide inflation, and the BCRA will consider this as the reference for the inflationary goals
  • Both YPF and Banco Macro issued USD300mn in peso-linked bonds under NY Law and priced at par, yielding 16.5% and 17.5% respectively

The Central Bank (BCRA, in Spanish) continues with its efforts to raise the dollar from current levels at which it becomes less and less competitive for some sectors in the economy. After the institution announced the decision to raise its reserve level to 15%, the dollar continued to trade at lower levels, which resulted in the BCRA modifying the limit of assets held in foreign currency that until now had been set for financial institutions. According to the latest decision made by the Central Bank, financial institutions may now determine the level and use of the General Exchange Position (PCG, in Spanish) related to liquid assets. This measure complements a similar decision made last Friday, which modifies the limit of assets in foreign currency for banks from 25% to 30%. With this, the BCRA is trying to boost dollar demand in the market and offset the appreciation of the FX rate.

Argentina Weekly Report

With an Eye on the US

May 5, 2017BancTrust & Co. Research & Strategy Team
  • President Mauricio Macri met with US President Donald Trump this week and discussed the strengthening of their bilateral relations
  • Argentina expects USD20bn yearly investment for Vaca Muerta field starting 2019
  • The government surpassed its fiscal deficit target for 1Q17 by closing with a fiscal deficit of 0.4% of GDP, below the official target of 0.6%

President Mauricio Macri met with his counterpart in the United States, Donald Trump, for the first time since the latter was elected last November. The meeting took place as part of the bilateral agenda Macri restarted with the previous administration. The encounter – which lasted longer than scheduled – covered subjects ranging from the lifting of export bans in lemons to a commitment from the United States to strengthen cooperation with the South American nation in their attempt to reinforce security. In our view, despite fears of a more protectionist stance from the US with the new administration, there is still enough room for a productive relationship between the countries, something both presidents look forward to.

Argentina Weekly Report

Revamping Monetary Policy

April 28, 2017BancTrust & Co. Research & Strategy Team
  • The Central Bank sets as a new target for its monetary policy to raise international reserve levels to 15% of GDP within the next two years
  • The government and representatives of provinces signed the Federal Agreement of Energy looking to sort a way out of the energy crisis
  • Province of Neuquen issues USD366mn in bonds due in 2024, making this its first issuance non-backed by oil revenues

The Central Bank of Argentina looks like drifting its monetary policy and once again tightening it as results for inflation for March suggest worrisome levels for core inflation. The monetary entity has restarted the progressive placement of notes to reduce liquidity, a policy they have reaffirmed through the hike in rates  – reference rate increased to 26.25% last week, while the shortest Lebac rates increased to 24.25%. The president of Central Bank, Federico Sturzernegger, showed confidence in achieving an inflation rate among the targets set by the institution, while acknowledged that the loosening of monetary policy responded to an error of miscalculation from the entity that relied on the slow pace of inflation during December and January.

Argentina Weekly Report

The Battle Against Inflation Persist

April 21, 2017BancTrust & Co. Research & Strategy Team
  • The Consumer Price Index increased 2.4% m-o-m in March, making the accumulated figure for 1Q17 reach 6.2%. In response, the BCRA decided to increase its key monetary policy rate to 26.25%
  • The US dollar also reflects the effect of the BCRA policy decision, continuing the downward trend saw this week
  • The government issued new Bonars and Letes to finance the payment of the Bonar X, while the provinces remain active on the look for financing in international markets

This week, the National Institute of Statistics and Census (INDEC in Spanish) released the Consumer Price Index (CPI) for March showing a 2.4% m-o-m variation, above the market’s expectations –around 2.1%- and the figure calculated by the Congress (2.2% m-o-m). This result drove accumulated inflation for 1Q16 to 6.2%. As consequence, and what we consider as a reasonable move, the Central Bank of Argentina (BCRA) decided to increase its key monetary policy rate in 1.5 percentage points to 26.25%.

  • Thursday, May 25 2017
    Venezuela:

    - During a televised press conference, the top Public Prosecutor Luisa Ortega Diaz addressed several events regarding the wave of protests in Venezuela. In detail, the prosecutor denounced the possession of arms by the population despite the current ban by the Ministry of Interior, the performance of state security forces and military trials of civilians. One of the statements with greatest impact referred to the cause of death of a young opposition demonstrator product of a metal projectile fired by an official of the Bolivarian

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  • Wednesday, May 24 2017
    Venezuela

    - Finance Minister Ramon Lobo and the Executive Board of the Central Bank of Venezuela (BCV in Spanish) announced the start of operations of the new FX system DICOM. The system will work through two weekly auctions (the first one will take place tomorrow) and a bands’ system where the FX rate will fluctuate – the starting rate has not been announced yet. The official rate will be the lowest offered by those who are adjudicated, but a “contingent” auction will take place in case that such rate exceeds the upper band establis

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  • Tuesday, May 23 2017
    Venezuela:

    - For today, the new FX scheme, DICOM, is set to begin operations, and yesterday the Minister of Foreign Trade and International Investment, Jesus Faria, assured that the main goal is to reduce the impact of the parallel dollar and to increase the assignment of currency for business. It is expected that today further details of the mechanism will be disclosed from the facilities of the Central Bank of Venezuela (BCV for its words in Spanish), so stay tuned for more.

    Argentina:

    - The US Treasury Secretary, Steven Mnuchin, told the Senate yesterday that regulators would review Rosneft’s stake of Citgo Petroleum Corp., this as concerns have emerged over possible control from the Russian company in case that PDVSA fails to make payments on the bonds guaranteed by Citgo’s collateral. Senators raised their concerns – regarding Rosneft’s “control of a major US energy supplier” – on what they consider a national security matter to Mnuchin, who heads the Committee on Foreign Investment in the Unite

    Read More >>

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