Subject: G. BREUER Monthly Newsletter: MARCH 2011
From: <[email-masked]>
To: "Info Gbreuer" <[email-masked]>
Date: Tue, 12 Apr 2011 16:01:23 -0300

G. Breuer's Newsletter
March 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
The main political news of March 2011 is related to the elections that are taking place in several Argentine provincial jurisdictions, which serve as an anticipated battle to the forthcoming October 2011 Presidential elections.
In that respect, there were elections in two jurisdictions during March 2011: Catamarca (March 13th) and Chubut (March 20th). Adding the population of these two provinces, they have 2% of the total Argentine population. In both cases the incumbent governors had been in power for two terms and could not be reelected, and their parties were seen as clear winners. The ruling party in the nation, Frente para la Victoria or FPV, was not running in any of these jurisdictions, and in the weeks prior to the elections started to grow in the polls. 
In Catamarca, the FPV obtained a closed but clear victory. And in Chubut, the FVP lost only for very few votes, amid allegations of fraud. In fact, many voting sections were challenged and, in some cases, the election in those sections was considered void, and it will have to be decided if there will be a new election there. The FPV and the ruling Federal Peronist Party exchanged all sorts of accusations.
Regardless of the results, and the total amount of votes of the FPV may be smaller than in precedent elections, it was clear in both cases that the FPV made a very good showing and such fact would be reflecting the increasing approval rates that Mrs. K´s administration is experiencing after her husband’s demise. Financial help to these jurisdictions prior to the elections may have helped also in the final results.
More provincial elections may follow in April.
In the meantime, the opposition continues to give very unclear sings. The UCR or Radical Party, after the cancellation of the early primaries, with one important candidate stepping down (the country’s Vice-president), confirmed Ricardo Alfonsín as its candidate. But mandatory internal elections are due in August. 
The Federal Peronists are currently holding anticipated primaries, which will take several weeks to be completed. And the left wing parties are all discussing whether they will form a front and with whom. And some candidates are deciding still whether they will run for the presidency or for their domestic executive office. 
There were statements in several parties of the need to form a caucus and run together against Mrs. K, who is seen as a clear favorite. None of these statements seem to be feasible as of yet, but there are chances that most political forces will consolidate in the coming months in more cohesive fronts. But it is too early to say when and how such consolidation will be produced. 
The elections in the City of Buenos Aires will be held on July 10th, and there the current major of the city of Buenos Aires may obtain the boost he needs to be the reference of the opposition in the national election. Or else. He is facing staunch opposition by most political parties, and the national administration is not making things easy for him either.
Other than this news related to elections, there are other events worth mentioning this month. 
First, the diplomatic incident with the US caused by the seizure of certain military material brought in an US Air Force airplane that came to Argentina for joint exercises. The US said that the material brought into Argentina had been previously authorized and Argentina claimed that some material was not in the authorized lists. Important media coverage was granted to the issue where overreaction on high Argentine officers could be observed. The issue went to courts, and a Federal Judge concluded that there was no US officers bringing material into Argentina and now the situation is to be dealt with by Customs to determine whether there was infringement. The US Government said that the incident was serious and demanded that Argentina returned the retained US property. The US President himself, in an interview, said that the issue was serious and that he would address it with the Argentine President when they met. 
Regardless of the manner in which the case is solved, it seems sure at this point that this case will tarnish the relationships between Argentina and the US. The US has been a good aid to the Argentine positions in issues such as the Paris Club, G 20, and is also perceived as having a moderate position vis-à-vis the holdouts issue. As far as things go, it does not seem that this case will be solved soon, and the final solution may have to wait until after the presidential elections next October. 
Other issue worth mentioning is related to certain judicial cases concerning Mr. Moyano, the leader of the main central union in Argentina (CGT). Mr. Moyano is said to be a very powerful person (and to be very unpopular with the middle class). This month, requests by Swiss courts regarding investigation of certain movements of funds abroad were made to Argentine courts, and some of those requests would have mentioned persons close to Mr. Moyano. The information was made public and made front pages, for which Mr. Moyano called to a general strike in the entire nation to demonstrate that “workers” would not be threatened and also against the newspapers that echoed such news. 
The move was seen by many as a way to show political force to the current Administration, who would be said to be interested in placing limits to this very ambitious union leader. The situation was controlled by negotiations between the Administration and the union leader, and then shows of friendship have been made. But it is clear that the powerful and unpopular Mr. Moyano is strong enough to be a power house by himself and his role in the future elections may be determinant. Being too close to him is said to have an effect on votes, for which the relationship between Mrs. K and Mr. Moyano would be one of the ones to follow up closely during the coming months.
We end with two worrisome notes. First, we mention that several private consulting firms that were preparing and reporting inflation indexes were fined by the Secretary of Commerce arguing that their indexes were technically inaccurate and brought confusion to the public. This move by the Administration may be showing a strong interest to hinder the distribution of information as to the real inflation in the country. It is certainly worrisome that the work of experts in the economic field be subject to fines, since such measure is very akin to forbidding the free expression of ideas. 
We also mention that the distribution of the main newspapers of Argentina, Clarín and La Nación, was blockaded from its prints for several hours by unionized workers on March 26, restricting the circulation of such papers. The police did not prevent the blockade and the current Administration did not condemn the move. We expect that these worrisome events -which give the idea that the Administration is not doing enough so that the free flow of information of ideas is guaranteed- are not repeated.
Top
Economy News
The main economic news for this month ratifies that Argentina is going through an expansive period. But the main question marks remain.
In that respect, construction grew 11.7% in January 2011, and utility use also grew by 12%, according to INDEC. 
Also, tax revenues grew 34% in February 2011, as reported by the tax authority. Inflation may be helping this boost, since the general public is turning to consumption considering that keeping the cash may not be that good of a business.   
And the state surplus grew 19%, as expressed by the government, amounting to AR$ 1.44 billion. Trade surplus grew 0.7%, and the economy would have grown 9.02% also in February as announced by INDEC. Indeed all data speaks of a very active economy, although the sustainability is the question. 
It is worth mentioning that the negotiations with the Paris Club would be advancing very slowly. Creditor countries would have rejected an Argentine proposal to pay the outstanding amount, where the amount, term and interest were not acceptable. An alternative with shorter payment term would have been offered with the IMF intervention, which would not be acceptable for Argentina. Still more negotiation rounds would be necessary in this field. 
Also worth mentioning is that a new importing license scheme was put into effect for an expanded amount of products. After the last resolution in this respect, around 600 products would be subject to non-automatic licenses to be imported into Argentina, and they cover plenty of sectors (metals, consumer electronics, textiles, cars, among others). This issue is likely to raise tension with trading partners. And this measure may be indicating a concern to protect the trade surplus and the provision of foreign exchange in the market.
Speaking of foreign exchange, the national treasury borrowed almost US$ 2.5 billion from Banco de la Nación to refinance debt with such institution and also ordered the payment of debt with multilateral financial institution with Central Bank funds (freely available reserves), and that by legal instruments passed during March 2011.  
As to inflation, it remains to be an issue and the discussion as to the real inflation in Argentina prompted some unusual measures, such as the fines to private firms making inflation measurements, which we pointed out in the political section. According to economists, inflation for February 2011 grew 1.5%. For the official statistics bureau, INDEC, such percentage was only 0.7%. The discussion will continue. In the meantime, the joint work with the IMF officers in order to create a national inflation measurement system continues to advance, and there may be news during April. 
We finish this section reporting that the Secretary of Commerce unfroze fuel prices, for which expectations of increases in this field are expected. We mention that reality may be placing limits to the freezes imposed in certain sectors. 
Top
G. Breuer News
For more information, you may request the latest edition of our Boletín Informativo, sent to our Argentine clients & friends at [email-masked]. 
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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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© G. Breuer, 2011

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