Cablegate: Argentina Economic and Financial Review, November 6-12, 2009

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UNCLAS SECTION 01 OF 02 BUENOS AIRES 001250

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON EINV ETRD ELAB EAIR AR
SUBJECT: Argentina Economic and Financial Review, November 6-12, 2009

REF: 09 BUENOS AIRES 1175

1. (U) Provided below is Embassy Buenos Aires' Economic and
Financial Review covering the period November 6-12, 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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GOA HOPES TO MAKE FORMAL OFFER TO BOND HOLDOUTS

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2. (SBU) In statements to the press on November 8, Economy
Minister Amado Boudou stated that the GoA hopes to make a formal
offer to the holders of defaulted debt that did not participate in
the 2005 restructuring operation (holdouts) in about 30 days,
provided that by that time the GoA has completed all of the
administrative, legal and regulatory clearances for the
transaction. In its efforts to maximize holdouts' participation,
the GoA will go on a road-show to major international financial
centers to meet with investors. Boudou also noted that the GoA
hopes to differentiate between retail and institutional investors
if possible. He added that, after the exchange, the GoA plans to
issue bonds in international capital markets in the first quarter
of 2010 to finance public investment.

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U.S. Judge rules in favor of the GoA

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3. (SBU) U.S. District Court Judge Thomas Griesa of the Southern
District of New York ruled November 5 that holdouts (who did not
participate in the 2005 debt restructuring) cannot compel
investment banks currently working with the GoA in a debt
restructuring offer to provide details on the deal. This ruling
came in response to a motion filed in September by NML Capital to
compel the banks -- Barclays, Citibank and Deutsche Bank -- engaged
by Argentina to provide details about the debt offer. In a
November 5 press release, the Ministry of Economy said that, under
the Court ruling, so-called vulture funds will not be given access
to terms, bank fees and documents filed with the U.S. Securities
and Exchange Commission (SEC) regarding the planned offer. The
release noted that the Court ruled against revealing details (of
the offer) because it could interfere with negotiations as well as
jeopardize GoA's capacity to go forward with the offer.

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SENATE TO DEBATE SUSPENSION OF "BOLT LAW" NEXT WEEK

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4. (SBU) On November 11, the Budget and Treasury Committee of the
Senate issued a favorable opinion on the bill to suspend the
so-called "Bolt Law" (Ley Cerrojo), approved in 2005 as part of the
original debt restructuring. The Senate is expected to start its
debate and approve it next week. [Background: The law prevents the
GoA from making additional offers to holdouts who did not
participate in the 2005 debt restructuring without prior

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authorization from the Congress. For additional background, see
October 30 - November 5 Argentina Economic and Financial Review.]

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CONGRESS APPROVES 2010 BUDGET BILL

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5. (SBU) After a ten-hour debate, the Senate approved the 2010
budget bill on November 12 (42 positive vs. 25 negative votes).
The Chamber of Deputies had already approved the bill October 14.
The budget's main macroeconomic projections include 2.5% GDP
growth, a 6.1% average inflation rate, a primary fiscal surplus of
2.3% of GDP (about ARP 28 billion), and an average exchange rate
range of 3.95 ARP/USD. The trade surplus is estimated at $14.2
billion, with exports of $65 billion and imports of $51 billion.
Consumption is forecast to increase 2.7% y-o-y after increasing
only 0.9% in 2009, while investment is expected to jump 8% y-o-y,
substantially recovering from its 9% decline in 2009. Total
revenues are projected at ARP 273.7 billion (about 22% of GDP) and
total expenditures at ARP 273.1 billion, which results in a fiscal
surplus (after interest payments) of ARP 621 million. The bill
also revised down 2009 GDP growth from the original 4% (included in
the 2008 bill) to 0.5%, compared to private analyst forecasts of a
2-3% contraction in GDP for 2009. Along with the budget bill, the
Senate approved the extension of five taxes, including the income
tax, the wealth tax, and the minimum presumed income tax for ten
years; the financial transaction tax (FTT) for two years; and the
tax on the final price of cigarettes for one year. [For additional
background and analysis on the 2010 Budget see reftel.]

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GoA SETS new work-related insurance rules

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6. (SBU) On November 6, President Cristina Fernandez de Kirchner
issued a decree that sets a minimum amount of ARP 180,000 in
compensation for workers for work-related injuries, amending the
"Work-Risk Law" enacted in 1995. The decree also eliminates the
ceiling on work injury claims, allowing injured workers to file
claims for unlimited amounts of money. The GoA decree is in
response to five years of inconclusive negotiations by the GoA,
unions, businesses and insurance companies. The Minister of Labor
Carlos Tomada acknowledged that the decree will not provide a final
solution to the issue but claimed that it will diminish the number
of lawsuits filed by workers for work related-accidents. However,
business groups (including the Argentine Chamber of Commerce, the
Association of Argentine-private owned banks, the Argentine
Construction Chamber, the Buenos Aires Stock Exchange and the
Argentine Industrial Union) have countered in a public statement
this week that the decree will increase labor costs and aggravate
the already pressing and growing problem of lawsuits because
workers will have a greater incentive to file lawsuits. According
to the chambers, workers have filed 70,000 work-related lawsuits in
the first nine months of 2009.
MARTINEZ

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