Argentina Economic and Financial Weekly for

UNCLAS BUENOS AIRES 000966

SIPDIS

SIPDIS

PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE
TREASURY FOR DAS LEE, RAMIN TOLOUI AND CHRIS KUSHLIS
NSC FOR SUE CRONIN
AND OCC FOR CARLOS HERNANDEZ
USDOC FOR ALEXANDER PEACHER
USDOL FOR ILAB PAULA CHURCH AND ROBERT WHOLEY
USSOUTHCOM FOR POLAD
OPIC FOR GEORGE SCHULTZ AND RUTH ANN NICASTRI

E.O. 12958: N/A
TAGS: EFIN ECON ELAB ALOW AR
SUBJECT: Argentina Economic and Financial Weekly for
the two week ending April 28, 2006


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Bi-Weekly Highlights
-------------- --------------

- BCRA increases its 2006 growth forecast to "above 7
percent".
- BCRA monetary policy appears to be tightening
- April Government Confidence Index down 6 percent m-o-
m.
- April Consumer Confidence Index down 9.8 percent m-o-
m.
- GOA runs an ARP 1.4 billion primary fiscal surplus
in March- lower than expected.
- GOA increases public sector wages by 19 percent.
- March industrial production index up 7.5 percent y-o-
y.
- Commentary of the Week: "The Style of One of
Kirchner's Most Controversial Officials, Moreno, the
Tough Guy Who Guards Prices."

-------------- --------------
BCRA increases its 2006 growth forecast to "above 7
percent" and maintains inflation forecast at 8-11
percent.
-------------- --------------


1. In its second quarter inflation report, the BCRA
increased its 2006 growth forecast from 6 percent to
"above 7 percent" based on the strong economic
performance during the first two months of the year
and the statistical carry-over effect from 2005.
According to the report, the continued strength of the
fiscal and trade surpluses, along with the BCRA's
increasing reserves and the recovery of the financial
system, allowed the BCRA to revise its growth forecast
upwards. The BCRA maintained its 2006 inflation
forecast unchanged at 8-11 percent. The BCRA
highlighted that inflation in the first quarter was
2.9 percent, below market expectations and well below
the 4 percent inflation during the same period in

2005.

-------------- --------------
BCRA monetary policy appears to be tightening.
-------------- --------------


2. Recent BCRA measures and the evolution of key
monetary variables indicate that the BCRA has shifted
towards a tighter monetary policy. The BCRA
introduced two measures that will take pesos out of
circulation and yield higher interest rates for time
deposits. First, the BCRA increased bank liquidity
requirements for sight accounts (current and savings
accounts) by 2 percentage points to 17 percent.
Second, it eliminated the 2.55 percent annual rate
that the BCRA pays banks for their minimum reserves.


3. The BCRA fulfilled its first-quarter monetary
target for M2 (cash plus public and private sector
current and savings account) with an average M2 level
of ARP 106.2 billion - close to the lower end of its
Monetary Program band of ARP 104.4 billion. Still, M2
grew 26 percent y-o-y in the first quarter, and M2
growth will have to decelerate to 21 percent during
the rest of the year to fulfill the Monetary Program.
(M2 grew 25 percent in 2005.)


4. The BCRA ended its policy of shortening Lebac
maturities to avoid interest rate increases in
December 2005. Since the beginning of the year, the
BCRA policy shifted to issue longer-term Nobacs which
carry a variable rate of Badlar (rate for deposits of
more than ARP 1 million) plus a spread (determined at
the BCRA auction). Badlar rates have more than
doubled in the past year, from 4.4 percent in April
2005 to 8.9 percent this month. Currently the BCRA is
paying interest rates of 12 percent for the 2-year
Nobac -- roughly equal to expected inflation -- and
Nobacs now represent 40 percent of the BCRA

instruments.

-------------- --------------
GOA says it will reduce its USD 6.8 billion World Bank
debt by 30 percent.
-------------- --------------


5. On April 24, an official in the GOA delegation to
the World Bank and International Monetary Fund spring
meetings stated that the GOA plans to reduce its USD
6.8 billion debt with the World Bank by 30 percent,
and that the GOA plans to focus on borrowing from the
Inter-American Development Bank, where the GOA will
ask for new loans to finance infrastructure projects.
Miceli told the press that the IADB is more responsive
to GOA policy objectives.

-------------- --------------
GOA considering a USD 600 million debt offering in
international markets.
-------------- --------------


6. On April 26, business daily El Cronista Comercial
reported that the GOA is considering tapping
international markets for USD 600 million to complete
its 2006 financing program. According to Cronista,
the GOA is updating its SEC 18K Form (a document
summarizing Argentina's economic and political
performance). The new instrument would reportedly be
a USD-denominated bond issued under U.S. law, and
would be the first debt issuance outside of Argentina
since the debt restructuring (no further details on
the bond's financial conditions were reported). The
GOA's U.S. legal advisors are working on a strategy to
allow the GOA to tap international markets without
running the risk of attachment due to judgments
obtained by holdout bondholders in U.S. courts. The
GOA's financing needs for 2006 are quite low, as
little as USD 1.5-2.0 billion, according to some
financial analysts.

-------------- --------------
GOA allowed to impose gas and electricity surcharges
to finance infrastructure projects.
-------------- --------------


7. On April 26, the Senate approved and turned into
law a bill allowing the executive branch to charge a
surcharge on electricity and gas tariffs, with the
proceeds going into fiduciary trust funds to finance
infrastructure projects. The GOA previously had said
that the surcharge would only affect large users, but
the bill does not exempt residential users from these
charges. Opposition senators harshly criticized the
bill saying it increases residential tariffs and gives
the Ministry of Planning the power to set tariffs,
determine investments and award contracts.

-------------- --------------
Amendments facilitate UIF's information gathering on
money laundering.
-------------- --------------


8. On April 24, the GOA published in the Official
Gazette the first amendments to the Money Laundering
Law of 2000. The amendments will facilitate
information gathering by the Argentine Financial
Intelligence Unit (Unidad de Informacion Financiera or
UIF) by revoking bank, stock exchange and professional
secrecy defenses against UIF requests for information.
The amendments also will make it easier for the UIF to
get access to tax information, and restrict exemptions
from prosecution for family members and "intimate
friends" who assist money launderers. The amendments
were approved by Congress at the end of March.

-------------- --------------
GOA and textile sector negotiating price restraint
agreement for basic clothing.

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9. Recently appointed Secretary of Internal Trade
Guillermo Moreno (see Commentary of the Week) met this
week with representatives from the textile industry to
discuss a price restraint agreement covering a basket
of basic clothing (including shirts, t-shirts and
jeans of a standard quality). The agreement seeks to
freeze prices until the end of the year and is
expected to be signed next week. The negotiations
come after the clothing component of the CPI increased
6.1 percent m-o-m in March. Moreno is also pressuring
shopping centers to fix the price of commercial space
for those textile manufacturers who agree to the price
restraints.

-------------- --------------
Employment index increased 0.7 percent m-o-m in March
- according to Ministry of Labor survey.
-------------- --------------


10. The Ministry of Labor announced that its
employment index increased 0.7 percent m-o-m in March.
The construction sector had the highest job creation
in March (up 2.3 percent m-o-m) followed by
manufacturing (up 0.9 percent m-o-m) and the trade and
services sector (up 0.5 percent m-o-m). The index
increased 9 percent y-o-y. (The index is based on
surveys from the cities of Buenos Aires, Mendoza,
Rosario and Cordoba).

-------------- --------------
April Government Confidence Index down 6 percent m-o-
m.
-------------- --------------


11. The Government Confidence Index decreased 6
percent m-o-m in April to 2.54 points, but is still
0.6 points above the average during the Kirchner
administration, and well above the 1.2 point reading
in May 2003 when President Kirchner took office.
Confidence in the GOA's ability to solve citizens'
problems is still the factor generating the most
confidence, even though it decreased 6 percent m-o-m.
Public opinion of GOA general performance and
efficiency of public spending decreased 9 percent and
14 percent m-o-m, respectively. The index rose 2
percent y-o-y. [The Government Confidence Index is a
survey-based index prepared by Di Tella University.
It varies from zero to five points and seeks to
measure public opinion of GOA general performance,
efficiency of pubic spending, honesty of GOA officials
and the government's ability to solve problems.]

-------------- --------------
BCRA rolls over its maturities at lower interest
rates.
-------------- --------------


12. The BCRA received ARP 252 million in bids at its
April 25 Lebac auction, compared to the ARP 109
million in Lebacs that came due during the week, while
the BCRA received ARP 1.2 billion in bids in its Nobac
auction. As in previous auctions, the BCRA therefore
was able to roll over its maturities by accepting bids
for ARP 765 million (ARP 163 million in Lebacs and ARP
600 million in Nobacs). The yield on the 35-day Lebac
decreased slightly from 6.62 percent to 6.60 percent,
the yield on the 84-day Lebac decreased from 7.20
percent to 7.10 percent, while the yield on the 1-year
Lebac remained unchanged at 11.50 percent. Lebacs for
maturities of more than one-year were withdrawn due to
lack of interest. The spread on the one-year Nobac
decreased sharply (forty basis points) from 2.90
percent to 2.50 percent, while the spread on the two-
year Nobac dropped forty five basis points from 4.15
percent to 3.70 percent. This auction continues the
previous auctions' shift from Lebacs to Nobacs. This
shift is due to the market's desire to acquire

instruments with flexible interest rates. The Badlar
rate (the base rate for Nobacs) is currently at 8.9
percent.

-------------- --------------
Six provinces sign agreements with the GOA to refinance ARP
3.0 billion provincial debt.
-------------- --------------


13. On April 26, local media reported that six provinces
(Buenos Aires, Entre Rios, Jujuy, Misiones, Rio Negro and
Tucuman) had signed agreements with the GOA to refinance
their ARP 3.0 billion in provincial debt to the GOA. The
agreement will allow provinces to refinance their loans for
seven years at a 6 percent fixed rate, with the first
principal payments due in January 2008. In exchange,
provinces agreed to ratify to the Fiscal Responsibility Law
(if they had not already done so),committed to expenditure
and debt restrictions, and the need to report on their
fiscal situation. Five additional provinces (Catamarca,
Cordoba, Chaco, Corrientes and Formosa) are expected to
follow suit in coming weeks. Total provincial debt stands
at ARP 75 billion, of which 70 percent is owed to the GOA.

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IADB approves USD 280 million loan to Argentina.
-------------- --------------


14. On April 26, the Board of Directors of the Inter-
American Development Bank (IADB) approved a USD 280
million loan to Argentina. The loan will finance
scientific and technological projects in the areas of
biotechnology, chemical sciences, information
technology and cattle and crop farming. The loan
matures in 20 years, has a 4.5-year grace period and
carries a variable interest rate.

-------------- --------------
The peso appreciated 1 percent against the USD during
the last two weeks, closing at 3.06 ARP/USD.
-------------- --------------


15. The peso appreciated 1.0 percent the USD during
the last two weeks, closing at 3.06 ARP/USD. The peso
appreciation is mainly attributed to increased sales
by exporters due to the harvest season and increased
demand for pesos by companies who have to pay the
income tax at the beginning of May. The appreciation
of the peso also came in spite of strong BCRA
intervention in the foreign exchange market. During
the last two weeks, the BCRA purchased USD 757 million
and has accumulated USD 1.1 billion so far in April,
bringing BCRA reserves to USD 22.2 billion (as of
April 25). The peso exchange rate has depreciated 0.3
percent since the beginning of the calendar year.

-------------- --------------
February monthly economic activity index up 9.5
percent y-o-y - stronger than expected.
-------------- --------------


16. The monthly economic activity index increased
9.5 percent y-o-y in February, well above the BCRA
market survey forecast of 8.9 percent. The growth in
the index is the result of continued strong activity
in the construction and tourism sectors as well as by
public infrastructure projects. The index increased
1 percent m-o-m after remaining flat the previous
month. The latest BCRA consensus survey estimates
8.6 percent economic activity growth for 2006, an
upward revision from its previous forecast of 7
percent. The monthly economic activity index is
viewed as a reliable leading indicator of GDP.

-------------- --------------
GOA and beef sector reached an agreement to reduce
beef prices.
-------------- --------------


17. On April 20, the GOA reached an agreement with
the beef sector to reduce beef prices on twelve
popular cuts by 15 percent, expanding a previous
agreement (signed at the beginning of April) which
included eleven popular cuts. This latest agreement
includes a series of reference prices for use by
meatpackers selling beef to wholesalers at the Liniers
cattle market, and suggested prices for butchers and
supermarkets selling to the public. The GOA also
promised to create fiduciary trust funds within 90
days to promote investment and increase domestic
cattle supply. These trust funds will be financed by
the price difference between the market price that
meatpackers pay ranchers at Liniers and the reference
price in the agreement. The recently appointed and
renamed Secretary of Internal Commerce, Guillermo
Moreno, said that this agreement will help reduce
inflation and reiterated that the GOA may lift the ban
on beef exports once domestic beef prices fall
significantly. [At the beginning of March 8, the GOA
imposed a ban beef exports for 180 days and raised
export taxes on boned cuts and heat-processed beef
from 5 percent to 15 percent in an attempt to keep
inflation under control.]

-------------- --------------
GOA runs an ARP 1.4 billion primary fiscal surplus in
March - lower than expected.
-------------- --------------


18. The GOA announced a primary fiscal surplus of ARP
1.4 billion in March, below market expectations of ARP
1.6 billion. This brings the accumulated fiscal
surplus for the first quarter of 2006 to ARP 4.9
billion, compared to ARP 4.2 billion in the same
period last year. The lower-than-expected March
result is the result of higher expenses, mainly debt
interest payments, transfers to provinces and capital
expenditures. In March, revenues increased 25.6
percent y-o-y to ARP 11.2 billion, while expenditures
rose 26.7 percent y-o-y to ARP 9.2 billion. The
primary fiscal surplus increased 13.7 percent y-o-y.
The BCRA consensus forecasts an ARP 22.6 billion
primary fiscal surplus for 2006.

-------------- --------------
GOA increases public sector wages by 19 percent.
-------------- --------------


19. On April 19, the GOA announced that it will
increase public sector salaries by 19 percent.
However, only one of the two public sector unions
agreed to this increase, while the union representing
the majority of the public sector employees rejected
the increase and continued to demand a 30 percent
increase. The 19 percent increase will be implemented
in two stages, 10 percent in June and 9 percent in
August. The increase will benefit 87,000 workers and
will not jeopardize the GOA's primary fiscal surplus
as half of the increase was already provided for in
2006 Budget. According to Indec (the GOA statistics
bureau),public sector salaries have lost 28 percent
of their purchasing power since the 2002 devaluation
(without this most recent salary increase). This
agreement tracks with the 19 percent salary increase
agreement reached between the GOA and the truckers'
union two weeks ago.

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Domestic oil prices under pressure.
-------------- --------------


20. On April 20, Esso's Public Affairs Director
denied there would be any increase in domestic oil
prices following the recent increase in international
oil prices (which remained above USD 70 per barrel
during the week),or a reduction in domestic supply.
However, he noted that Argentine domestic oil prices
are 40-50 percent below oil prices in Brazil. Esso's

representative also said that oil producing companies
and non-integrated refining companies are currently in
negotiations over the domestic price refiners will pay
for crude oil.


21. Earlier in the week of April 21, Chief of Cabinet
Alberto Fernandez denied that recent increases in
international oil prices would impact domestic prices
given the agreement between producing and refining
companies. However, the companies say that this
agreement expires when international oil prices rise
above USD 70 per barrel. [Under the current agreement
with a price of oil of USD 70 per barrel, oil
companies can sell to the domestic market at USD 45
per barrel, while they can export at USD 47.6 per
barrel.] According to press reports, non-integrated
refining companies (such as Esso and Shell) are asking
the GOA to reach a new agreement since the oil
increase is hurting their potential earnings. An
increase in domestic oil prices could undermine the
GOA's attempt to control inflation, which is
forecasted to increase by 1 percent m-o-m in April.

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Ministry of Planning to take over military
manufacturing from the Ministry of Economy.
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22. On April 18, the Senate Defense and Budget
Committee approved the bill to transfer "Fabricaciones
Militares" (the agency in charge of purchasing and
producing national defense arms and equipment) from
the Ministry of Economy to the Ministry of Planning.
The bill is scheduled for debate at the Senate on May
3 and is expected to be approved. It would be the
latest in a string of transfers of resources and
authority to Minister of Planning De Vido at the
expense of Minister of Economy Felisa Miceli. In
another area, the GOA is planning to transfer the Air
Regions Command, the Argentine FAA, from the Ministry
of Defense to the Secretariat of Transportation in the
Ministry of Planning.

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IMF recommends higher utility tariffs and interest
rates and a flexible exchange rate.
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23. In its World Economic Outlook report, the
International Monetary Fund (IMF) praised Argentina's
strong expansion but warned that the GOA should
increase utility tariffs, let the peso appreciate and
control inflation to avoid damage Argentina's
competitiveness. The IMF recommended a combination of
higher interest rates and exchange rate flexibility to
manage domestic demand pressures and keep inflation
under control. The IMF revised upwards its GDP growth
estimate from 4.3 percent to 7 percent, while
estimating that inflation will reach at 12.9 percent
in 2006 and 15 percent in 2007. This revised IMF
growth estimate continues to lag behind local growth
estimates (see first item above).

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March industrial production index up 7.5 percent y-o-
y.
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24. The industrial production index rose 7.5 percent
y-o-y in March, in line with market expectations.
First quarter growth was 0.5 percent q-o-q. During
March, the fastest growing sectors were auto
production (up 28 percent),tobacco production (up 16
percent),and minerals (up 17 percent). There was a
slight decrease in paper and cardboard (-3.8 percent).
The index increased 11.6 percent m-o-m without
seasonal adjustment and 0.4 percent m-o-m when
seasonally adjusted. The BCRA consensus survey
forecasts 6.8 percent industrial production growth for

2006 - a slight upward revision from the previous 6.4
percent forecast.


25. The industry-wide capacity utilization index
reached 71.6 percent in March, up 1.3 percent over
February and just slightly higher than the 71 percent
reached in March 2005. The sectors showing the
highest capacity utilization were metal based
industries (98.8 percent),oil refining (94.0
percent),textiles (80.5 percent),and printing (78.0
percent). The sectors with the lowest capacity
utilization were auto production (52.0 percent) and
minerals (58.0 percent).

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April Consumer Confidence Index down 9.8 percent m-o-
m.
-------------- --------------


26. The Consumer Confidence Index -- published by
Universidad T. Di Tella - dropped 9.8 percent m-o-m to
54.0 points in April, after reaching its all-time high
of 59.9 points in March. The index decreased in all
three of its subcomponents: consumer willingness to
purchase durable goods and real estate (-13.2 percent
m-o-m),consumer sentiment towards the macroeconomic
environment (-9.16 percent m-o-m) and negative
expectations on individual personal situations (-7.8
percent m-o-m). Despite April's decrease, the index
increased 1.7 percent in the first four months of 2006
compared to the same period last year. The index
increased 3.4 percent y-o-y. The index is based on
surveys of individual economic sentiment and consumer
willingness to purchase durable goods, houses and
cars.

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Retail sector employees agree to a 19 percent salary
increase.
-------------- --------------


27. On April 17, Minister of Labor Carlos Tomada
announced that retail workers had agreed to a 19
percent wage increase, down from the 28 percent they
had demanded at the beginning of negotiations. The
increase will be implemented in three installments: 10
percent in April, 5 percent in June and the remaining
4 percent in August. This agreement will benefit
800,000 workers in 180,000 companies, according to
press reports. This increase is also in line with
recent wage increases for the truckers' union and
public sector workers.

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GOA envisions tripling its gas imports from Bolivia in

2008.
-------------- --------------


28. On April 18, the Minister of Planning Julio De
Vido met with Bolivian Vice-president Alvaro Garcia
and informed him of the GOA's intention to sign a long-
term (30-year) agreement to triple gas imports from
Bolivia from the current maximum of 7.7 million cubic
meters to almost 23 million cubic meters per day in

2008. However, they did not discuss the price to be
paid for gas from Bolivia, leaving that discussion for
technical officials. The additional gas would be used
to supply the proposed USD 1.2 billion north-east gas
pipeline (GNEA),which would transport up 20 million
cubic meters per day to Argentina's nine northeastern
provinces when it reaches full capacity.

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Argentina scores 41 points in a Venture Capital index
- behind most Latin American countries.
-------------- --------------


29. The Latin American Venture Capital Association
(LAVCA) introduced a scorecard on the private equity

and venture capital environment for eleven Latin
American and Caribbean countries to identify regional
strengths and weaknesses. In the scorecard's first
release, Argentina scored 41 points (out of a maximum
of 100),behind Chile (at 76 points),Brazil (59
points),Mexico (54 points) and Peru (47 points),but
slightly ahead of Uruguay, which scored just 40
points. [The main factors that the score takes into
account are: laws on venture capital; tax treatment
for venture capital; protection of minority
shareholder's rights; intellectual property rights;
bankruptcy regulation; capital market development; and
perceived corruption.]

-------------- --------------
IMF denies rumors of the closure of its Buenos Aires
office.
-------------- --------------


30. On April 18, local press reports quoted the
International Monetary Fund (IMF) as denying rumors
that it will close its Buenos Aires office now that
Argentina has prepaid its USD 9.5 billion debt to the
IMF at the beginning of the year. The IMF explained
that the office is key for better communications
between the country and the IMF. The IMF said that
Ernesto Ramirez Rigo will head the Buenos Aires
office, replacing Andrew Wolfe, who was transferred to
Washington before the end of his term. Rigo has been
working in the Buenos Aires office as a resident
representative.

-------------- --------------
Commentary of the Week: "The Style of One of
Kirchner's Most Controversial Officials, Moreno, the
Tough Guy Who Guards Prices." By Joaquin Morales
Sola, translated and edited from an article published
on April 23 in La Nacion
-------------- --------------


31. Guillermo Moreno believes that he who strikes
first strikes twice. Designated yesterday as
Secretary of Internal Trade in the Ministry of

SIPDIS
Economy, his mission will be to provide Nestor
Kirchner with a single-digit annual inflation rate ...
His first objective: the price of beef. The initial
reaction of producers and consigners has been
stupefaction, from which they have not yet recovered.


32. Moreno, who in his youth was a militant in the
most radical wing of the Peronist youth movement ...
is an economist who is not ignorant of the textbooks
of his specialty. Some would say that he understands
it badly, but he understands it. In turn, he is
frequently contradictory. He is a fervent devotee of
maintaining a fiscal surplus, to the point that he
scorns heterodox economists who promote deficit
spending, yet his orthodoxy vanishes when he
encounters the laws of the marketplace.


33. Moreno is convinced that his job is to distrust.
He distrusts above all businessmen, whom he considers
a condemned race that will injure the common people if
governments do not protect and mediate between them.
While classical economics tells us that only
investment and competition can restrain prices, he is
convinced that the club of the State is much more
efficient, expedient and overwhelming.


34. Kirchner put him where he did because Kirchner
has similar convictions. Moreno already told his
associates that he will examine each link in the beef
production chain and establish the level of profit
sufficient for each step in this complicated process.
This is not a new thought on his part. He already did
this as Secretary of Communications, where he
admonished the telephone companies because they had
made a lot of money in the 1990's.


35. He stopped singing this song when a Spanish
executive replied: "We made a lot of money when the
national circumstances and the economy were right,
which were circumstances created by the Argentine
government. So now we have to lose a lot of money
because we made a lot before?" Moreno never believed
in these arguments, but he saw, in that moment, that
he lacked the political support to continue with his
offensive.


36. He practices the method of attacking first and
negotiating afterwards. After various apocalyptic
encounters with the telephone companies, he ended up
liberalizing the cellular market for them. It was a
way of compensating them for the freeze on the price
of land line telephones. As a result, the telephone
companies have not done badly.


37. Another story is about the abuse he heaps on
executives and businessmen who meet with him. One
group of executives from one of the principal
telephone companies had to endure a statement by
Moreno that was so aggressive and scatological
(impossible to recount here within the bounds of good
taste) that one of them later fainted.


38. Moreno only believes in the experience of men in
their 50's or 60's. He demands that those businessmen
who have not reached that age show him the palms of
their hands or the soles of their shoes. "There
aren't calluses on these hands. You can't run a
business that way," he said to one. He reproached
another one with "those shoes aren't worn. You aren't
capable of leading a company."


39. He has no pity with heretics from Kirchnerismo.
Two years ago, at an IDEA seminar, he heard an
executive of a telephone company call for creating the
conditions needed to attract investment to Argentina.
"This discussion is in opposition to the Government!"
he exploded. He demanded that the company remove the
executive in question immediately. The executive left
his position a few hours later.


40. The most instructive anecdote of all is about
Moreno's meeting with the National Communications
Commission, an entity made up of government delegates
from around the country. When he arrived for the
meeting, Moreno pulled a pistol out of his belt and
put it down on the table. "He did it naturally, as if
it was a cellphone," said one of the stupefied
witnesses. Intimidation or just the swagger of power?
No one knows. His own boss, Minister Julio De Vido,
refers to him, to other people, as "the Crazy" ("El
Loco"). "What does the Crazy think about this
issue?" asks the minister, and everyone knows that he
is referring to Moreno.


41. This brand new official of the Ministry of
Economy also insists that the bodyguards of ministers,
who are members of the Federal Police but wear
civilian dress, stand to attention for him. "You are
police officers?" he asks. "Yes," they reply. "Then
stand to attention for me, because I am a Secretary of
the Government." Police in civilian dress are not
required to stand to attention for anyone.


42. Moreno admires the economic experience of the
first Peron administration, and surrounds himself with
economists who think along similar lines, such as
Eduardo Curia. In Moreno's old offices in the
Ministry of Planning, this team managed to disrupt
even the celebrated, Buddha-like composure of former
Economy Minister Lavagna.


43. Since Kirchner came to power, Moreno has
struggled against wind and tide to bring Argentina
into an axis with Venezuela and Bolivia. This is his
cosmic vision of the world and Argentina. While other

ministers (such as Foreign Minister Taiana, among
others) have doubts about the institutional management
of Hugo Chavez, Moreno ignores these naysayers and
remains enchanted by the state nationalism, with a
populist bias, of the talkative strongman from
Caracas. Chavez is, for Moreno, the model of a South
American leader given the current and historical
conditions in the region.


44. In dealing with public service companies in the
past, Moreno had to restrain his aggression to insults
in most cases. These companies have to get along with
the government, but they also usually have the
protection of important foreign governments. His
mistreatment of Spanish businessmen finally forced the
Argentine ambassador in Madrid, Carlos Bettini, to
complain to his friend Kirchner. The ambassador also
complained about other officials of the Planning
Ministry.


45. Now, Moreno has to deal with private businesses
that, in principle, aren't dependent on the state, but
who also lack, in many cases, any foreign protection.
How will Moreno be in this process? "He'll be the
same. First he will attack and then he will
negotiate. First he will choose an enemy, then he
will knock him down, and later he will cut a deal with
his successor," suggested an official who knows him
well. He has the face and mannerisms of a tough guy
and, if any doubt remains, he always has an arrogant
remark ready to confirm it.


46. He began being himself. In recent days, he
called private businessmen, at the ridiculous hour of
6:30 AM, to advise them that they cannot raise prices
without notifying him in advance. "Don't even think
about raising prices unless I know about it
beforehand," he warns.


47. Lavagna built a concrete wall around the Ministry
of Economy to keep Moreno out. Felisa Miceli had
another candidate to be Secretary ... (who, perhaps,
would not have been much better than Moreno),but she
decided to accede to the President's decision. A
vapor of weakness has surrounded Miceli since De Vido
took charge of the major economic responsibilities.
Moreno only listens to De Vido, his mentor and
godfather.


48. His loyalty to De Vido is so great that he once
called an important public service business and
demanded that it withdraw a newspaper advertising
campaign that did not paint the minister in a
flattering manner. "Let me be perfectly clear: not
one centimeter of this advertising or you will never
speak with me again," he warned.


49. But Kirchner always prefers mute loyalty and
obedience to any presumption of political or
intellectual independence. This is why his most
recent appointments have not lacked a certain
eccentricity. His cabinet is, increasingly, a sea of
conformity and meekness. Is there a problem in the
country? Are beef prices rising, for example? In
such moments, the entire cabinet automatically looks
to the President, hoping that the recurrent and
destructive idea of doing something new will come to
him. (Note: We reproduce selected articles by local
experts for the benefit of our readers. The opinions
expressed are those of the authors, not of the
Embassy. End Note.)

GUTIERREZ