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Tuesday, October 29, 2013

Peronists Vie For Power After Election Defeat


October 28, 2013 6:36 pm

Peronists vie for power as Fernández’s third term hopes are crushed

By Benedict Mander in Buenos Aires
Oposition candidate Massa wins in the mayor Argentine district©EPA
With the president given a browbeating, Sergio Massa has become the man of the moment
President Cristina Fernández’s re-election hopes were quashed once and for all following a limp performance by her ruling coalition in Argentina’s midterm congressional elections on Sunday, so launching a battle for power that will come to a head in presidential elections in 2015.
After failing to secure the two-thirds majority she would need to amend the constitution and so run for a third term, Ms Fernández will be denied the chance to follow in the footsteps of other Latin American populist leaders who extended their rule through constitutional changes, such as Venezuela’s Hugo Chávez, Bolivia’s Evo Morales and Ecuador’s Rafael Correa.
Although Argentina’s 60-year-old leader is recovering from an operation three weeks ago to treat bleeding on the brain after a head injury, government spokesmen said she will soon return to office invigorated. The majority she maintains in both houses of congress means she remains firmly in charge of the country.

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In her continued absence, the man of the moment is Sergio Massa, Ms Fernández’s former cabinet chief, who thrashed the candidate of the ruling Front for Victory party (FPV) in the populous province of Buenos Aires. Mr Massa won with almost 44 per cent of the vote, leaving his rival, Ms Fernández’s chosen candidate, trailing with just 32 per cent.
Many believe that Mr Massa, who broke from the government in June and is considered to be more pragmatic and market-friendly than the president, is now a strong contender for the presidency in 2015. Mr Massa can criticise the government’s failings, particularly over the economy and crime, while credibly claiming to continue its successes.
“Millions of votes oblige us to cross the [provincial] frontier and start traversing the country,” said the 41-year-old suggestively in his victory speech, while refraining from declaring his candidacy outright.
Nevertheless, with two years to go until the election, some observers caution that Mr Massa could peak too early. They point to similar candidates who performed strongly in midterm elections but were eventually defeated – both Carlos Menem and Néstor Kirchner won the presidency as outsiders.
Indeed, one great unknown is how many candidates will present themselves from within the disparate Peronist movement, which both Ms Fernández and Mr Massa claim to belong to. It has been the dominant force in Argentina since its founder, Juan Domingo Perón, first won the presidency almost 70 years ago.
In large part, that will be determined by whether or not Ms Fernández decides to anoint a successor. Several provincial governors are thought to be in the running, including the loyal governor of Entre Ríos, Sergio Urribarri, and the governor of Chaco, Jorge Capitanich. The latter was a close companion of the president when they were both senators.
A question mark hangs over the more statesmanlike Daniel Scioli, governor of Buenos Aires province, by far the largest with 37 per cent of the population. On Sunday night he was uncomfortably mopping his brow on the podium beside Mr Massa’s defeated FPV opponent, for whom he had campaigned in Ms Fernández’s absence.
With the FPV in clear decline, it is highly unlikely the new president would come from its own ranks. This opens the door for the Peronist dissidents to gain office, heralding some significant changes in policy making and potentially bringing an improved business environment in Argentina
- Carlos Caicedo
“With the FPV in clear decline, it is highly unlikely the country’s new president would come from its own ranks. This opens the door for the Peronist dissidents to gain office, heralding some significant changes in policy making and potentially bringing an improved business environment in Argentina,” said Carlos Caicedo, a risk analyst at IHS. Argentine bond prices rallied slightly on Monday.
But two, or even three, Peronist candidates running in 2015 could split the Peronist vote, and increase the prospects of victory for an opposition candidate. Indeed, that is how the opposition last managed to win power, in 1999.
Hopes of incurable divisions within Peronism could explain the launch on Sunday night of the presidential campaign of Mauricio Macri, the centre-right mayor of Buenos Aires, who enjoys limited support beyond the capital city.
But Argentina’s long-fractured opposition may continue to deny itself another stint in power if other opposition candidates also throw their hats into the ring. This seems likely after two powerful regional politicians, Julio Cobos of Mendoza and socialist Hermes Binner of Santa Fe, hinted at their interest after convincing local victories on Sunday night.
In the meantime, the government has been at pains to point out that the FPV remains the country’s most voted-for political force. Opponents dismissed this as empty triumphalism.
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Monday, October 28, 2013

Cristina Fernandez Suffers Poll Setback


October 28, 2013 4:19 am

Cristina Fernández suffers Argentine electoral setback

By Benedict Mander in Buenos Aires

Shirts with the portraits of Argentine president Cristina Fernandez de Kirchner, the late president Nestor Kirchner and Eva Peron©Getty
Argentina’s President Cristina Fernández suffered a major setback in congress in midterm elections on Sunday, putting an end to her ambitions to be re-elected in the 2015 presidential polls.
Although it did not lose its congressional majority, the president’s ruling coalition won just 32.8 per cent of the national vote with 95.5 per cent of the votes counted, compared with Ms Fernández’s victory in the 2011 presidential elections with 54 per cent of the vote.

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The result is expected to spark a bitter struggle for succession within the dominant Peronist movement after Ms Fernández’s party failed to secure the two-thirds majority in congress that she needed to amend the constitution and stand for a third presidential term.
With half of the seats in the chamber of deputies and a third of the seats in the senate at stake, Ms Fernández’s coalition suffered a particularly stinging defeat in the populous province of Buenos Aires, where the dissident mayor of Tigre, Sergio Massa, beat the government’s candidate by more than 11 percentage points.
“In just 120 days, a path to the future has been born for our province – and, why not say it, for the country too,” said Mr Massa in his victory speech, referring to the brief period since he broke from the government in June, and hinting at his designs on the presidency.
After his resounding victory, Mr Massa is now tipped as a strong competitor in the 2015 presidential race, with traditional opposition politicians also throwing their hats into the ring on Sunday. Emboldened by his party’s victory in Buenos Aires, Mauricio Macri, mayor of Argentina’s capital city, made his presidential bid official. “The time has come,” he told cheering supporters.
Meanwhile, the government was quick to point out that the president’s Front for Victory party remains Argentina’s leading political force, winning the most votes nationwide, and maintaining its majority in both houses of congress.
We are very happy that the president is getting better every day. She is preparing to return with all her strength
- Amado Boudou, vice-president of Argentina
Critics point out that this is only because the opposition remains deeply fractured. In fact, Ms Fernández’s party came in second or third place in the most populous provinces of the country, as well as the capital city.
Ms Fernández was unable to campaign during the elections after undergoing surgery three weeks ago to relieve a bloodclot on her brain. Vice-president Amado Boudou, who is also serving as acting president, assured government supporters that she was recovering.
“We are very happy that the president is getting better every day. She is preparing to return with all her strength and to continue building this project,” he said at a post-election rally.
Ms Fernández’s son Máximo Kirchner, who is considered to be one of her closest confidantes but keeps a low profile, told reporters with a smile when he voted on Sunday that he did not know when she would return to the public arena. She has not been seen since her October 8 operation, after which doctors ordered her to rest for at least 30 days.
The big question now being asked is how Ms Fernández will react to the new political situation when she returns. Her approval ratings have plunged since she was re-elected to a second term in 2011, as Argentines become increasingly discontented with high inflation, rising crime and corruption.
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Sunday, October 27, 2013

Brasil Braces For A Shift From Four To Three Mobile Operators



October 27, 2013 1:42 pm

Brazil braces for shift from four to three mobile operators

By Joe Leahy in São Paulo and Daniel Thomas in London

In Brazil, it was once accepted wisdom that four telecom operators was the correct number to ensure good levels of profit versus competition.
But in recent weeks, events in Europe are being felt across the Atlantic as Telecom Italia prepares for a possible sale of its Brazilian asset, Tim Participações, a manoeuvre that could leave the Latin American market with only three major players.

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This is already having repercussions among rivals withPortugal Telecom and Brazil’s Oi signing up for a merger ostensibly to prepare themselves for consolidation.
Brazil is one of the world’s prized telecom markets. Subscriber numbers were more than 268m in August, representing penetration rates of more than 1.35 lines per head of population, compared with 46m cellular lines a decade ago, according to Anatel, the industry regulator. By 2018, Brazilian cellphone users are expected to increase to 350m, a report by Ericsson predicted.
The prime beneficiary of this growth has been Vivo, owned by Telefónica of Spain, with more than 77m subscribers, followed by Tim, controlled by Telecom Italia, with nearly 73m. In third place was Claro, owned by Mexican billionaire Carlos Slim’sAmérica Móvil, with about 67m and then Oi, the former Brazilian incumbent fixed line operator, with 50m.
Speculation is rife, however, that Tim will soon be put up for sale by Telecom Italia in a transaction that could be worth at least €9bn, according to analysts. Anatel is unlikely to let Telefónica own the country’s two largest mobile operators, so Tim is expected to be divided up between Vivo, Claro and Oi.
Regulators are expected to be suspicious of any sale of Tim to its three rivals. Brazilian telecom companies are already regularly criticised by consumers for low-quality services, and any reduction in the number of operators would raise fears this would get worse.
Operators counter that high taxes, red tape and fierce competition limit their ability to invest, particularly in remote areas and in new technology, such as next-generation 4G services, which they aim to roll out in time for next year's World Cup.
For this reason, analysts expect the regulator to consider allowing only three operators, as long as they carve up TIM in such a way that no one company dominates any single region.
Zeinal Bava, chief executive of Oi who will remain in charge after the merger, says the combined Portugal Telecom and Oi would have the scale and financial firepower to participate in the wider consolidation of the fiercely competitive Brazilian market.
“If we do not make this move then we will never have the option to consider anything,” he told the Financial Times in an interview. “Let’s suppose that Telecom Italia gets rid of its asset in Brazil and sells bits to different people. Then there is a knock on my door and someone is saying how about this? I would have to raise capital – do you think I could do [that] before?”
The merger would result in a single, Rio de Janeiro-listed group with 100m customers and almost $19bn in annual revenue. It would span the new and old world economies with large operations in Brazil and Portugal, as well as an African business that could be sold, according to people familiar with its strategy.
It is a union though that has left some analysts scratching their heads, who say the transaction benefits the controlling shareholders of both companies at the expense of Oi’s minority shareholders. “The level of disclosure has been poor,” said Richard Dineen, analyst with HSBC.
This transaction is not just about scale, although that is important. We will have one listed entity, one class of shares, high liquidity, high standards of governance . . . the company becomes investable
- Zeinal Bava Oi chief executive
The structure of the company will be simplified to take out the debt of the old controlling shareholder, Telemar Participações. Portugal Telecom will go from holding a 25 per cent direct stake in Oi and an indirect stake of 12.1 per cent in Telemar to about 38 per cent of the new combined group.
From the spaghetti-like corporate structure of the old group, which had many classes of shares with unequal voting rights, the new company will have one class of shares with the same rights 100 per cent free floated on Brazil’s Novo Mercado, which entails the market’s highest standards of corporate governance.
“This transaction is not just about scale, although that is important,” Mr Bava says. “We will have one listed entity, one class of shares, high liquidity, high standards of governance . . . the company becomes investable.”
Analysts question whether the deal will really fortify Oi to make acquisitions. The merger is expected to generate synergies of R$5.5bn, although Oi will need to raise R$7bn-$R8bn to complete the deal. However, the group will be left with a large net debt of R$41.2bn even after the equity raising. That is equivalent to a net debt to 2013 earnings ratio of 3.3 times, a metric similar to Oi on a standalone basis, which Mr Bava acknowledges is high. This also worries analysts, with rating agencies threatening to downgrade the group’s debt to junk status.
The company’s debts are a legacy of a period of high dividend payouts to investors, a shareholder perk that mostly disappeared under Mr Bava after he cut the dividend by three-quarters.
“Of course, the shareholder base has got to change as a lot liked the dividend and yield, but now we are positioning ourselves as a growth stock.”

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Tuesday, October 22, 2013

Brasil's Foreign Exchange Moves Reveal Policy Tensions


October 22, 2013 12:10 pm

Brazil’s FX moves reveal policy tensions

By Joe Leahy in São Paulo and Delphine Strauss in London

When Alexandre Tombini launched in August a determined response to a wave of currency depreciations sweeping emerging markets, central bankers of other embattled nations must have looked at the Brazilian with envy.
Brazil’s large derivatives market allowed the central bank president to intervene in the currency through swaps. The $60bn campaign was underwritten by Brazil’s large external reserves, which have risen more than 12 times since 2000 to $373bn.

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The real, which had tumbled 15 per cent from the beginning of the year, heading for R$2.50 to the dollar, immediately reversed its losses.
But today there are questions over whether the programme was too successful. The real has come back to R$2.17 to the dollar, up 13 per cent on August, leading to market rumours of tensions between the central bank and the finance ministry, which wants a weaker currency to help Brazil’s flagging industry.
“One side always wants lower inflation while the other side wants more competitiveness,” said Tony Volpon, economist with Nomura.
This debate would have seemed unimaginable in August, when investors were fleeing emerging marketson the assumption that the US Federal Reserve was about to start scaling back the vast stimulus programme that had fuelled their growth.
Now, the knock-on effects of the political debacle in the US over whether to raise the nation’s debt ceiling seem likely to delay “tapering” further, at least to the start of 2014, leading analysts to predict a revival of carry trades in EM currencies.
For some countries, the delay of tapering is a welcome reprieve: it will give policy makers in India and Indonesia, for example, more time to convince investors that reforms to narrow current account deficits and liberalise capital markets are working.
Others will be less keen to see a fresh flood of easy money. Traders believe thecentral bank of South Korea – which must contend with Japanese exporters revelling in a much weaker yen – intervened heavily to stop the won rising too fast against the dollar.
Mr Tombini faces an especially acute dilemma. Under his intervention programme, he committed to daily currency swap auctions and weekly repo sales at least until the end of the year.
With tapering on hold, analysts at Barclays said: “The pre-announced [central bank] strategy to sell derivatives . . . has helped not only contain the pace of depreciation but has also added pressure to keep the currency strong.”

In depth



Currency wars
Emerging markets are taking a battering as investors withdraw at the prospect of higher global interest rates
One man who will be particularly vexed by the stronger real is Brazil’s finance minister, Guido Mantega. As part of his “currency war” in 2010, he backed a web of currency controls in Brazil to try to weaken the real against the greenback, which was depreciating on the back of the US Federal Reserve’s quantitative easing programmes.
A meeting last Wednesday between Mr Mantega and Dilma Rousseff, Brazil’s president, fuelled speculation that the central bank might come under political pressure to scale back its intervention. When the central bank was late that day in announcing plans for the daily swap auction, the real fell sharply – showing how sensitive the market has become to any hint of a change in policy.
For the central bank, the stronger real is a powerful weapon in its bid to contain inflation, which has been running in the upper range of its target of 4.5 per cent plus or minus 2 percentage points. Mr Tombini and his fellow directors have repeatedly raised rates to tackle inflation but their efforts have been countered by a fiscal stimulus from the government, which needs to spur growth and jobs ahead of an election next year.
“Whether there is outright discord between the central bank and the finance ministry, the fact is they need to contain inflation somehow and the central bank is finding a way to do that through the exchange rate,” says Flavia Cattan-Naslausky of RBS.
She argues that the problem is an old one – too many “policy objectives”. The government is trying to provide a fiscal stimulus, reduce inflation and weaken the currency to promote competitiveness, all at the same time.
Nomura’s Mr Volpon said the government’s objectives were not necessarily conflicting – it was just a matter of timing. First priority should be to restore the central bank’s credibility on controlling inflation, after which the currency could be allowed to depreciate to promote industry.
“The more sophisticated debate is the one about timing and sequencing,” he said.
As to whether there is really a conflict between Mr Mantega and Mr Tombini, many in Brazil are sceptical. Both take their orders from the nation’s overbearing president, Dilma Rousseff, said one fund manager in São Paulo, dismissing rumours of the rift.
“I know the gender of the real central bank president and finance minister and she is a woman,” he said.

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Friday, October 18, 2013

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Wednesday, October 16, 2013

A Golden Era Fades As South America Faces Its Cross Roads



A golden era fades as South America faces its crossroads

By John Paul Rathbone in London

Boom subsides but election prospects imply democracy is vigorous
Protesters march during a nationwide anti-government rally in Buenos Aires©Reuters
South America’s golden years are over. The commodity boom has peaked and the region no longer enjoys the abundant capital it did. Economies are slowing fast – look at Brazil’s, which is limping along.
Last month, the International Monetary Fund cut the region’s growth forecast for 2013 to 2.7 per cent, its worst performance since Lehman Brothers imploded in 2008. Meanwhile, democratic gains are threatened – look at the hyper-presidentialism of Venezuela or Argentina whose leaders have had visions of never-ending rule.

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That, at least, is the doom-mongers’ gloomy regional view. Farewell, salad days; hello, hair shirts and sunglass-wearing dictators. But is this the correct prognosis?
Forthcoming elections in Argentina, Chile and Venezuela, plus an early start to Brazil’s presidential campaign, suggest that democracy is more vigorous than ever. And there are good economic times still to be had. Commodity prices are higher than during the golden years of the mid-2000s. Capital remains abundant. Between 2003 and 2008, around $100bn flowed into the region annually; this year, inflows will top $300bn.
Nonetheless, South America has reached a crossroads. Commodity prices and capital flows remain high; the snag is they are no longer rising. At the same time, the fortunes of many incumbents are good but the excesses of the past are now showing. As a result, the region is experiencing a kind of political and economic bifurcation.
One group of countries, which includes Chile, invested the commodity windfall and is still growing strong. Another group, which has Argentina and Venezuela in its ranks, spent the boon on consumption instead. As Ernesto Talvi and Ignacio Munyo show in a fascinatingBrookings Institution paper, they now suffer more growth-throttling bottlenecks.
Politics tells a similar story. For the past 10 years, the commodity boom boosted incumbents across the spectrum. High growth allowed them to spend more on needed social programs. Millions also joined the ranks of the “new middle class”, who then returned incumbents to power.
Yet while that economic growth helped whoever was in power, it did not always help democracy. In countries where constitutionalism was weak it tended to get weaker, with some presidents unwilling to serve just one term or to compromise with opponents. In such countries the forthcoming elections, like their economic slowdowns, are likely to be more traumatic.
In Argentina over the past decade, Cristina Fernández, with her husband and former president, Néstor Kirchner, concentrated power at the expense of the judiciary and the legislature. They planned to rule forever but with the economy now sagging, polls suggest that at October’s midterm polls “Kirchner-ismo” will reveal itself as a spent force, with the opposition renewed by centrist dissidents from within the Peronist movement.
Then there is the extreme example of Venezuela, where Hugo Chávez systematically sought to weaken all political parties, not just the opposition. In 2007, he disbanded his Fifth Republic Movement and forced its merger with several smaller parties into Venezuela’s United Socialist Party (PSUV). As a result, the institutional processes of all parties weakened.
Recently, though, the Venezuelan opposition has coalesced under a single banner. By contrast, the PSUV is grappling with internal inconsistencies, especially since the death of Mr Chávez this year, leading to policy paralysis. December’s municipal elections will reveal what voters think about Nicolás Maduro and the ensuing economic problems.
Chile’s presidential elections in November will probably see power transferred from one party to another for the second time since the transition to democracy 25 years ago, a sign of a strong constitutional democracy.
Lastly, there is Brazil, where the Workers Party has ruled successfully since 2002. But this long spell in power also weakened the effective capacity of the opposition. Indeed, Dilma Rousseff, the president, is likely to win next October’s election. Yet the alliance last week between Marina Silva, a popular environmentalist, with Eduardo Campos, a can-do state governor, suggests the opposition is reforming, a healthy development for the balance of power.
What lessons can be drawn from all this? There is always the risk of over-categorisation but, broadly, there is seemingly one group of South American countries with strong constitutional process and stronger economies, and another that is the opposite. It is the old liberal verity: good politics makes good economics possible, and vice versa.
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Friday, October 11, 2013

Argentine economic crisis (1999–2002) - Wikipedia, the free encyclopedia

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Cristina Fernandez Health Scare Symbolizes Argentina Ills

October 10, 2013 2:10 pm

Cristina Fernández health scare symbolises Argentina’s ills

By John Paul Rathbone and Benedict Mander in Mendoza, Argentina
Argentine president Cristina Fernández is to have an operation to remove blood accumulated in her skull©AP
Argentine president Cristina Fernández is to have an operation to remove blood accumulated in her skull
It was a small but telling sign that even as Amado Boudou, Argentina’s acting president, reassured the nation on Monday that Cristina Fernández needed only rest, Argentina’s actual president was speeding off to hospital for a crucial operation.
Ms Fernández, suffering from blood on the brain after a knock on the head eight weeks ago, emerged in “high spirits” from her operation on Tuesday to leach the subdural hematoma, officials said.

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Even so, the 60-year-old leader’s delicate health has exposed the institutional fragility of her highly centralised regime, where power is concentrated among a coterie of loyal advisers, and underlined the limits of her ability to govern – even as Argentina faces a crescendo of economic problems that need to be addressed.
“It feels like the beginning of the end,” said Walter Molano, strategist at BCP Securities and author of an Argentine economic history In the Land of Silver. “The economy is on a knife-edge; so too the population.”
Ms Fernández’s approval rating has sunk to 33.5 per cent as Argentines are fed up with inflation estimated at 25 per cent, foreign currency shortages, corruption scandals, administrative incompetence and sagging business confidence. Polls indicate the government could lose its Congressional majority at midterm elections on October 27.
“I can’t import oak barrels to mature my wine,” cries José Manuel Ortega, a fine winemaker, in exasperation. “Yet for every $1 of imported oak, I can export $15 of wine. Isn’t more exports exactly what the government wants?”
Ms Fernández’s aggressive political style has also damaged the country’s international standing. In addition to squabbling with its immediate neighbours, the government is fighting Repsol after it expropriated, so far without compensation, the Spanish oil company’s 51 per cent stake in national energy company YPF.
In addition, the government is in the middle of a legal battle with holdout creditors that have refused to accept the terms of the country’s $80bn debt restructuring. The US Supreme Court declined to accept an Argentine appeal to hear the case this week, although a second appeal is expected.

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These are just some of the problems facing Mr Boudou, Argentina’s constitutionally enabled acting president, while Ms Fernández convalesces.
Whether the 50-year-old former economy minister has the power to tackle them is moot. Mr Boudou faces corruption charges, making him one of Argentina’s most unpopular politicians; in an October poll by Management & Fit, 47 per cent viewed him negatively. Even allies say Mr Boudou seems more at ease playing guitar in a rock band or riding a Harley-Davidson than governing.
“The president will [continue to] take the decisions,” said cabinet chief Juan Manuel Abal Medina even as Ms Fernández remained in intensive care. “The only person who has power is the president.”
The uncertainty surrounding who is actually in charge is reminiscent of the institutional confusion that paralysed decision-making in Venezuela when Hugo Chávez was diagnosed with cancer two years ago.
Although Ms Fernández’s condition is far less serious, and resolving a hematoma is an almost routine procedure, Pablo Rubino, a doctor at the Fundacion Favaloro clinic that conducted the operation, said it required “a period of complete rest” that could last from 20 to 30 days.
In the meantime, investors have taken Ms Fernández’s declining popularity as a sign that a more business-friendly government may emerge after presidential elections in 2015. Over the past month, Argentine stocks have risen 15 per cent. More centrist Peronist politicians, such as Sergio Massa, the ambitious mayor of Tigre and a former Ms Fernández adviser, are already jostling for position.
“If Massa is not in the opposition, then I am the Mona Lisa,” Ms Fernández said in a rare television interview screened two days before she went to hospital.
Ms Fernández’s condition has prompted a stream of condolences from even bitter opponents, including the government of the Falklands which she has made the focal point of her foreign policy in an intensification of Argentina’s longstanding claim to the islands.
“Irrespective of our differences, we wish [the] Argentine President well,” it tweeted on Monday.
Still, such well-meaning words have not stopped gossip about what Ms Fernández might do when she returns. Speculation ranges from a deepening of the populist model she calls “the project”, to retiring from politics on health reasons – especially if her party is trounced in the midterms, leaving her a lame-duck president.
For the feisty leader, whose closest followers are referred to as Penguins after her power base in the icy southern province of Patagonia, that might be an unconscionable defeat.
“Cristina hates losing,” said Celia Szusterman, an Argentine academic. “She would hate to be a lame penguin.”
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