Subject: G. BREUER Monthly Newsletter: December 2010.
From: <[email-masked]>
To: "Info Gbreuer" <[email-masked]>
Date: Thu, 6 Jan 2011 12:25:05 -0300

G. Breuer's Newsletter
December 2010
Dear Clients & Friends, 
We are sending to you the monthly edition of our Newsletter, where you will find an update on:
Political News
Economy News
G. Breuer News
Please do not hesitate to contact partners Jorge Otamendi and Diego Fissore for any specific question you may have after reading the news below, or for any other issue you may need advice on.
Best regards,

G. Breuer
25 de Mayo 460
Buenos Aires - Argentina
Tel: +54 11 4313 8100
Fax: +54 11 4313 8180
www.gbreuer.com.ar
Political News
This month started with the Wikileaks revelations, and by the end of the month little was remembered of the information made available by such source. In the case of Argentina, only rumors about a supposed stress of the President were leaked and the relationships between the two countries seem to have been completely unaffected by those disclosures. There were some revelations about personal opinions of official party politicians regarding the deceased Mr. K that may produce some effects.
The actual political stir in Argentina came by mid-December when a group of squatters occupied a public park in the city of Buenos Aires -called Parque Indoamericano-, in a southern district of the city mainly inhabited by working class families and where many shanty towns grew in the last years. There was an initial action by the Federal Policy that evicted the squatters, but then those squatters entered the park again and the Police of the City of Buenos Aires –not the Federal Police, could not vacate the park. Violence erupted between residents of the neighborhood and the squatters, and there was police intervention also. As a result, two squatters died, and it is still unclear who fired the killing shots. Then, more families camped in the area. 
In the meantime, other occupations took place, mainly in the southern area of the city of Buenos Aires and in the southern Great Buenos Aires area.
After the violence and deaths, the Federal Government initially refused to send police again and occupations continued, causing a great state of tension and massive disapproval among the inhabitants of the affected areas. Also, in those days, the Federal Government created a Security Ministry and said that many changes would be introduced in the Federal Police, some of which were immediate, which implied in a way an acknowledgment of faults in the eviction of the park. Later it was announced that border guards would be deployed in the Greater Buenos Aires, one of the areas hardest hit by insecurity.
The Indo American park and other occupied lands were later evicted through a sort of agreement between the Federal Government, the Municipal Administration and the occupants,  although some places still remain occupied. 
This squatters’ crisis was very important politically, because it may have marked the end of the truce that the country had given to the President after the demise of her late husband. Mrs. K’s approval ratings were very high prior to these events and virtually granted her easy path to reelection, but this crisis was a wake-up call and the indication that many areas in the Government may not be handling crisis well. One of those areas is security and the lack of efficient response to the occupations may have damaged the Presidential approval ratings. After these events, opinion polls measured that the Presidential image suffered a significant decrease.
On the other hand, some of her likely opponents, the BA Major in the first place, may have emerged of this crisis with improvements in their images. It is still too soon, but the presidential race is on its way and any significant political event may alter the scenario.
Among those events that may bring about political consequences we mention important sectors of the city of Buenos Aires that experienced energy blackouts during the Holiday Seasons. The temperatures were record high and the blackouts were extended geographically and in time. At the same time, there was an important shortage of gas and fuels during the Holiday Season, were many people traveled by car.  And finally, there was a shortage of cash ($pesos 100 notes), which made that many people had trouble getting paid, particularly retirees. These facts opened questions marks as to the efficiency of the current Administration in handling regular issues, such as energy, fuel and cash provision. And in an electoral year, crisis may be becoming more difficult to hide and the temperature, this time political, may be starting to grow.
Also of importance this month is the fact that in the last days of 2010, the EP issued the relevant provisions (one regular Decree and one emergency Decree) extending the Budget for 2010 into 2011. Since Congress did not approve the draft sent by the Government, such a decision was expected, since the applicable legislation so provides. In that respect, the Government basically passed by Decree, i.e. without previous control by Congress, the budgetary provisions for 2011 that had been included in its failed draft budget law for 2011, heavily criticized by the opposition as not representing an actual budget for its gross underestimation of growth, income and inflation. 
The provisions that would apply for 2011 pursuant to the Government’s decree include the use of Central Bank’s reserves for the payment of State debt and several other provisions allowing expenditures to be made by several Ministries, mainly the Ministry of Federal Planning, which is in control of the public works and works of infrastructure.  These regulations were criticized by the opposition, but still there were not legal moves as the ones that took place last year when the use of Central Bank reserves was decided by the Government. The opposition is heavily objecting the lack of congressional control of the expenditure of funds and that the Government will have a great decree of discretion in the handling of funds, everything in an electoral year. It is not yet certain what may happen in this respect, but it seems that no legal battles will take place this year.
We end this section by saying that after the visit of the head of the Financial Action Task Force  (FATF),  Argentina  will present an action plan to fight money laundering in February 2011, so as to avoid negative implications for the country regarding the remarks that such institution made to Argentina in a report dated October 2010. Corrective legislation was issued in this respect, but the action plan would be presented in February. 
Argentina is now entering a vacation month, but all politicians with political aspirations are working hard and candidacies may start to be shaped. Thus, this vacation may bring little rest to politicians. We will be certainly informing next month about the changes in the country’s political scenario. 
Top
Economy News
As we mentioned in the political section above, the Government passed decrees extending the 2010 budget for 2011. Central Bank reserves would be used to pay state debt and other indebtedness is provided for in those decrees. The expansive spending policy seems to continue during 2011. 
In the meantime, the good times for the Argentine economy seem to continue, although with some slowdown signs. 
We start by mentioning that in November 2010, tax revenues grew 39.5% as compared to the same month in 2009, according to the information provided by the tax authorities. Manufacturing figures were up 2.2% in October 2010, as per figures produced by the Argentine Industrial Union.  In the third quarter of 2010, the Argentine GDP grew 8.6% and the industrial production grew 12.8% in November 2010 according to INDEC. 
Inflation continues to be a serious concern. The basic food basket is said to have risen substantively according to some NGO (43%). Salaries would have increased twice the rate of inflation, according to INDEC, the questioned official statistics office. Private estimations tell otherwise and see inflation being much higher than INDEC’s figures.
Regarding INDEC, officers from such entity met at the beginning of December with the IMF’s officers after nearly five years. The meeting was oriented to IMF’s advising INDEC on a new national IPC, which would be launched in the future. The IMF return to Argentina may have been also an indication of the closing of positions between the Argentine Government and the IMF, which will be useful for the former in order to advance with the negotiations with the Paris Club. The IMF officers came to Argentina, met with INDEC’s officers and with statistics experts, and are said to return soon to continue with their work. It is yet to be seen whether these time improvements are to be seen in INDEC.
The inflation issue will be very important this year and the salary negotiations between unions and employers may be key in seeing whether the tensions brought by inflation will be easily manageable or not.
Also worth mentioning is that the Government reopened the exchange of defaulted securities for holders of Brady Bonds and also for the other holdouts that had not entered the previous debt swaps. The Brady Bonds’ swap is said to have been successful (around 80%), and with respect to the other swap there is no final information. Such information may come by mid January 2011. As to this second swap, the Government is said to have low success expectations and it is said to be a good intention showing towards holdouts. 
The Paris Club negotiations continue, and there may be advances on this front at the end of January, when the parties agree on the amount of the debt. 
As we could see, the general view of Argentina’s economy for 2010 and 2011 is that it is well, although many issues would need to be corrected so that the course remains fine.  And that counting with good commodities’ price and a strong Brazilian economy. 
Top
G. Breuer News
For more information, you may read the latest edition of our Boletín Informativo, sent to our Argentine clients & friends. 
Top
G. Breuer
25 de Mayo 460
Buenos Aires - Argentina
Tel: +54 11 4313 8100
Fax: +54 11 4313 8180
www.gbreuer.com.ar

Please note that the information given in this bulletin is for general purposes only and does not intend to provide comprehensive legal advice on any issue.
If you do not want to receive this newsletter anymore, or if you think someone else in your organization should be receiving it, please reply to [email-masked]. 
© G. Breuer, 2011.

G. BREUER
Tel: 54-11 4313-8100
Fax: 54-11 4313-8180
e-mail: [email-masked]
Web: www.gbreuer.com.ar  

************************************************************
PRIVILEGED AND CONFIDENTIAL

This e-mail message is intended only for the use of the individual or entity 
to which it is addressed and may contain information that is privileged, 
confidential and exempt from disclosure. If you are not the intended
recipient, please do not disseminate, distribute or copy this communication,
by e-mail or otherwise. Instead, please notify us immediately by return
e-mail (including the original message in your reply) or by telephone at
+54-11 4313-8100 and then delete and discard all copies of the e-mail. 
Thank you.

Este e-mail está destinado al uso por parte de la persona o compañía que
figura como destinatario y puede contener información privilegiada,
confidencial y que no puede ser divulgada. Si Usted no es el destinatario
del mismo, le rogamos no diseminar, distribuir o copiar su contenido por
e-mail o por cualquier otro medio. En tal caso, por favor, notifíquenos
inmediatamente por e-mail (incluyendo en su respuesta el mensaje original)
o por teléfono al +54-11 4313-8100 y luego borre todas las copias del
e-mail. Muchas gracias.

************************************************************