Argentina Economic and Financial Review, November 6-12, 2009

UNCLAS SECTION 01 OF 02 BUENOS AIRES 001250 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EFIN ECON EINV ETRD ELAB EAIR AR SUBJECT: Argentina Economic and Financial Review, November 6-12, 2009 REF: 09 BUENOS AIRES 1175 ¶1. (U) Provided below is Embassy Buenos Aires' Economic and Financial Review covering the period November 6-12, 2009. The unclassified email version of this report includes tables and charts tracking Argentine economic developments. Contact Econ OMS Megan Walton at WaltonM@state.gov to be included on the email distribution list. This document is sensitive but unclassified. It should not be disseminated outside of USG channels or in any public forum without the written concurrence of the originator. It should not be posted on the internet. -------------- -------------- -------------- GOA HOPES TO MAKE FORMAL OFFER TO BOND HOLDOUTS -------------- -------------- -------------- ¶2. (SBU) In statements to the press on November 8, Economy Minister Amado Boudou stated that the GoA hopes to make a formal offer to the holders of defaulted debt that did not participate in the 2005 restructuring operation (holdouts) in about 30 days, provided that by that time the GoA has completed all of the administrative, legal and regulatory clearances for the transaction. In its efforts to maximize holdouts' participation, the GoA will go on a road-show to major international financial centers to meet with investors. Boudou also noted that the GoA hopes to differentiate between retail and institutional investors if possible. He added that, after the exchange, the GoA plans to issue bonds in international capital markets in the first quarter of 2010 to finance public investment. -------------- -- U.S. Judge rules in favor of the GoA -------------- -- ¶3. (SBU) U.S. District Court Judge Thomas Griesa of the Southern District of New York ruled November 5 that holdouts (who did not participate in the 2005 debt restructuring) cannot compel investment banks currently working with the GoA in a debt restructuring offer to provide details on the deal. This ruling came in response to a motion filed in September by NML Capital to compel the banks -- Barclays, Citibank and Deutsche Bank -- engaged by Argentina to provide details about the debt offer. In a November 5 press release, the Ministry of Economy said that, under the Court ruling, so-called vulture funds will not be given access to terms, bank fees and documents filed with the U.S. Securities and Exchange Commission (SEC) regarding the planned offer. The release noted that the Court ruled against revealing details (of the offer) because it could interfere with negotiations as well as jeopardize GoA's capacity to go forward with the offer. -------------- -------------- -------------- SENATE TO DEBATE SUSPENSION OF "BOLT LAW" NEXT WEEK -------------- -------------- -------------- ¶4. (SBU) On November 11, the Budget and Treasury Committee of the Senate issued a favorable opinion on the bill to suspend the so-called "Bolt Law" (Ley Cerrojo),approved in 2005 as part of the original debt restructuring. The Senate is expected to start its debate and approve it next week. [Background: The law prevents the GoA from making additional offers to holdouts who did not participate in the 2005 debt restructuring without prior BUENOS AIR 00001250 002 OF 002 authorization from the Congress. For additional background, see October 30 - November 5 Argentina Economic and Financial Review.] -------------- -------------- CONGRESS APPROVES 2010 BUDGET BILL -------------- -------------- ¶5. (SBU) After a ten-hour debate, the Senate approved the 2010 budget bill on November 12 (42 positive vs. 25 negative votes). The Chamber of Deputies had already approved the bill October 14. The budget's main macroeconomic projections include 2.5% GDP growth, a 6.1% average inflation rate, a primary fiscal surplus of 2.3% of GDP (about ARP 28 billion),and an average exchange rate range of 3.95 ARP/USD. The trade surplus is estimated at $14.2 billion, with exports of $65 billion and imports of $51 billion. Consumption is forecast to increase 2.7% y-o-y after increasing only 0.9% in 2009, while investment is expected to jump 8% y-o-y, substantially recovering from its 9% decline in 2009. Total revenues are projected at ARP 273.7 billion (about 22% of GDP) and total expenditures at ARP 273.1 billion, which results in a fiscal surplus (after interest payments) of ARP 621 million. The bill also revised down 2009 GDP growth from the original 4% (included in the 2008 bill) to 0.5%, compared to private analyst forecasts of a 2-3% contraction in GDP for 2009. Along with the budget bill, the Senate approved the extension of five taxes, including the income tax, the wealth tax, and the minimum presumed income tax for ten years; the financial transaction tax (FTT) for two years; and the tax on the final price of cigarettes for one year. [For additional background and analysis on the 2010 Budget see reftel.] -------------- -------------- GoA SETS new work-related insurance rules -------------- -------------- ¶6. (SBU) On November 6, President Cristina Fernandez de Kirchner issued a decree that sets a minimum amount of ARP 180,000 in compensation for workers for work-related injuries, amending the "Work-Risk Law" enacted in 1995. The decree also eliminates the ceiling on work injury claims, allowing injured workers to file claims for unlimited amounts of money. The GoA decree is in response to five years of inconclusive negotiations by the GoA, unions, businesses and insurance companies. The Minister of Labor Carlos Tomada acknowledged that the decree will not provide a final solution to the issue but claimed that it will diminish the number of lawsuits filed by workers for work related-accidents. However, business groups (including the Argentine Chamber of Commerce, the Association of Argentine-private owned banks, the Argentine Construction Chamber, the Buenos Aires Stock Exchange and the Argentine Industrial Union) have countered in a public statement this week that the decree will increase labor costs and aggravate the already pressing and growing problem of lawsuits because workers will have a greater incentive to file lawsuits. According to the chambers, workers have filed 70,000 work-related lawsuits in the first nine months of 2009. MARTINEZ