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P 191046Z OCT 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 4487
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS PRIORITY
RUEHSO/AMCONSUL SAO PAULO PRIORITY 3967
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHINGTON DC PRIORITY
UNCLAS SECTION 01 OF 02 BUENOS AIRES 001137
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN ECON EINV ETRD ELAB EAIR AR
SUBJECT: ARGENTINA ECONOMIC AND FINANCIAL REVIEW, OCTOBER 9-15,
2009
1. (U) Provided below is Embassy Buenos Aires' Economic and
Financial Review covering the period October 9-15, 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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INDEC announces a 0.7% September m-o-m CPI
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2. (SBU) National statistics agency INDEC announced October 14 that
the September CPI increased 0.7% m-o-m, about half the consensus
private source estimate of true inflation of around 1.3% m-o-m.
Inflationary pressures in September were widespread. The main
increases were in clothing (1.5% m-o-m), education (1.1 m-o-m), food
and beverages (0.9% m-o-m), and equipment and house maintenance
(0.8% m-o-m). According to INDEC, the accumulated CPI increase for
the first nine months of the year was 5%, compared to private
estimates of about 10-15%. INDEC's wholesale price index (WPI)
increased 0.8% m-o-m in September, for a total of 6.6% in the first
nine months of 2009.
3. (SBU) Despite INDEC's August CPI announcement, which was higher
than the market consensus and caused many to think that INDEC was
attempting to address the lack of credibility of its reporting by
gradually improving its accuracy, September's announcement suggests
that there has been no fundamental change in INDEC's approach. On
the positive side, however, September's statistics do recognize a
large increase in the politically-sensitive food and beverages
sub-index, in contrast to previous months, when food and beverages
price increases were substantially understated.
4. (SBU) According to October 15 press reports, Economy Minister
Boudou said that "there is no doubt that it's necessary" to have
multiple CPIs, adding that "all countries have this." La Nacion
noted that the U.S. has multiple indexes, although only one is
considered the official CPI. Boudou added, "In every country where
a CPI exists, like Argentina, they measure a basket for the lowest
two deciles of the population. Therefore, it's reasonable to hear
it said that [the CPI] doesn't represent some sectors" of the
population.
5. (SBU) Di Tella's index of consumer confidence fell to 39.0 in
October from 40.0 in September, largely as a result of consumers
being less optimistic about future economic conditions and less
willing to spend on durables and real estate. This was the third
consecutive fall in the consumer confidence index, reversing the
April - July recovery off of its March 2009 low of 37.5. The
survey's measure of consumers' willingness to purchase durable goods
and real estate fell to 26.8 in October from 29.2 in September, as
did the measure of consumers' perceptions about the current
macroeconomic situation, which declined to 43.8 in October from 45.0
in September. In contrast, the index's measure of consumers'
perception about their own economic situation rose slightly to 46.5
in October from 45.9 in September. This general deterioration of
consumer sentiment suggests that consumer spending may remain weak
in the third quarter of 2009, and possibly in the fourth as well,
following a second-quarter decline of 1.8% y-o-y in real terms.
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GoA reportedly has debt transaction paperwork for SEC
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6. (SBU) On October 15, the Cronista Commercial daily reported
(without quoting any source) that the Financial Secretariat in the
Ministry of Economy, headed by Finance Secretary Hernan Lorenzino
has all of the paperwork needed to move ahead with the reopening of
the 2005 debt restructuring prepared and ready to file with the U.S.
Security and Exchange Commission. This is not the first time in
recent weeks that the press reported that the Ministry was prepared
to move ahead with the SEC filing. On September 29, a Bloomberg
report stated that an unnamed GoA official said that the GoA had
begun filing paperwork with the SEC. However, this report was later
denied by the Ministry of Economy. See Buenos Aires 1129 for
Citibank Argentina's views on the potential for a holdout deal.
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GoA subsidies increased 12% through September
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7. (SBU) According to the Argentine Association of Budget and
Financial Administration (ASAP), public sector subsidies increased
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12% y-o-y in the first nine months of the year to ARP 25 billion.
Transfers to the energy and agricultural sectors declined, but
resources devoted to transportation and the recently state-purchased
airline Aerolineas Argentinas increased. Private analysts estimate
that subsidies may reach ARP 37 billion for the whole year (about
3.3% of GDP). The 2010 Budget bill calls for an ARP 4 billion
decline in subsidies, mainly due to a projected reduction of energy
transfers. Energy subsidies currently represent 40% of total
subsidies, followed by transportation at 28%.
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Large drop in global purchases of main Argentine crops
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8. (SBU) The Institute for Economic Studies of the Argentine Rural
Producers Association (Sociedad Rural Argentina or SRA) estimated in
a report published this week that direct global purchases of the
2009/2010 harvest of the four major Argentine crops (soybeans, corn,
wheat, and sunflower) will decline 32.6% to $ 4878.5 million from
the previous year. This estimate assumes lower prices for
agricultural inputs, caused by the world economic crisis, and the
consequent lowering of production costs for farmers. However, these
factors are also causing local farmers to invest less in their
production capabilities. The severe local drought, and the GoA's
economic policies vis-`-vis the agricultural sector, are also
affecting potential sales. Ernesto Ambrossetti, head of the
Institute, talked to the press and said that "the government has
been stubborn regarding the agricultural sector." He added that he
estimates the total cultivated area for this harvest at 28.9 million
hectares, 1.4 million less than in the previous year. Other
agricultural sector analysts contest this, claiming that reduced
input prices should partially compensate for other negative factors,
leading to no major reduction in cultivated area.
MARTINEZ