EMTA SPECIAL SEMINAR: THE FUTURE OF ARGENTINA: THROUGH THE LOOKING GLASS
Friday, February 28, 2014
360 Madison Avenue, 17th Floor
(on 45th St. between Madison and 5th Aves.)
11:45 a.m. – Registration
12:00 noon – 2:00 p.m. Panel Discussion
Walter Molano (BCP Securities) - Moderator
Arturo Porzecanski (American University)
Casey Reckman (Credit Suisse)
Vladimir Werning (J.P. Morgan Chase)
Guillermo Nielsen (Strategic Investments S.A.)
Lunch will be provided
In the wake of unfavorable mid-term election results and economic trends, the time is ripe for a look at Argentina's future – economic and political – post-litigation and possibly post-Kirchner. Please join us for a lively discussion with leading experts on the sovereign.
Attendance is US$95 for EMTA Members / US$695 for non-members / Credentialed Media Complimentary.
EMTA Hosts Special Seminar: “The Future of Argentina: Through the Looking Glass” in NYC
In the wake of unfavorable mid-term election results and economic trends, the time was ripe for a look at Argentina’s future – economic and political – post-litigation and possibly post-Kirchner. EMTA’s panel, sponsored by Puente and held at EMTA’s offices in New York on February 28, was moderated by Walter Molano (BCP Securities), and included the following panelists: Arturo Porzecanski (American University), Casey Reckman (Credit Suisse), Vladimir Werning (J.P. Morgan Chase) and Guillermo Nielsen (Strategic Investments S.A.).
Molano, author of In the Land of Silver: 200 Years of Argentine Political-Economic Development, presented the geographic perspective on how power was centralized in Buenos Aires and how that has led to dysfunction for the rest of the country. His Presentation and PowerPoint can be accessed by clicking on the relevant links.
Porzecanski suggested that the current period was one of calm before the storm. Despite high tax revenues (40% of GDP), there were insufficient funds to pay for the welfare state (with 25% of the population dependent on the state), companies had lost their competitiveness, sales were down and the interest rates were much higher. He suggested that the “dam was about to burst” with social sparks resulting from the gap between what workers want/what they’re used to in terms of raises that compensate them for inflation and what the government and companies can pay.
Reckman reported that, while measures had been taken in the last few months to gain credibility, with more active policy management by the Central Bank, there was still less confidence on the fiscal side (despite rumors of hikes in utility prices and/or subsidy cuts), with negative effects on international reserves and a probable second devaluation by the end of the year.
Nielsen (former Argentine Secretary of Finance) stated that Argentina’s economic policy under Cristina Kirchner has been problematic, but that the recent economic cabinet re-shuffle was positive, with the new regulations on exposure of banks providing a “feeling of relief”. He views Argentina’s main problem as one of inflationary pressures, with an unwarranted belief that price controls will work. Instead, Argentina needs better fiscal and monetary policies, a reduction in subsidies for energy and transportation and a safe transition between political parties. He expects a major turnaround and claims Argentina is “extremely cheap”.
Werning sees Argentina with a unique risk premium for its economic, political and litigation situation. The government in the past has maximized growth, but now has shifted priorities and is aiming to preserve reserves. Its actions seem to be a result of political considerations, as necessity to arrive at an orderly political transition in 2015 has influenced its actions. In contrast to other opinions, Werning thought GDP warrants would not pay a coupon this year as last year’s growth would be revised down. He was also more constructive on litigation risk assuming that the US Supreme Court was likely to hear the pending Argentina case since it dealt with a federal law (the Foreign Sovereign Immunities Act), and sovereigns were likely to submit amici briefs in Argentina’s favor, so this may diffuse any technical default this year.
Most of the panelists were positive about Argentina’s future (“Argentina is neither Ukraine or Venezuela, nor Colombia, Chile or Brazil”), with the Central Bank changes going in the right direction and an opportunity to buy the country’s debt cheaply. Energy subsidies should, however, be going to the poorer provinces, rather than mostly to Buenos Aires, and any new government would need a clear anti-inflationary plan. As Nielsen notes, “Argentine society is looking for a change – tranquility, wealth creation, a different perspective”.