VZCZCXRO1501
RR RUEHAO RUEHCD RUEHHO RUEHNG RUEHRD RUEHRS
DE RUEHBU #0096/01 0291419
ZNR UUUUU ZZH
R 291417Z JAN 10
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0404
INFO WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHSO/AMCONSUL SAO PAULO

UNCLAS SECTION 01 OF 04 BUENOS AIRES 000096 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EINV ETRD ELAB EAIR AR
SUBJECT: Argentina Economic and Financial Review, Jan 22-28, 2010 
 
REF: 09 BUENOS AIRES 1175 
 
¶1. (U)  Provided below is Embassy Buenos Aires' Economic and 
Financial Review covering the period January 22-28, 2010.  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. 
 
 
 
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GoA unlikely to launch holdout offer before March 
 
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¶2. (SBU)  The US Security and Exchange Commission (SEC) started 
January 27 to analyze the answers submitted by the GoA to a number 
of SEC queries regarding the GoA's proposed offer to the holdouts 
who did not participate in the 2005 debt restructuring.  This 
process could take some time and might generate additional 
questions.  During the lead-up to the 2005 debt exchange, there 
were three such information exchanges that preceded the launching 
of the transaction.  Consequently, the GoA is now reportedly 
working under the assumption that the launching of the debt swap 
will be delayed until March. 
 
 
 
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Congressional Bicameral Commission Examining GoA request to remove 
BCRA President 
 
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¶3. (SBU)  The Congressional Budget and Finance Bicameral Commission 
held its first meeting on January 26 to examine the GoA's request 
to remove (now former) Central Bank President Martin Redrado from 
office for reasons of malpractice.  While the final 
opinion/recommendation of the commission is non-binding, the GoA is 
legally required to consult the commission before being allowed to 
remove the Central Bank President.  So far, the commission has met 
with Minister of Economy Amado Boudou, Acting Central Bank 
President Miguel Pesce, (now former) Treasury Attorney Guillermo 
Guglielmino, and Redrado.  At this point, it is unclear whether the 
testimony and information-gathering phase of the proceedings is 
complete.  If it is, the Commission might issue an opinion during 
the first week of February. 
 
 
 
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BCRA reserves will not go to Bicentennial Fund until Congress 
debates the issue 
 
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¶4. (SBU)  On January 22, the Court of Appeals ratified an earlier 
decision that Central Bank reserves cannot be used to fund the 
Bicentennial Fund without Congressional approval of the "emergency" 
presidential decree (DNU -decree of necessity and urgency) that 
created it.  The Court of Appeals also ruled that the GoA cannot 
appoint a permanent replacement for Martin Redrado without 
consulting with the Congress.  Meanwhile, Central Bank 
Vice-President Miguel Angel Pesce took over as acting President of 
 
BUENOS AIR 00000096  002 OF 004 
 
 
the Central Bank on January 22.  Following the Court of Appeals 
decision re the use of BCRA reserves, the GoA reportedly started 
signaling that it may call Congress into session during the 
February recess to deal with this issue.  In statements to the 
press on January 27, Minister of Economy Amado Boudou insisted that 
"the GoA will continue working to implement the Bicentennial Fund 
as it was designed using the Central Bank reserves to pay 2010 debt 
obligations." 
 
 
 
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Treasury Attorney Guglielmino to be replaced by Da Rocha 
 
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¶5. (SBU)  On January 27, Treasury Attorney Osvaldo Guglielmino 
presented his resignation for "personal reasons."  Press reports, 
presumably sourced from the government, said that he was fired 
after his lackluster performance defending the GoA position before 
a Congressional committee investigating the BCRA leadership 
controversy.  Many private analysts claim, however, that he is 
being scapegoated for the BCRA fiasco and the failure, so far, to 
implement the Bicentennial Fund.  His successor, named on January 
28, is Joaquin Da Rocha, a lawyer who is reportedly close to Chief 
of Cabinet Anibal Fernandez.  He has recently been working at his 
own law firm and as an advisor to Minister of Justice, Security and 
Human Rights Julio Alak.  Previously, he worked as Undersecretary 
of Justice for the Province of Buenos Aires (1988-1991) and as the 
government representative to the Council of Magistrates 
(2003-2006). 
 
 
 
¶6. (SBU)  Background: The Treasury Attorney (Procurador General del 
Tesoro) enjoys the rank of "Minister" and heads the legal office 
working to defend the interests of the Argentine State in foreign 
jurisdictions and international tribunals.  The Treasury Attorney 
leads Argentina's defense against all arbitration claims filed by 
foreign firms against Argentina through the World Bank's 
International Center for Settlement of Investment Disputes (ICSID) 
and within the Argentine legal system, and is the main legal 
advisor to the President. 
 
 
 
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ATFA Holdouts seek BCRA reserves deposited at BIS 
 
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¶7. (SBU)  On January 26, local daily Ambito Financiero reported 
that American Task Force for Argentina (ATFA) is asking the Bank 
for International Settlements (BIS) for access to the US$40 billion 
in reserves that Argentina has deposited in the entity.  According 
to ATFA representative Robert Shapiro, the GoA is using the BIS to 
hide money from judicial orders around the world.  He stated that: 
"the President (CFK) can escape from legal decisions, but she can't 
degrade and debase an international financial institution to do it. 
Argentina is using the BIS and abusing its international role in 
order to evade court judgments in the U.S., Italy, Japan, England 
and France."  Reportedly, ATFA is seeking to reach out to the U.S. 
Treasury and to European Central banks for their support. 
Argentina reportedly has about 80% of its US$48 billion in reserves 
at the BIS, compared to a 4% average for other countries. 
 
 
 
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Trade Surplus reaches US$ 16.9 billion in 2009 
 
BUENOS AIR 00000096  003 OF 004 
 
 
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¶8. (SBU)  The National Statistical Agency (INDEC) announced January 
22 a 2009 trade surplus of US$ 16.9 billion.  There was a 
substantial drop in overall trade volumes compared to 2008.  The 
US$ 55.7 billion in exports and US$38.7 billion in imports 
represented drops of 20% y-o-y and 32% y-o-y, respectively, 
compared to 2008.  The Mercosur region remained the GoA's main 
trade partner, accounting for 25% of its exports and 34% of its 
imports.  Economic analyst Mauricio Claver???? of Abeceb.com declared 
that "there is nothing to be pleased about" - as the surplus "was a 
product of the historic contraction of international commerce, 
where Argentine exports dropped significantly, albeit less than the 
imports."  Notwithstanding the diminished international trade 
volumes for the year, December was a good month, during which 
Argentina exported US$ 4.8 billion and imported US$ 3.6 billion, a 
rise of 17% and 4%, respectively, over December 2008.  Most 
Argentine economists expect trade volumes to continue increasing in 
2010 as the global economic recovery continues. 
 
 
 
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EMAE increased in November for the third consecutive month 
 
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¶9. (SBU)  The National Statistics Agency (INDEC) announced January 
15 that the Monthly Economic activity index (EMAE - a proxy for 
real GDP growth) increased 2.2% y-o-y during November, considerably 
more than the approximately 0.8% circulated by some private sector 
analysts.  The INDEC figure represents the third month in a row of 
an increased rate of growth (0.4% and 0.6% in the previous two 
months). There was no y-o-y variation in August, and the index 
decreased between May and July 2009.  November EMAE's positive 
result was mainly driven by a rise in exports, especially in the 
automobile sector. 
 
 
 
¶10. (SBU)  According to INDEC, in the first eleven months of the 
year, EMAE increased a cumulative 0.5% y-o-y, and the GoA made a 
preliminary announcement that 2009 GDP growth was in the 0.9% 
range.  Private analysts are predicting a strong recovery in 2010, 
with GDP growth of about 4%. 
 
 
 
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Business climate improves, but inflation, political uncertainty 
still major concerns 
 
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¶11. (SBU)  On January 20, SEL Consultores released the results of 
its business climate survey in Argentina, and its comparison with 
the rest of the region.  The survey, conducted with 146 company 
directors and managers of large- and medium-size enterprises, 
covers the fourth quarter of 2009.  The following points summarize 
the companies' expectations for 2010, as indicated in the Sel 
survey: 
 
 
 
- The surveyed companies estimated an average GDP increase of 3.9% 
for 2010.  Expectations regarding their own companies' growth were 
milder, with 66% of respondents expecting their situation to 
improve this year.  Both results constitute an improvement over the 
previous survey. 
 
BUENOS AIR 00000096  004 OF 004 
 
 
- Companies reported that their main concerns are inflation and 
cost increases (69%), compared to only 31% in the previous survey. 
Average expected inflation is 17%, 11 points higher than official 
forecasts.  Average expected salary increases are about 16%.  On a 
macroeconomic level, respondents highlighted as their main 
concerns: legal uncertainty and state intervention (55%), lack of 
confidence and general instability (53%), and inflation (51%). 
 
 
 
- 40% of the firms will increase investment in 2010; 48% of this 
group will focus on maintenance or company reorganization plans, 
with no significant technological innovation. 45% of the firms will 
not change their investment levels at all, and 59% claimed that the 
political context and government actions negatively affected their 
investment decisions. 
 
 
 
- 74% of the surveyed companies forecasts sales increases in 2010. 
66% estimated growth below10% (sales growth expectations averaged 
7.5%).  With regard to the labor market, 28% of the companies 
reduced their headcount in 2009.  For 2010, 64% of the companies 
plan to keep their current headcount, while 30% said they will hire 
new personnel, increasing their workforces by about 1.5%.  These 
results reflect low employment-product elasticity, and indicate 
that employment is not expected to return to pre-crisis levels. 
 
 
 
- 48% of surveyed directors referred to the investment climate as 
"regular", while 49% describe it as "negative".  According to the 
survey, these perceptions are based on: legal uncertainty (81%), 
state intervention (44%), general instability (42%) and labor union 
problems (20%).  51% of those surveyed believe that 2009's 
investment climate worsened compared to 2008.  Only 34% of the 
surveyed companies think that it will improve in 2010. 
 
 
 
- Argentina's institutional framework for investment is regarded as 
less favorable than in Brazil, Chile, Uruguay and Mexico.  It is 
considered superior only to that in Venezuela. 
MARTINEZ