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DE RUEHBU #1137/01 2921046
ZNR UUUUU ZZH
P 191046Z OCT 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 4487
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS PRIORITY
RUEHSO/AMCONSUL SAO PAULO PRIORITY 3967
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 BUENOS AIRES 001137 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EINV ETRD ELAB EAIR AR
SUBJECT:  ARGENTINA ECONOMIC AND FINANCIAL REVIEW, OCTOBER 9-15, 
2009 
 
¶1. (U) Provided below is Embassy Buenos Aires' Economic and 
Financial Review covering the period October 9-15, 2009.  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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INDEC announces a 0.7% September m-o-m CPI 
------------------------------------------ 
 
¶2. (SBU) National statistics agency INDEC announced October 14 that 
the September CPI increased 0.7% m-o-m, about half the consensus 
private source estimate of true inflation of around 1.3% m-o-m. 
Inflationary pressures in September were widespread. The main 
increases were in clothing (1.5% m-o-m), education (1.1 m-o-m), food 
and beverages (0.9% m-o-m), and equipment and house maintenance 
(0.8% m-o-m).   According to INDEC, the accumulated CPI increase for 
the first nine months of the year was 5%, compared to private 
estimates of about 10-15%.  INDEC's wholesale price index (WPI) 
increased 0.8% m-o-m in September, for a total of 6.6% in the first 
nine months of 2009. 
 
¶3. (SBU) Despite INDEC's August CPI announcement, which was higher 
than the market consensus and caused many to think that INDEC was 
attempting to address the lack of credibility of its reporting by 
gradually improving its accuracy, September's announcement suggests 
that there has been no fundamental change in INDEC's approach.  On 
the positive side, however, September's statistics do recognize a 
large increase in the politically-sensitive food and beverages 
sub-index, in contrast to previous months, when food and beverages 
price increases were substantially understated. 
 
¶4. (SBU) According to October 15 press reports, Economy Minister 
Boudou said that "there is no doubt that it's necessary" to have 
multiple CPIs, adding that "all countries have this."  La Nacion 
noted that the U.S. has multiple indexes, although only one is 
considered the official CPI.  Boudou added, "In every country where 
a CPI exists, like Argentina, they measure a basket for the lowest 
two deciles of the population.  Therefore, it's reasonable to hear 
it said that [the CPI] doesn't represent some sectors" of the 
population. 
 
¶5. (SBU) Di Tella's index of consumer confidence fell to 39.0 in 
October from 40.0 in September, largely as a result of consumers 
being less optimistic about future economic conditions and less 
willing to spend on durables and real estate.  This was the third 
consecutive fall in the consumer confidence index, reversing the 
April - July recovery off of its March 2009 low of 37.5.  The 
survey's measure of consumers' willingness to purchase durable goods 
and real estate fell to 26.8 in October from 29.2 in September, as 
did the measure of consumers' perceptions about the current 
macroeconomic situation, which declined to 43.8 in October from 45.0 
in September.  In contrast, the index's measure of consumers' 
perception about their own economic situation rose slightly to 46.5 
in October from 45.9 in September.  This general deterioration of 
consumer sentiment suggests that consumer spending may remain weak 
in the third quarter of 2009, and possibly in the fourth as well, 
following a second-quarter decline of 1.8% y-o-y in real terms. 
 
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GoA reportedly has debt transaction paperwork for SEC 
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¶6. (SBU) On October 15, the Cronista Commercial daily reported 
(without quoting any source) that the Financial Secretariat in the 
Ministry of Economy, headed by Finance Secretary Hernan Lorenzino 
has all of the paperwork needed to move ahead with the reopening of 
the 2005 debt restructuring prepared and ready to file with the U.S. 
Security and Exchange Commission.  This is not the first time in 
recent weeks that the press reported that the Ministry was prepared 
to move ahead with the SEC filing.  On September 29, a Bloomberg 
report stated that an unnamed GoA official said that the GoA had 
begun filing paperwork with the SEC.  However, this report was later 
denied by the Ministry of Economy.  See Buenos Aires 1129 for 
Citibank Argentina's views on the potential for a holdout deal. 
 
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GoA subsidies increased 12% through September 
--------------------------------------------- 
 
¶7. (SBU) According to the Argentine Association of Budget and 
Financial Administration (ASAP), public sector subsidies increased 
 
BUENOS AIR 00001137  002 OF 002 
 
 
12% y-o-y in the first nine months of the year to ARP 25 billion. 
Transfers to the energy and agricultural sectors declined, but 
resources devoted to transportation and the recently state-purchased 
airline Aerolineas Argentinas increased.  Private analysts estimate 
that subsidies may reach ARP 37 billion for the whole year (about 
3.3% of GDP).  The 2010 Budget bill calls for an ARP 4 billion 
decline in subsidies, mainly due to a projected reduction of energy 
transfers.  Energy subsidies currently represent 40% of total 
subsidies, followed by transportation at 28%. 
 
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Large drop in global purchases of main Argentine crops 
--------------------------------------------- --------- 
 
¶8. (SBU) The Institute for Economic Studies of the Argentine Rural 
Producers Association (Sociedad Rural Argentina or SRA) estimated in 
a report published this week that direct global purchases of the 
2009/2010 harvest of the four major Argentine crops (soybeans, corn, 
wheat, and sunflower) will  decline 32.6% to $ 4878.5 million from 
the previous year.  This estimate assumes lower prices for 
agricultural inputs, caused by the world economic crisis, and the 
consequent lowering of production costs for farmers.  However, these 
factors are also causing local farmers to invest less in their 
production capabilities.   The severe local drought, and the GoA's 
economic policies vis-`-vis the agricultural sector, are also 
affecting potential sales.  Ernesto Ambrossetti, head of the 
Institute, talked to the press and said that "the government has 
been stubborn regarding the agricultural sector." He added that he 
estimates the total cultivated area for this harvest at 28.9 million 
hectares, 1.4 million less than in the previous year.  Other 
agricultural sector analysts contest this, claiming that reduced 
input prices should partially compensate for other negative factors, 
leading to no major reduction in cultivated area. 
 
 
MARTINEZ