Argentina Weekly Report

Inflation is Finally Giving Up

September 22, 2017BancTrust & Co. Research Team
  • The national CPI result for August 2017 stood at 1.4% m-o-m, confirming a deceleration trend for the end of the year. By then, it is expected to reach a monthly inflation of 1% in order to achieve 2018 inflationary goal
  • On the Fixed Income arena, the government of Jujuy issued a “green bond” for USD210mn with a 5-year maturity and a coupon rate of 8.625%
  • Likewise, Finance Ministry Luis Caputo announced that, given the current scenario, they do not discard a new bond issuance before the mid-term elections. This issuance could be denominated in EUR, CHF, JPY or a mix of currencies

This week, the long-awaited news arrived to confirm that the government’s policies have resulted in routing inflation to the desired target and that the FX movements did not cause the so fear “pass-through” effect. However, this is still not enough reason for the Central Bank of Argentina to ease its actions with the key monetary policy rate.

Argentina Weekly Report

When One Door Closes, Another One Opens

September 15, 2017BancTrust & Co. Research Team
  • The EU decided to lift the blockage on Argentina’s biodiesel after four years, and at the same time serving as precedent  for the current US blockage for the same prodcut
  • Expectations for Macri’s government are getting better with the FX with a stable performance and polls showing an increase in popularity ahead of October elections
  • The government will deliver next week the draft for 2018 budget, which until now reflects the previous economic expectations of a 2018’ growth of 3.5%

Two weeks ago we reported that the US was increasing the tariff for Argentine biodiesel imports based on an argument of dumping actions, and this decision would have a significant impact on the national biodiesel industry which will see its exports decline, leaving them with just a few options to try to survive. One of these options is that the European Union (EU) will reopen its market to this same product, after four years of blockage and hearings in the World Trade Organization (WTO), delivering good news to the biodiesel when was most needed.

Argentina Weekly Report

Focus On the External

September 1, 2017BancTrust & Co. Research Team
  • Argentina government must be ready to decide what steps to take regarding biodiesel imports to the US, given the hard effects on the industry and in the trade balance
  • Trade balance for July presented a negative balance of USD798mn, with imports growing at a faster pace than exports. One of the key factors in exports improvements are the biodiesel sector, which now is in danger
  • Recent reports on the advance of the economy hints the materialization of the economic policies established by the government

After last week commercial good news for the veto lifting on Argentina’s lemon by the US in exchange for the allowance of imports of pork meat to Argentina from the US, negotiations were truncated as the US Trade Department decided to impose compensatory tariff from 50% to 64% for biodiesel imports due to the supposed arguments that Argentina’s producers receive subsidies of up to 68%. In our view, this is an important hit to the government policies in the development of the country that must be addressed as far as possible with the best strategy possible, some of which we will address next.

Argentina Weekly Report

Taking Off Again

August 25, 2017BancTrust & Co. Research Team
  • PASO elections acted like a booster for market’s performance this week, with the FX going south of the ARS/USD18 mark
  • The first step towards fiscal reform has been taken with an agreement between the government and the provinces to send a new fiscal responsibility law to the Congress in the next weeks
  • The US Vice-president’s visit ended with positive news for Argentinean trade. Further steps on trade policy are expected after October legislative elections

This week was one of praises and outstanding performance as the PASO elections’ unofficial results gave a return of confidence into Argentina’s future. Now, all bets are in the government with a clearer path to apply the necessary reforms. In this regard, one of the main indicators of the positive feeling was the Buenos Aires stock exchange main index, the Merval, which on Monday closed with a 4.19% gain compared to Friday while hitting a high on Wednesday. Likewise, the FX performance fell from the levels of ARS/USD18 and close at ARS/USD17.49 on Monday – the lowest level since mid-July – while at the moment of the writing of this report the dollar quotation was around ARS/USD17.6. With these results, the local market expects an FX performance around the AR/USD17.5 level for the upcoming months. So the strategy seems to be to take advantage of these good times before the government moves forward with its plans.

Argentina Weekly Report

A Preliminary Test

August 23, 2017BancTrust & Co. Research Team
  • This Sunday the PASO elections are taking place, and as we see, the results will serve as a measurement for the government’s real possibilities to keep applying economic reforms
  • The government seems to be adapting its speech for a greater inflation target than the previously expected. Nonetheless, July’s inflation results were better than anticipated
  • The 51% state-owned oil company YPF published its 2Q17 financial statements, in which the company showed a reduction in its investments and expects a major recovery for next year

This Sunday 13 August will be carry out the primary elections known as PASO that precede October elections where are going to be elected 127 national deputies and 24 Senators, while on the provinces side they are going to choose 323 deputies and 73 senators. Each party has an important number of seats that are at stake, reason why –as we stated in our previous weekly reports- this election could be also focused on the relative gain that each party can assure itself. All-in, this Sunday elections are going to show us what is the certain political general view, demonstrating if Macri’s government will be able to continue with the necessary reforms while providing an stable environment for the market.

  • Wednesday, November 15 2017


    - Amid uncertainty after the investors meeting, the attention continues to be on the interest payments which grace period expired this week (PDV’27, VENZ’19 and VENZ’24) and the call for default for both Venezuela and PdVSA. In this sense, the ISDA which is in charge since last week of assessing a credit default decision over the PDV’17 payment (which also arrived later than the day expected) said that they will meet again on Thursday with a deadline until Friday to make any decision on

  • Tuesday, November 7 2017


    - The selloff in sovereign and quasi-sovereign curves continued yesterday, with the first leading with an average 11.47% drop – thanks mostly to the whopping correction of both VENZ’18, as the old fell 51.73% and the new decreasing 48.64%. Meanwhile, the PDVSA curve closed the day with a -4% average result. This situation is likely to continue, in our view, for as long as payments of coupons in grace period are not being made, situation aggravated by the closeness of the deadlines of each gr

  • Thursday, November 2 2017


    - After yesterday’s comments of the Depository Trust Company of Venezuela’s bond payments, confirming the transaction and extra official information about some holders that already received payment on 2020 bond, the Venezuelan bonds showed positive movements. In this sense, we can use the PDV’20 experience to expect a similar process for the funds of the PDVSA 2017N to matured today for a total amount of USD1.170mn between principal and interest, with an announcement of the payment during

  • Wednesday, November 1 2017


    - Until today 01 January 2017, will be held the process to postulate for the municipal elections, which are expected for around 10 December. However, there is no clear information on the ongoing process and the opposition response has not been clear either. In detail, seven opposition parties has decided to not participate in the next electoral process, however we do not discard that some of its member could –at the very last minute- decide that they will participate as an independent candidat


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