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It’s Coming… Resource Nationalism

It’s Coming… Resource Nationalism

Early 2012 Argentina’s oil industry was controlled by Repsol, the Spanish energy giant, through YPF, its local subsidiary. By the end of the year, this was no longer the case.

By then President Cristina Fernandez Kirchner’s leftist government had nationalised the oil sector, stealing YPF with the stroke of a pen.

The experience for investors in Repsol was an elevator drop so jarring I suspect many were left with their spines sticking out the top of their heads.

We can all scoff and laugh at the poor bastards and say, “Well, what did you expect investing into yet another Latin American backwater grasping at fading socialist ideas in order to stay in power?”

And to be sure, the third world loves to dance to Marxist music, but I’ve more than a sneaky suspicion, in fact I’m pretty convinced we’re going to see it, and not just from crazy bitches south of the equator. Resource nationalism, that is.

The problem for oil companies, and indeed resource companies of many stripes, is that they have to go where the deposits happen to be. Contrast this to industries such as manufacturing, where factories can be built wherever wages are lowest, you simply can’t outsource energy production.

One Thing Leads to Another

In 2016 I wrote an article arguing that we’d see what I called the rise of the “Strong Men” where I suggested the following:

Now I could write an essay on the ramifications but let me provide you with 3 important things to watch out for:

1. Political cohesion and stability can no longer be relied upon as politics becomes inward looking with everything from trade deals to central bank swap lines being renegotiated or cancelled altogether.

…click on the above link to read the rest of the article…

Currency Controls Strangle Argentina, But Hey, “Take it up with the Next Government, We’re on Our Way Out”

Currency Controls Strangle Argentina, But Hey, “Take it up with the Next Government, We’re on Our Way Out”

Running out of money doesn’t care if you’re a socialist or neoliberal.

Last week wasn’t easy for President-on-her-way-out Cristina Fernández de Kirchner. On the political front, she treated us with deafening silence following her candidates’ poor performances in the general election. But on the economic front her government was not so quiet.

Remember how Argentina’s reserves, or how much foreign currency the Central Bank holds, has been creeping lower despite foreign currency controls? Last week the Central Bank (BCRA) and National Insurance Regulator jumped back in to keep the country from running out of money for just a little while longer.

First, the BCRA raised interest rates by three percent, the highest in 18 months, to try to make holding pesos more attractive. Shockingly, not many people rushed to buy peso notes. The government sold ARS $11.3 billion, five percent less than the previous week, despite the higher rate.

Next, the Insurance Regulator passed a new law forbidding insurance companies from holding dollar assets in excess of their dollar contracts. English translation: Insurance companies whose clients are in Argentina and thus likely have peso-denominated policies cannot hold dollars even though the peso is likely to depreciate before these policies are paid. Not good news for the peso policy holder.

Importers received informal calls from their banks informing them that the automatically-approved amount they are permitted to pay providers was cut in half, from US $150,000 to US $75,000. While that might seem like a reasonable number please be advised that you can’t buy very many car parts, air conditioner blades, or other industrial input with US $75,000. This adds to the US $9.5 billion (that’s right, billion) that the Central Bank is already in debt to importers. Commerce Ministry Sub-Secretary Paula Español reportedly told importers to, “take it up with the next government – we’re on our way out.”

…click on the above link to read the rest of the article…

Argentina’s Ruling Party Eyes Bigger Banknotes amid Soaring Prices

Argentina’s Ruling Party Eyes Bigger Banknotes amid Soaring Prices

Congressman Claims Inflation Not a Motivating Factor

Congressman Carlos Kunkel, author of the initiative, claims the measure has nothing to do with inflation, which runs at 25-35 percent annually, according to private estimates.

Instead, the larger bill — US$12.50 at the black-market rate — would “reduce the cost of printing and circulating money,” Kunkel told a local radio station on October 8. “It will be more convenient for the people.”

Opposition lawmakers have unsuccessfully lobbied for the printing of AR$200, AR$500, and AR$1,000 bills in the past to cope with mounting inflation.

Contrary to government figures, the Massachusetts Institute of Technology’s Billion Prices Project found that the price of essential foods has increased six-fold in the South American nation since 2008.

The new banknote’s design features former President Hipólito Yrigoyen (1916-1922 and 1928-1930), a renowned leader of the opposition Radical Civic Union (UCR) party, and celebrates the Cry of Alcorta, an agrarian rebellion of the early 20th century.

The move, however, has UCR activists up in arms, who say they don’t want their leader associated with the loss of purchasing power. The party’s community manager derided the initiative by publishing an image of the former Radical president giving a bras d’honneur.

 

“Thanks, but inflation is all yours.”

 


Inflation Begets Larger Bills

The Cristina Kirchner administration has ignored repeated requests by economistsbanks, and other financial institutions to issue larger-denomination bills. Some 42 percent of Argentineans deemed it necessary in a 2014 survey by Argentina-based pollsters Poliarquía.+

…click on the above link to read the rest of the article…

Cristina Takes on Financial Times in Multi-Platform BRICS Tirade

Cristina Takes on Financial Times in Multi-Platform BRICS Tirade

Cristina has been on the media warpath against a perceived attack on emerging markets.

This Monday, Cronista republished (in Spanish) an article from the Financial Times titled, “Emerging Markets: Fixing a Broken Model.” The article is long, a bit on the dry side, hardly sensational and difficult to construe as an attack on anyone.

The article does not mention Argentina even one time. Nevertheless, Argentine President Cristina Fernández de Kirchner exploded onto the Twittersphere with close to 100 tweets, shot back with twoblog posts and drove her point home at an electoral rally where she somehow connected the BRIC issue with European nations turning away migrants.

I have to preface this by saying that a few years ago, I liked Cristina enough. I disagreed with her, but at least could respond to her policy moves and statements as a professional with reasoning based in economics. In this case, her violently emotional reaction to a newspaper article reads like a crazy person writing a stream of consciousness. You disagree with Cristina or want to suggest she has misread an article? Too bad! You’re a racist who hates the poor and celebrates genocide.

Before attempting to decipher why an economic assessment of emerging market growth happens to grind Cristina’s gears, it’s important to have a bit of context concerning emerging markets and the terms BRIC and BRICS.

BRIC is an acronym for Brazil, Russia, India and China that was coined in 2001 by a Goldman Sachs investment bank paper to describe these big, rapidly growing countries. Over the ’00s, BRICs was used to describe the shift in global economic power away from the historically rich economies to the developing world. Back then, economists debated projections of the future power of the BRIC economies, with estimates ranging from overtaking the G7 economies by the middle of the 2020s to the 2050s.

…click on the above link to read the rest of the article…

Inside the Spyware Campaign Against Argentine Troublemakers

Inside the Spyware Campaign Against Argentine Troublemakers

Alberto Nisman, the Argentine prosecutor known for doggedly investigating a 1994 Buenos Aires bombing, was targeted by invasive spy software downloaded onto his cellular phone shortly before his mysterious death. The software masqueraded as a confidential document and was intended to infect a Windows computer.

An investigation by The Intercept indicates that this targeting was likely not an isolated event. The person or persons behind the attempted monitoring appear to have run other surveillance operations involving various locations throughout South America, at least one apparently targeting a rabble-rousing Argentine journalist. In the process, they created at least four distinct spyware bundles, all communicating with the same server set to receive Nisman’s data. They also left traces showing that their operations were active as recently as March, raising the possibility that the online spying continues today.

Nisman (pictured above) made powerful enemies inside and outside of Argentina. In his decade-long investigation into the suicide bombing of a Jewish organization and community center, Asociación Mutual Israelita Argentina, he indicted a top Hezbollah operative and several Iranian officials, including a former president, former intelligence minister, and a former foreign minister. Four days before his death, he accused the president of Argentina, Cristina Fernández de Kirchner, and her foreign minister, Héctor Timerman, of being involved in a criminal conspiracy to let Iranian officials off the hook for the attack. He was called to testify before Congress.

 

But the night before he was slated to deliver that testimony, Nisman was found in his apartment dead from a bullet wound to the head. An autopsy ruled his death a suicide. But as details of the police investigation emerged, so did more and more questions into the manner of his demise. There was no suicide note, nor was any gunpowder residue found on Nisman’s hands. A document requesting the arrest of Kirchner and Timerman was found in Nisman’s trash. And it seemed much of the evidence had been gathered in a disorganized and erratic manner.

…click on the above link to read the rest of the article…

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