ARGENTINA: A new IMF report & more – 20th Jun 2024

¡Buenos días from Louse Point! This is the Rorshok Argentina Update from the 20th of June twenty twenty-four. A quick summary of what's going down in Argentina.

In May, the country saw a decrease in monthly inflation, marking the lowest level since early twenty twenty-two and falling below economists’ expectations of a five percent inflation. The monthly rate stood at around four percent, mostly as a result of the renewal of a currency swap line with China and the Senate’s approval of a number of new laws.

This is good news, but private economists are still concerned about recession and the impact of the Argentine peso’s parallel exchange rate on prices. On top of that, the government’s commitment to fiscal balance involves the removal of subsidies, which could lead to increased prices across various sectors.

Speaking of costs, the government has taken legal action to demand that four social organizations cover the 130 million pesos (about 100,000 US dollars at the parallel exchange rate) that went into restraining the protests near the Congress building. As we covered in last week’s episode, violent clashes erupted while the Senate debated the reform bill, leading to burning cars, several injuries, and arrests. Manuel Adorni, the presidential spokesperson, confirmed that social organizations like Movimiento Evita and Barrios de Pie would have to bear the expenses for the Federal Police, Prefectura Naval, and Gendarmería, as well as damages to equipment.

The biggest concern, though, is the remaining sixteen individuals that the police arrested during the protest. Their families held a press conference on Monday the 17th and took to the streets on Tuesday the 18th to call for the immediate release of the detainees, many of whom were students.

One of the released protesters described the arrests as illegal, detailing harrowing treatment and inhumane conditions. The family members and supporters are now urging those with videos or witnesses of the arrests to come forward to support the detainees’ innocence.

In total, thirty-three people face charges related to the protests, including allegations of provoking violence and attacking the country’s constitutional order. Demonstrators and student leaders condemned the government’s efforts to intimidate protestors, arguing that the authorities are using fear tactics to suppress dissent.

If you’re still confused about what the Senate actually approved that was so controversial, the Buenos Aires Herald published an article in English that sums it up. Follow the link in the show notes.

Moving on, Joaquín Cottani, the economy vice-minister, resigned citing the difficulty of commuting from New York City, where his family lives. That said, Cottani is closely associated with former Economy Minister Domingo Cavallo, whose criticism of President Milei’s economic policies, particularly regarding foreign exchange restrictions, has been linked to Cottani’s resignation. Cavallo has expressed skepticism about the government’s commitment to lifting these restrictions, despite promises made to the International Monetary Fund or IMF.

José Luis Daza, a Chilean economist with a strong background on Wall Street, is likely to become Cottani’s replacement. Born in Buenos Aires and living in New York for decades, Daza is known for his liberal economic views and past advisory role to far-right politician José Antonio Kast in Chile. Daza’s appointment aligns with Milei’s agenda to reduce state spending and potentially privatize state assets.

Back to the IMF, its eighth review of Argentina’s economic program came out last week. Among other things, it urges faster currency devaluation and the lifting of exchange controls, as well as the need for a better quality fiscal adjustment and increased social assistance. Despite the government’s prior commitment to lift the exchange restrictions this year, it will now do so only if it does not hinder inflation control and reserve accumulation.

Additionally, the government aims to abolish the PAIS tax by year-end, which is a tax levied on foreign currency transactions, and unify the exchange rate under a new monetary regime called currency competition, though details remain unclear.

On that note about fiscal adjustment, there’s been some controversy surrounding President Milei’s three-day trip to Los Angeles in early May. According to a public information request by the news outlet Perfil, the visit cost approximately 200,000 US dollars. During his time in LA, the president stayed at the Beverly Hilton Hotel, although the costs primarily stem from the use of the presidential aircraft.

Also, Associated Energy Group, a US-based aviation fuel provider, has sued the Argentine government for not paying a bill of more than 350,000 dollars for fuel and services to the presidential plane. This debt covers trips made between September twenty twenty-three and January twenty twenty-four by both former President Alberto Fernández and current President Javier Milei. The lawsuit, filed in a Miami court, seeks full payment along with additional fees, potentially totaling between 400,000 and 450,000 dollars.

The Argentine government attributed the unpaid debt to the previous administration.

In other fuel-related news, YPF, Argentina’s largest energy company, is selling thirty mature oil fields to focus on its Vaca Muerta shale patch project. So far, it’s received over sixty offers from national and international companies. The next steps involve analyzing proposals and finalizing negotiations within two weeks, aiming to transfer assets in the second half of the year. This sale is part of YPF’s 4×4 strategic plan, which aims to streamline its portfolio by concentrating on more valuable conventional and unconventional areas. Horacio Marín, YPF’s president and CEO, intends to let smaller companies handle the mature fields while YPF directs efforts towards Vaca Muerta. The plan seeks to elevate hydrocarbon exports to thirty billion dollars by twenty twenty nine and significantly boost YPF’s stock price.

Manuel Adorni announced on Tuesday the 18th that he will oversee the dissolution of the defunct state-owned Télam news agency, along with other public media entities. This decision reaffirms the government’s intent to privatize all public companies eventually.

The government has progressively dismantled Télam, once Argentina’s largest news service with a history dating back to nineteen forty-five, since its closure in March, which included barring staff from the premises and shutting down its website. Media freedom advocates criticized the move, contributing to Argentina’s decline in press freedom rankings.

Moving on, José Alperovich, the former Tucumán governor and senator was sentenced to sixteen years in prison for raping his niece, who worked as his secretary. The abuse occurred between December twenty seventeen and March twenty eighteen, and Alperovich’s niece publicly shared her ordeal in twenty nineteen. Despite the severity of the allegations, Alperovich retained his Senate seat and immunity with the support of Kirchnerism until his term ended in twenty twenty-one, highlighting the lack of prompt justice for victims.

In less serious news, the government mistakenly installed a solar panel in Chilean territory. This week, they announced plans to remove the solar panel, following a public request from Gabriel Boric, the Chilean President. The panel is part of a quartet powering a navy watch post, and was installed using a ranch fence as a guide for the border instead of satellite coordinates. The watch post is situated at a strategic location near the Strait of Magellan.

Speaking of the Argentine-Chilean border, there’s a lake that both countries share down in the South. In Argentina, that lake is called Lake Acigami. However, the libertarian government is waging a cultural battle to rename it to its old name, Lake Roca. Manuel Adorni announced the change, emphasizing the government’s stance against “selling the fatherland”. Acigami is an aboriginal term meaning “long bag,” and so Adorni also stated that the National Parks Administration would take legal action against land occupations by, in his own words, “pseudo-Mapuches.”

The decision to change the name was made without consulting this community or local residents.

To wrap up the episode, a recommendation: The Nora Fisch Gallery in Buenos Aires is showcasing a private art collection by Alejandro Ikonicoff, featuring art from the early two thousands, a period marked by a severe financial crisis in the country. This exhibit highlights the vibrant yet challenging art scene of that era, characterized by limited support for contemporary art. The collection includes works acquired by Ikonicoff, fostering a unique Argentine identity and embracing a “trashy” aesthetic.

The exhibit will run until July 20.

Aaand that’s it for this week! Thank you for joining us!

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¡Nos vemos la próxima semana!