Argentina Economic and Financial Review, February

UNCLAS SECTION 01 OF 02 BUENOS AIRES 000254 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EFIN ECON EINV ETRD ELAB EAIR AR SUBJECT: Argentina Economic and Financial Review, February 20-February 26, 2010 ¶1. (U) Provided below is Embassy Buenos Aires' Economic and Financial Review covering the period February 20-February 26, 2010. The unclassified email version of this report includes tables and charts tracking Argentine economic developments. Contact Econ Deputy Jason Witow at WitowJN@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. -------------- -------------- -------------- Rumors Regarding Departure of Minister of Economy Boudou -------------- -------------- -------------- ¶2. (SBU) The press this week reported rumors that Minister of Economy Amado Boudou would be relieved of his position. Government spokespeople denied the rumors, saying that the Minister is on the job as usual. The apparent source of the speculation was an unsourced article in Clarin, which claimed that Boudou had clashed with Domestic Commerce Secretary Guillermo Moreno. Many analysts doubt the veracity of the rumor, given Boudou's importance to the success of the GoA's proposed debt restructuring. On February 24, Chief of Cabinet Anibal Fernandez denied the rumor, and gave Boudou a strong vote of confidence. He also claimed that the rumors were begun by "certain private analysts, seeking to unsettle the markets." -------------- -------------- -------------- Court denies use of reserves for the Bicentennial Fund -------------- -------------- -------------- ¶3. (SBU) On February 24, the Court of Appeals upheld a previous injunction suspending the GoA decree allocating USD 6.6 billion of Central Bank reserves for the so-called Bicentennial Fund, to be used to pay GoA debt servicing coming due in 2010. The earlier preemptive injunction blocked the transfer of reserves until Congress could debate and vote on this issue, and the current ruling upholds this decision. The case will now be brought before the Supreme Court, which may, however, decline to rule on the matter, and leave it to be resolved by the Congress. -------------- -------------- Transfer of 2009 BCRA profits to Treasury -------------- -------------- ¶4. (SBU) According to La Nacion (February 24),the GoA has requested that the Central Bank begin the transfer of its 2009 profits of ARP 24 billion to the Treasury. The process is slated to begin with the transfer of ARP 1.5 billion in March. This move will require BCRA Board approval, which is likely, since the majority of the Board is aligned with the Kirchner administration. -------------- -------------- -- Trade Surplus up 25% y-o-y in January -------------- -------------- BUENOS AIR 00000254 002 OF 002 -- ¶5. (SBU) According to the National Institute of Statistics and Census (INDEC),exports increased 19% y-o-y in January to USD 4.4 billion. Imports increased 16% y-o-y to USD 3.2 billion, giving a trade surplus for the month of USD 1.2 billion. The trade surplus was up 25% y-o-y versus January 2009, which was a weak month due to the international financial crisis. Compared to January 2008, when the surplus totaled USD 1.164 billion, there was relatively little change. -------------- -------------- Textile imports decreased 28% in 2009 -------------- -------------- ¶6. (SBU) According to the Sectoral Economic Investigations consulting company (IES),textile imports decreased 28% in 2009 to US$ 1.2 billion. IES explained that the decrease is due to the contraction of the domestic market and protectionist measures adopted by the GoA. In an attempt to combat accelerating inflation, Domestic Commerce Secretary Guillermo Moreno promised that the GoA would subsidize national clothing industries that do not raise their prices. Inflation reached 7.7% in 2009 according to the GoA, and about 20% according to private sources. -------------- -------------- -------------- Unemployment Rate Dropped to 8.4% In The Fourth Quarter of 2009 -------------- -------------- -------------- ¶7. (SBU) According to INDEC, the unemployment rate decreased to 8.4% in the fourth quarter of 2009 compared to 9.1% in the previous quarter. However, the rate was 1.1% higher compared to the fourth quarter of 2008. INDEC reported that 1.37 million persons are unsuccessfully searching for jobs. Another 1.68 million individuals work less than 35h/week and would like to work more. MARTINEZ