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Cablegate: Argentina Economic and Financial Review, December 4-10, 2009

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DE RUEHBU #1346/01 3442046
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R 102045Z DEC 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0183
INFO WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHSO/AMCONSUL SAO PAULO

UNCLAS SECTION 01 OF 02 BUENOS AIRES 001346

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON EINV ETRD ELAB EAIR AR
SUBJECT: Argentina Economic and Financial Review, December 4-10, 2009

REF: 09 BUENOS AIRES 1175

1. (U) Provided below is Embassy Buenos Aires' Economic and
Financial Review covering the period December 4-10, 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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President signs the decree to authorize moving ahead on debt
restructuring offer

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2. (SBU) On December 9, President Cristina Fernandez de Kirchner
signed a decree authorizing the GoA to move ahead in the process of
preparing an offer to the holdouts from the 2005 debt
restructuring. On December 10, the GoA published the decree in the
Official Gazette (N1953), thereby formally giving the Ministry of
Economy the authority to issue new bonds to exchange for the
defaulted bonds that are expected to be surrendered in the upcoming
offer to those who did not participate in the 2005 debt
restructuring. Also, the GoA published on the same date in the
Official Gazette the Law (N26.547) that suspends the so-called
"Bolt Law" (Ley Cerrojo), a key legal step in the process leading
up to the presentation of a formal offer to the holdouts. This Law
was approved by Congress on November 18, but becomes effective with
this publication. [Background: The Bolt law, originally approved
in 2005, prevented the GoA from making additional offers to
holdouts without prior authorization from the Congress.]

Meanwhile, the GoA is still waiting for regulatory approvals from
the Security and Exchange Commission (SEC) and a number of other
international regulatory agencies in order to formally announce an
offer. It is unclear whether these approvals will come in time to
allow the GoA to launch the offer before the end of the year. Most
analysts believe that the launch will not be initiated until
January 2010 at the earliest.

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The GoA to use part of SDRs to pay the GDP warrant

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3. (SBU) According to the local press, the GoA plans to use part
of its $2.5 billion IMF Special Drawing Rights (SDR) allocation to
meet the $1.2 billion payout on GDP warrants due on December 15.
GDP warrants were attached to all the bonds -- Par, Discount and
Quasi-Par -- issued in the 2005 GoA debt restructuring, and linked
to GDP growth. That is, they pay when Argentina's economic growth
exceeds a certain level. Six months after the settlement of the
debt restructuring -- in November 2005 -- these units started to
trade separately. The warrants pay the holders 5% of the value of
excess GDP growth beyond a predetermined figure based on a
forecasted trend, which has ranged from about 4.3% in 2005 to 3.2%
in 2013, after which it stabilizes at 3%. This year's payment is
related to 2008 growth, when the economy expanded by 6.8% according
to INDEC. Given that the SDRs are not a currency, the only way to
transform the SDR allocation into usable currency is to sell them
to another central bank for hard dollars. On August 28, the IMF
issued a total of $250 billion in SDRs to member countries in line
with their shareholder stakes.

BUENOS AIR 00001346 002 OF 002


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Businessmen moderately optimistic on 2010 economic performance

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4. (SBU) According to a survey entitled "Leader's Vision"
published December 9 on El Cronista, businessmen are moderately
optimistic regarding next year's economic performance. The main
results of the survey, which was carried out among 200 businessmen,
include:

* About 40% of the businessmen surveyed expect GDP to
grow 2-3%; in tandem, they expect to increase their sales, both
domestically and internationally. However, they acknowledged that
they would face higher costs and a negative business climate which
could limit the investment necessary for stronger GDP growth. A
third of those surveyed believed that growth would be limited to
0-2%.

* 72% of those surveyed said that inflation will be 15%
in 2010. Only 6% forecast inflation higher than 20%.

* Inflation and non-adherence to the rule of law are the
top concerns for businessmen, followed by government interference
in setting prices and higher costs for their inputs.

* About 65% do not foresee any changes in company
payrolls. 18% said they would likely increase their payrolls by
more than 10%, while 12% indicated they would increase them by less
than 10%.

* About 31% of the businessmen said they would invest to
increase production, another 23% plan to invest to maintain
production, and 17% will invest to reduce costs. 17% of those
surveyed plan to invest to increase exports. Only 1% indicated
that they had no plans to invest.
MARTINEZ

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