News November 9, 2009 |
ECONOMY
Tax revenues
The Afip (our IRS) reported that in October the fiscal revenues reached $ 26417 millions, 8.8 % more than in the same month of last year, and became the second lowest increase of the year, an analyst commented, “…the revenues have again shown a performance well below the inflation level, which in the last 12 months accumulate an increase which the private analysts estimate at around 14 %... notwithstanding, the government’s officers were optimistic on the economy: the VAT had a year to year increase of 21 % and this is the result of the recuperation of the domestic consumption which has exceeded our expectations…”.
Inflation, debt swap and the Indec
A journalist commented, “…a few days ago the minister of Economy anticipated that the inflation rate for October could be around 0.6 or 0.7 %, this increase would be closer to the estimates of the analysts who have projected for October an increase of around 0.8 %... according to the analysts October is traditionally a month with low inflation and this year there was a significant deceleration of the food products -which only increased 0.5 %- and in clothing, after the increases originated by the change of season… several analysts are afraid that the reason for the Indec to publish increases closer to the real inflation be the result of a temporary political decision related to the debt swap -since Argentina is including in its offer bonds adjusted by the inflation level they could not show the same level of manipulation as before-, but they doubt whether this decision will only last while the offer is being considered or is a real change…”.
Automotive sector
A journalist commented, "...manufacturers, dealers and analysts coincide that for the automotive sector the worst is over, even if the year to year comparisons continue to be negative the contraction has decelerated... notwithstanding, it is estimated that it will take over one year to reach again the 2008´s levels (597999 vehicles manufactured and 611000 units sold)... among the factors which allowed the stabilization of the contractions around 20 %, the first place is assigned to the successful tax reduction plan implemented by Brazil -9 out of each 10 units manufactured in the country are exported to Brazil-, in the domestic market the main place is attributed to the stabilization of the dollar, while the plan implemented by the government contributed between 2 and 3 % of the sales... the estimates of Adefa (manufacturers association) for this year are a production of between 470000 and 480000 units, and sales between 490000 and 500000 vehicles...".
USA, the economy and politics
A journalist commented, “…according to Krugman in Washington one of two arguments are heard: either that the fiscal stimulus plan has failed and the unemployment continues to increase -it reached 10.2 % in October-, thereby the government should not spend more, or that since the stimulus has succeeded, the GDP is increasing, the government should stop spending… Krugman considers that the government’s plan was useful to break the vicious circle, to stop the fall and promote the recuperation, but this is not enough… why?, during the Clinton’s administration the GDP increased on average 3.5 % during eight years, and if they were lucky to increase again at such a level -as in the last quarter-, the unemployment would only decrease 0.5 points per year and it would take a decade to return to full employment… moreover, the major impact of the government’s plan on growth has already taken place, therefore a sound increase will only take place if the private sectors start to spend and to replace what today is being done by the public sector, but up to this moment there are no signs that this is happening… for this reason Krugman recommends the government to continue doing more but he recognizes that at Washington the political chances are not good …”.
Our markets´ trends
In our country the indexes closed last week as follows: the index “Bonos IAMC” (Instituto Argentino del Mercado de Capitales – argentine capital markets bond index) increased 0.13 % last week and the country’s risk (EMBI Argentina) closed at 733 b.p. which compares with 711 b.p. on the prior week; with respect to the stock market, the Merval -an index based on a group of shares- closed at 2222.81 which compares with 2115.76 on the prior week.
The dollar closed at $ 3.83 (the same level of the prior week) and at the Rofex the dollar futures´ market closed at $ 3.83 by the end of December and $ 3.88 by the end of February; the CB´s international reserves are estimated at US$ 46512 million which compare to US$ 46297 on the prior week.
Last week the CB bid for $ 700 million in Lebacs and Nobacs, received offers for $ 2612 million and accepted $ 2093 million; the rates for the Lebacs were: 147 days 13.30 %, 175 days 13.75 %, 210 days 14.20 %, 238 days 14.45 %, 280 days 14.85 %, 364 days 15.33 %, 546 days 16.40 %, 728 days 16.98 % and for the Nobacs (private banks Badlar rate plus 2.50 % annual) the additional rate was 182 days 0.59 %.
The Banco Nación’s interest rates continued at the following levels: fixed term deposits for 30/59 days at 9.38 % annual, 60/89 days at 9.88 %, 90/179 days at 10.65 % and over 180 days 10.78 %, general loans at 20.57 % annual and overdrafts at 35.81 % also annual.
POLITICS
Private sector and business climate
An analyst commented, “…there is consensus that Argentina’s economy has come out of the recession and has started to grow again, but it is clear that the investments will not recuperate as other variables… according to a recent survey prepared by the consulting firm SEL, the more important factor which affects the investments is the uncertainty related by the political situation and the government’s decisions… in the last survey on the business climate almost two thirds of the companies stated that the political-institutional situation is the one that is affecting the investments… 21 % has reduced or will reduce the investment plans, 29 % has postponed investments which had already been decided, 11 % has cancelled the evaluation of new projects, but what it is significant is that this trend has aggravated as from the beginning of the recession… the political insecurity is not only high as perceived by the companies but for 70 % of them it has increased during the last year… in a scale of 1 to 10 the respect for the private property rights are rated at 4 points, the independence and correct application of Justice, the fulfillment of the commitments by the State, the ability to take advantage of the international trade opportunities, the professional proficiency and management ability of the public sectors, are all rated below 4 points… finally, it is not strange that 94 % of the companies state that the present economic policies are unfavorable for the development of their businesses…”.
Comments by Alfredo Toledo
A journalist referred to comments by Peru’s former president, during the Coloquio de Idea (a yearly summit of business leaders), “…although he made clear that he would not refer to Argentina, his words contradicted him, he stated: to implement State policies implies for the political leaders to have the courage to accept that they will not receive the credit for what they have started… the legitimacy of a democracy is not only based on the results of the elections, it is not enough to be chosen democratically, it is difficult to govern democratically… the statesmen think in the next generations and not in the next elections… we should stop discussing about the left or the right, there are governments which are efficient and achieve concrete results and there are inefficient governments, our leaders should be accountable for the results… there is something that it should be clear, we can govern with or without the press, but we can not govern against the press… at that moment the people that were listening started to cheer Toledo, it is evident that the businessmen are able to send messages in different forms… one of them reflected, two years ago we had the former Brazil president Fernando Enrique Cardoso and he left us with our mouth open, last year we were startled by Ricardo Lagos (former Chile’s president), now Toledo has given us lessons on leadership and statesmanship, when will Argentina have a leadership such as this?...”.
Fake candidacies
A journalist commented."...the Electoral Justice confirmed that governor Daniel Scioli and Tigre´s major Sergio Massa submitted their resignations to the representatives´ seats they had obtained in June’s elections, to continue in their present government posts… it is only pending the resignation of vice governor Alberto Balestrini and that of most of the majors who participated as “fake” candidates… as expected, this is a new sign of the hypocrisy and that the lack of respect for the institutions by those that are governing us…”.
An opinion on the Partido Justicialista
A well known political analyst reflected on the PJ, "...the PJ is not drifting nor without the possibility of facing the challenge in the coming presidential elections, its leaders are the ones who can not reach an agreement... while Néstor Kirchner was president the historical law ruled: the leader of the PJ was the one at the Casa Rosada (our White House)... this changed when Cristina assumed the government and after the political defeats between the middle of last year and this June... this originated an internal rebellion within the PJ which although did not tumble Néstor Kirchner, splintered his authority in an irremediable manner, but nobody was there with the sufficient ability to replace him... this benefits Kirchner at this moment who although has had to abandon his hegemonic dreams, conserves the control of the government's structure and of the cash... the vacuum generated by the lack of a strong voice to align the PJ, makes the diminished power of the presidential couple to look greater... . until one of the barons within the PJ´s dissidents is able to get control of the party at a national level, Néstor Kirchner will continue to be primus interpares and will act as such... it looks as if this situation will not change significantly until the end of the first quarter of 2010, with the new legislators elected last June... by that time it is expected that a political block will be formed with the PJ´s dissidents and the representatives of the PRO in the Capital and in the Buenos Aires province... its strength would be an incentive for Carlos Reutemann to take the step that all of them expect, aside from the former Santa Fe´s governor there is nobody else in the PJ capable of gathering enough votes to have the chance of winning in 2011...".
Political reform
A journalist commented, “…the decision to open the Partido Justicialista´s primaries to all the electorate could surprise the government as much as the June’s 28th elections in the Buenos Aires province… the project proposed by the government is trying to neutralize those factors which according to Néstor Kirchner were responsible of the defeat: expensive political campaigns financed with private funds, the betrayal of majors accustomed to bet to different candidates, the possibility of the becoming a candidate outside of the political parties´ structure… if the reason for the defeat were the consequence of a complex problem of political declination, which presented itself in a rejection which exceeded the government’s own structures -to benefit a quasi neutral candidate- the former president could be building his own electoral gallows… in the mandatory internal elections all the citizens allowed to vote can participate, and to any official political leader with over 60 % of rejection rate, as it is the case of Kirchner, this would be an invitation to participate in the PJ´s primaries to all of those who are eager to get Kirchner out of the race…”.
Corruption
A journalist commented, "...the scandals accumulate on former Secretario de Transportes (transportation secretary), one of the officers considered closer to Néstor Kirchner, he had to resign after becoming the government officer with the larger amount of denounces of corruption… now it has been denounced the purchase in 2005 of around $ 1500 millions in 298 used wagons and locomotives from Spain and Portugal… of the 150 vehicles purchased in Spain only 29 are being used, the other 121 can not operate… of the 148 purchased in Portugal only 57 are being used the other 91 have been casted aside… in summary of the 298 vehicles purchased only 86 could be used… these purchases should be investigated, since they were not only a very bad investment, but specially for being the pretext for an illegal and parallel business...".
Another journalist commented, “…now it was time of Secretario de Transporte´s family, the Dirección General de Inmigraciones (the immigration department) reported to the judge -who is investigating the former government officer for illegal enrichment- that Jaime and six member of his family made 221 trips abroad since 2003, and that according to the information provided by them their reported income can not afford such expenditures… also, four private secretaries who assist the president were charged by the courts for illegal enrichment, the prosecutor requested the judge to obtain information on the stunning increase of their net worth, which has allow them in a five year period to build millionaire’s houses, tourist complexes, buy condominiums and land, and establish important companies …”.
Robert Aumann and the crisis
The Nobel Prize in Economics participated in a local seminar, a journalist referred to his comments, “…Aumann rejected the governments´ programs to rescue private companies impacted as the result of the global crisis, he stated that the rescue plans served only for short term electoral purposes but were unviable in the long term, that nobody assumed the risk, that everybody was buying and selling shares, that at the end somebody was to pay for this and that one of the options was to print more money… according to Aumann there is no need to regulate but to promote competition and avoid monopolies, as well as operating in an honest and transparent manner: to the markets the risk is healthy, but risk should not be sold, in a financial crisis it is necessary more market… Aumann is opposed to the remunerations of the executives based on shares´ options, which promote them taking more risks, and stated that they should be remunerated according to the market’s rules, that it was necessary to encourage them to take risks but associating them to the risks for the companies …”.
REGION
Brazil
According to the last surveys the popularity of president Lula remain at record levels compared with those of prior administrations, during October it reached 77 % and in all the prior months has remained close to the 84 % peak which had been reached at the beginning of the year. The IBGE (the statistics office) reported that the industrial production increased 0.8 % in September compared to August, although it fell 7.8 % when compared with the same month of last year, and the capital goods increased for the sixth consecutive month, a sign of the quality and sustainability of the industrial recuperation in Brazil. Last week the dollar closed at 1.72 reales, which compares with 1.76 reales in the prior week, and the Bovespa index at 64466.13 which compares with 61545.50 on the prior week.
Chile
President Michelle Bachelet reached a new popularity record, during October the approval level reached 80 %, which compares with 76 % in September and 42 % last year, her popularity is attributed to the good perception on the handling of the economy during the crisis, the other big winner is the minister of Economy whose popularity reached 71 %, and according to the survey the government’s area best ranked has been the ministry of Economy (74 %), followed by the Foreign Relations (70 %). Last week the dollar closed at $ 523.75 pesos which compares with $ 531.20 in the prior week and the stock index closed at 15825.58 which compares with 15653.08 on the prior week.
Uruguay
A journalist commented, “…while the campaign is intensifying towards the second round on November 29th, the Corte Electoral (electoral court) confirmed that the Frente Amplio (FA) will continue to held the majorities at both chambers… the FA will have 16 senators and 50 representatives, the Partido Blanco 9 senators and 30 representatives, the Partido Colorado 5 senators and 17 representatives and the Partido Independiente 2 representatives… it is evident that the growth of the FA has ended and that the country is divided in two political halves, the left vis-à-vis the traditional parties, this is why we are facing a ballottage…”. Last week the dollar closed at $ 20.95, which compares with $ 20.80 on the prior week.
LEGISLATION
Labor accidents
The government issued Decree Nº 1694 which increases the indemnities and eliminates the caps on the payments to be made by the companies insuring labor risks.
Electronic products
The Representatives Chambers approved the law which promotes the production of electronic products in the Tierra del Fuego province, and increases the taxes on similar products manufactured outside this area.
Single tax regime
The government submitted to Congress a reform of the single tax regime, which incorporates new categories, increases the maximum revenue amounts and the monthly payments.
Buenos Aires´ taxes
The Buenos Aires tax office announced a new plan to facilitate the payment of overdue taxes (on real estate and cars, and stamp and gross income taxes) which will be available until the end of the month.
Dollar futures
The CB extended from 12 months to 18 months the term for its participation in the dollar futures market
NOTE: The purpose of this Newsletter is to summarize last week’s news and is based on information available in the press at the date it was issued. It can be accessed at our website or you can request that we email it to you in Spanish or English. Visit our site www.deloitte.com/ar where you will find additional publications describing our economy, politics and legislation.