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Cablegate: Argentina Economic and Financial Review, October

VZCZCXYZ0009
RR RUEHWEB

DE RUEHBU #1121/01 2821646
ZNR UUUUU ZZH
R 091646Z OCT 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 4467
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUEHSO/AMCONSUL SAO PAULO 3965
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC

UNCLAS BUENOS AIRES 001121

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAIR ECON EFIN EINV ELAB ETRD AR
SUBJECT: ARGENTINA ECONOMIC AND FINANCIAL REVIEW, OCTOBER
2-8, 2009

1. (U) Provided below is Embassy Buenos Aires' Economic and
Financial Review covering the period October 2-8, 2009. The
unclassified email version of this report may include 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.

--------------------------------------------- -
Nominal September Tax Collection up 9.8% y-o-y
--------------------------------------------- -

2. (SBU) The GOA announced October 2 that September tax
collection increased 9.8% y-o-y to ARP 26.2 billion. While
this was in line with the BCRA consensus survey estimate of
ARP 26.3 billion, the increase was negative in real terms
after taking into account an annual inflation rate that most
private analysts estimate in the range of 14-16%. In spite
of the disappointing result, September's increase is more
than twice the extremely poor August increase of 4.2% y-o-y.
In a press release, the GOA touted the result, explaining
that the strength of the domestic economy plus the measures
enacted by the GOA to counter the impact of the international
financial crisis have generated higher than expected tax
revenues. The main drivers of September's collection were:
social security administration revenues, VAT, and fuel taxes.
Export tax revenues dropped 42% y-o-y due mainly to the fall
of international commodity prices as well as a reduction in
export volume. Year-to-date, tax collection increased 12%
y-o-y to ARP 224 billion.

--------------------------------------------- ----
Discussions Regarding IMF Article IV Consultation
--------------------------------------------- ----

3. (U) Minister of Economy Amado Boudou met with senior IMF
officials on the margins of the IMF/WB meetings. According
to press reports, the GOA appeared to move closer to
accepting an IMF Article IV consultation some time during the
first quarter of 2010. However, in later press statements,
the Minister indicated that such a potential IMF visit would
not involve a discussion of policies, but would be strictly
technical and low profile. Boudou is expected to meet the
IMF Managing Director Dominique Strauss-Kahn again in early
November to work out the details of the potential IMF visit.

------------------------------------
U.S. Judge Rules in Favor of the GOA
------------------------------------

4. (U) On September 30, U.S. District Court Judge Thomas
Griesa of the Southern District of New York vacated previous
orders that would have allowed NML Capital to attach assets
of Argentina's state-owned Banco Nacion (BNA). NML is the
New York-based affiliate of the Elliott Management investment
partnership, which reportedly holds claims of about USD one
billion worth of defaulted Argentine debt and did not
participate in the 2005 debt restructuring. In his ruling,
Griesa upheld the GOA's argument that BNA is not a proxy for
the GOA.

---------------------------------------
August Wage Index Increases 1.48% m-o-m
---------------------------------------

5. (U) The National Bureau of Statistics (INDEC) announced
October 1 that the wage index increased 1.48% m-o-m in
August, slightly below expectations of 1.70% (measured by the
BCRA survey). This index defines wages as a price, without
considering hours worked or special payments for productivity
gains. It surveys the private and public sectors, where
salaries rose 1.69% and 1.15%, respectively. The wage index
increased a cumulative 11% in the first eight months of the
year. The BCRA consensus survey forecasts a 15% increase in
the wage index for 2009 and 13% for 2010. Local media
reported that salary negotiation agreements increased 18% on
average so far in 2009, slightly less than the average wage
negotiation increase of 19.5% agreed to in 2008.

--------------------------------------------- --------------
Government Confidence Index Up 10% m-o-m but Down for Year
--------------------------------------------- --------------


6. (U) The Government Confidence Index increased 10% m-o-m
in September to 1.22 points; however, it is 1.26 points below
the average during the Nestor Kirchner administration and
0.69 points below the average of the series (which dates back
to the beginning of 2002). Ratings on the honesty of GOA
officials increased 15% m-o-m and remained the factor
generating the highest level of confidence, followed by the
GOA's ability to solve citizens' problems, which increased 6%
m-o-m. Opinion with regard to the efficiency of public
spending and the GOA's general performance were the factors
generating the lowest confidence levels in September. The
index decreased 15% y-o-y and has decreased an accumulated
11% since the beginning of the year. (Note: The Government
Confidence Index is a survey-based index prepared by Di Tella
University. It goes from zero to five points and seeks to
measure public opinion of the GOA's general performance,
efficiency of public spending, honesty of GOA officials, and
the government's ability to solve problems. End Note).


MARTINEZ

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