Wednesday, February 26, 2020

ARGENTINA | 30-12-2017 11:20

What we learned this week: the Budget, inflation, dollar

The government ended the year with a final round of fire-fighting, after a end-of-year economic frenzy.


The government ended the year with a final round of fire-fighting, after a end-of-year economic frenzy.

Events began at a high-profile end-ofyear press conference on Thursday, during which the government decided to “recalibrate” (dixit Cabinet Chief Marcos Peña) its inflation targets for the next three years, quickly causing Thurday’s exchange markets to shoot up by over 70 cents toward the 20-peso mark to close the day at 19.45 pesos. By Friday, it had closed at 18.92 pesos for the year.

Tensions between the ministers and Central Bank chief Federico Sturzenegger were on full display at the presser, with stern faces all round. After experiencing frustration in the first two years of the Mauricio Macri administration (the 2016 target of 25 percent turned into 41 percent inflation, while the 17 percent planned for this year looks like being more like 24 percent), the government apparently decided that the 10-12 percent forecast specified in the 2018 Budget (approved by the Senate only the previous day) would be stretching thecredibility gap unduly. So it upped next year’s inflation forecast to 15 percent, then dropping to 10 percent in 2019 and five percent in 2020 (according to the original schedule single-digit inflation was to have been achieved in the last year of Macri’s current term in 2019).

The new targets gained the approval of Treasury Minister Nicolás Dujovne’s preedecessor Alfonso Prat-Gay but some critics thought that changing the numbers only a day after their final approval by the Senate might create a new credibility problem, deterring investors. Less ambitious inflation targets should lead to lower interest rates though. After stagnating for months at levels not much above 17 pesos, the greenback has taken off in the last fortnight following the stormy passage of pension reform, rising nine working days running since then (although a surge was also long overdue for economic and technical reasons, as well as corresponding to seasonal demand).

The developments were a downer for the government, coming just days after it had scored legislative wins, with the Senate passing a tax reform package, the 2018 Budget and a five-year extension to the Debits Tax Law with solid majorities. In other economic news, Christmastime sales failed to impress in 2017 rising by a mere 0.8 percent on 2016 figures, the Argentine Medium-sized Business Confederation (CAME) reported. INDEC also announced that industrial output rose 3.5 percent in November compared to the same month last year.

Rounding off the economic news, the ATE state-workers association announced it will strike on January 4 to protest the decision not to renew some 15,000 fixed-term contract roles and the likelihood of coming job cuts. Grain workers were also striking at the time of writing, after a tragic explosion at a grains terminal owned by China’s COFCO in Rosario claimed the lives of at least two people.


An extremely heavy-duty extraordinary session of Congress throughout December ended on Wednesday with Senate passage of the government’s tax package and the 2018 Budget. The day was also marked by the début of Senator Crist ina Fernández de Kirchner’s third Upper House term – the ex-president denounced politically loaded judicial persecution aimed at stunting “popular representation.” In a lengthy speech (based on a question of privilege), Fernández de Kirchner accused Vice-President Gabriela Michetti of signing a memorandum of understanding with Qatar very similar to the 2013 MOU with Iran which now sees the expresident facing trial (originally on “treason” charges). Over and above its numerous details, the fiscal package (which was approved by a 52-15 margin, almost identical to the 54-14 vote in favour of the 2018 Budget) is seen by experts as broadly neutral, shuffling rather than reducing the tax burden.

Meanwhile the Buenos Aires provincial assembly (perhaps not surprisingly) approved a national fiscal pact assigning an extra 105 billion pesos to the province over the next two years.


Special prosecutor Alberto Nisman was murdered, the court investigating his death said this week, as Federal Judge Julián Ercolini charged Diego Lagomarsino – the IT specialist who lent his former boss a 22-calibre pistol, the same weapon found to have killed Nisman — as an accessory to murder. Four of Nisman’s former bodyguards were also charged for their alleged involvement in the crime. Lagomarsino received the news while he was giving a live interview to Crónica TV on Tuesday. He denies the allegation.


One of the country’s most notorious dictatorship-era criminals, Miguel Etchecolatz, was granted house arrest this week after a 10-year stint in jail for human rights crimes. The 88-year-old was serving six life sentences for torture, murder, the kidnapping of babies, and for the management of at least 21 concentration camps during his time as the head of investigations for the Buenos Aires provincial police force. In their ruling, judges José Martínez Sobrino, Julio Panelo and Fernando Canero cited Etchecolatz’s age and health problems as justification for his release into house arrest to the coastal city of Mar del Plata.

The news was met with outrage from human rights groups, union leaders, politicians and civil society.


The Grandmothers of Plaza de Mayo gave the human rights cause a slightly belated Christmas present when they announced on Wednesday the identification of the 127th grandchild illegally adopted after being born to parents who went missing in the 1976-83 military dictatorship. The 127th grandchild was identified as the daughter of Montonero militants Carlos Poblete and María del Carmen Moyano who were abducted in Córdoba in 1977. When making the announcement at a press conference, Grandmothers leader Estela Barnes de Carlotto was accompanied by the missing couple’s sisters, Elsa Poblete and Adriana Moyano. As is often the case, the story surrounding granddaughter number 127’s disappearance is a tragic one.

Her parents were kidnapped in April or May of 1977 in Córdoba province where they were kept at the La Perla concentration camp. “The birth of granddaughter 127 was at the hands of the ESMA doctor Jorge Luis Magnacco, recently released from prison after serving two thirds of the soft sentence he was given,” Carlotto said. The young woman is said to be reflecting still on the news of her true identity. It was the second success this month after the recovery of the daughter of Edgardo Garnier and Violeta Ortolani on December 4.


Thomas Poole Griesa, the Manhattan magistrate famous for his pari passu clause who presided over the decadelong legal battle between the Cristina Fernández de Kirchner administration and hedge fund holders of defaulted bonds insisting on their full payment, died last weekend at the age of 87. Appointed by Richard Nixon in 1972, he only retired last June after 45 years on the bench.


Hope of finding wreckage in the search for the missing ARA San Juan submarine seems to be all but extinguished as the year draws to a close – Washington announced in midweek that it would be withdrawing its naval units from the search after six weeks while Moscow said that Russian vessels would be following suit in the next fortnight.

Some families of the missing crew members blamed the dwindling search effort and the withdrawal of international support on the Mauricio Macri administration’s lack of commmitment but the government has yet to officially give up the submarine as lost. The ARA San Juan went missing off the Chubut coast on November 15.


Home for Christmas but lacking in the seasonal spirit – Argentine national football team coach Jorge Sampaoli’s Yuletide return to his native Casilda (Santa Fe) was blighted by his abusive reactions to local police traffic controls.

When his own car was stopped for carrying eight people with only five seatbelts and after an accompanying vehicle lost its driving licence after testing positive for drunk driving, Sampaoli lost his temper, asking the police officer (among other insults) how he dared interfere with him when “you only earn 100 pesos a month, you idiot.”


Just a day before the year draws to a close, with temperatures soaring in the capital, the National Meteorological Service (SMN) announced yesterday that 2017 had become the warmest year in Argentina’s history, at least since records began, exceeding the previous record set in 2012.

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