Saturday, July 11, 2020

ECONOMY | 23-09-2017 10:34

Economy in brief: GDP, Despegar and more bonds

Five items about the Argentine economy.

GDP UP 2.7% IN SECOND QUARTER. Gross domestic product grew 2.7 percent in the second quarter of 2017 when compared to the same period last year and the economy expanded by 0.7 percent versus the first three months of 2017, INDEC announced on Thursday. The economy exited recession in the latter half of 2016, but the government’s attempts to tackle inflation have not taken full effect, with analysts predicting annual inflation will be in the low-20s.

DESPEGAR FLOATATION VALUES FIRM AT NEAR US$2 BILLION. Argentine travel firm Despegar was handed a boost this week when its shares jumped 12 percent during its debut on the New York Stock Exchange, valuing the firm at a whopping US1.96 billion. The firm, which handles travel services including airline tickets, package deals and hotel bookings for Latin American customers, has a tie-up with fellow travel firm Expedia, which has a minority stake in the Argentine firm and handles its bookings outside the region. Its IPO was eyed as a strong offering from the Latin American travel sector. Corp floated on Wednesday after offering 12.8 million shares at US$26 a pop, raising an initial US$332 million. But after trading opened, shares jumped to a high of US$29.20, pushing its valuation higher. The result of the IPO is a boon for the company – Despegar suffered a 2.5-percent fall in revenue last year and reported a profit of US$17.8 million in 2016, a big drop on 2015’s profits which totalled US$85.3 million.

CAPUTO: MORE BONDS ON WAY. Finance Minister Luis Caputo confirmed at a press conference this week that the government will issue at least two more bonds this year, though he said they would not be in dollars. Since the Mauricio Macri administration settled its debts with holdout creditors, the government has sought to raise money frequently through bond issuances. In June, the country issued a century bond and so far, Argentina has sold nearly US$10 billion in dollar-demoninated bonds in 2017. Speaking at a press conference on Wednesday, Caputo confirmed there was a sweeping fiscal reform package in the Works, as well as a bill that would address capital markets and ease restrictions on foreign investment.

US$700M DEBT TO GAS PRODUCERS. Between last week’s 2018 budget pledging to reduce the fiscal deficit from 4.2 to 3.2 percent of gross domestic product and next month’s midterm elections, Argentina’s natural gas producers are part of the ham in the sandwich as their promised subsidy payments are lagging by some US$700 million, it was revealed this week.Designed to lure investment and unique in Latin America, the incentive programme has cost over US$7 billion since first implemented in 2013 by former President Cristina Fernández de Kirchner. When the 2018 increases social spending by 21 percent (more than projected inflation) ahead of next month’s elections, oil companies do not seem to take priority with the subsidy payment delays lengthening since business-friendly President Mauricio Macri took office in late 2015. Hardest-hit is YPF, which was owed some US$551 million of the US$700 million unpaid subsidies in midyear with 10 months of arrears, forcing the state company to raise its debt. While slashing energy subsidies for households, to families, he has retained the incentives for producers and even extended the programme until 2021 in order to attract oil majors to Argentina, where high labour costs and outdated logistics clash with low energy prices globally (doubled by Argentina’s guaranteed floor). Last year more money was spent on these natural gas production subsidies than on child benefits.

EU CUTS DUTIES ON BIODIESEL. Argentina looks set to sell biodiesel again to the European Union, after the bloc said it would lower import duties following a World Trade Organisation (WTO) ruling. The change, which kicked in on Wednesday, sees tarrifs cut to between 4.5 and 8.1 percent, a drop from 2013 rates which stood at between 22 and 25.7 percent. According to the Reuters news agency, local businesses that stand to benefit include Bunge, Cargill, Louis Dreyfus and Molinos Rio de la Plata. The news is timely, with the United States recently having moved to restrict imports and raise duties considerably on Argentine biodiesel. The EU’s case was based on Argentina’s imposition of an export duty on soybeans, used to make biodiesel, which the bloc argued allowed domestic producers to “dump” biodiesel at exceptionally low prices.

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