Subject: G. BREUER Monthly Newsletter: January 2011
From: <[email-masked]>
To: "Info Gbreuer" <[email-masked]>
Date: Mon, 7 Feb 2011 12:24:17 -0300

G. Breuer's Newsletter
January 2011
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
January is the main vacation month in Argentina, and thus last month had less political news than usual, although there was plenty of political activity. That is because political parties are starting to define who their candidates for the next presidential elections will be.
In that respect, the Radical Party (UCR) scheduled an internal election for April 30, 2011. Only two candidates would participate, and the Vice-President, who belongs to that party, would not. The dissident peronists are also disputing who will participate in an internal election the date of which is still unknown; and not all of the potential candidates are ready to define positions now. The rest of the parties are also defining candidates, and so far only one decided its presidential ticket, which is the Civil Coalition (Ms. Carrió). Also the major of the City of Buenos Aires, Mauricio Macri, would have confirmed that he will be a presidential candidate, although it is not clear whether he will run with his party only (PRO) or within a coalition with the dissident peronists.
On the official party’s side, there is a meaningful silence from the person who everyone says will be the candidate. That person is Mrs. Kirchner, who is indicated by many as the sure candidate for reelection from the official party. Most analysts think that it would be really a surprise if Mrs. Kirchner does not run, considering the improvement in image that her husband’s demise brought to her. Those good poll numbers for her may be starting to wine down, but still Mrs. K would be leading the polls, although it is not clear whether she would be able to win in first round. And if she has to face a second round, then the result would be open.
We note that there were no crossed legal actions related to the use of BCRA reserves this past month, as it happened in January 2010. This time, the emergency decree in that respect did not bring about legal battles, at least not in January. The opposition may decide to present battles earlier in the year regarding such issue. It seems that this year the opposition privileged the coming elections and the primaries.
In the meantime, the shortage of bills, particularly AR$pesos 100, was felt in the first days of the year, as much as a gas shortage and some electricity cuts that were due partly to record high temperatures. All of those issues may have political significance in an electoral year.
We also mention that farmers’ associations completed another sales boycott in protest against wheat export restrictions imposed by this Administration. The measure came after the failure of the negotiations that took place between the farmers and the Minister of Agriculture. The measure did not include perishable goods and may continue in the future, since the substantive conflict is still unsolved. It is a bad indication for this Administration to have a conflict in an electoral year with a key sector such as the Farming sector, which is very influential in populated areas of the country’s inland. 
Also worthy of mention is that the salary claims bickering and negotiations continued during January, and that unions and employers are exchanging remarks regarding their needs. Unions are seeking salary increases of around 30%, and employers say that such amount is too high. Even the Minister of Labor said that requests of that sort do not have support.
With an inflation that is not supposed to decrease during 2011 and expansive monetary policies, it seems that the tension for salary increases will make headlines constantly. That is no good news for the country, considering that strikes may follow, like the one that paralyzed the main agricultural export harbor of Argentina in the last week of January.
We will report on the development of these issues in the following months. 
Top
Economy News
As to the course of economy, the official statistics’ office, INDEC, informed that inflation during 2010 was up 10.9%. And, as usual, private firms and provincial statistics bureaus measure an inflation that is at least twice the official figure. 
The industrial activity grew annually 13.9% in November 2010, as informed by the Argentine Industrial Union. Also, imports grew 53% in such month. And INDEC informed that Argentina’s GDP grew 9.8% in November on a yearly basis. The growth of the economy continues, and the spending policies of this Administration also continue to be expansive being unlikely that those policies will change in an electoral year.
With respect to the tarnished credibility of INDEC, this month it was known that the IMF would present its report on INDEC in April. In such report, the IMF would present its findings and conclusions so as to create a consumer price index with national reach. Currently, even unions friendly to this Administration do not use the official figures for their salary negotiations. 
The existing inflation of around 25% is posing threats to the Argentine competitiveness, since Argentine products may be becoming more expensive in US$ Dollars. That may explain in part why in December 2010 the trade surplus narrowed to 80% with respect to the same month of 2009. Imports grew 48% year-on-year. And the total amount of the trade surplus in 2010 was US$ 12.6 billion, down 29% from the precedent year. Certainly, the appreciation of the Argentine products due to inflation may be a key factor to bear in mind to see if it is possible to keep the current activity levels.
The annual fiscal performance was announced during January 2010. A primary fiscal surplus of US$ 25 billion and a financial surplus of US$ 3 billion were reported. Central Bank’s and ANSES’ profits were accounted for and, without those gains, the situation would have been different. This is something to bear in mind, since the announced surplus deserves some disclaimers, at least.
As to the Argentine debt, we note that the negotiations to regularize the Paris Club debt continue, and there would be agreement between the parties in this sense. No official announcements were made yet, but it is likely that soon those announcements may come, at least with respect to the amounts. The terms of the payment may be the next steps in the negotiations.
Regarding the debt exchange reopened in December 2010, US$ 156.2 M of debt in default was tendered, and the Ministry of Economy said that the transaction exceeded their expectations.
This Administration formalized the note for US$ 7.5 billion in order to use Central Bank’s reserves to pay debt during 2011. As we pointed out, the emergency decree issued in that respect and the administrative resolutions implementing the decision were not challenged in court so far although the opposition may revisit the issue later.
As said, the economy is showing good numbers, but the solidity of the surplus, inflation and salary negotiations are issues that need to be watched. And those good numbers in a way assume that commodities’ prices will continue to be good and with a strong Brazilian economy with no devaluations. 
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

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