The IMF is wrong again

The IMF is wrong again

Buenos Aires, Argentina

Friday March 11, 2008

By Paola Pecora

*** The IMF was wrong again ... but no ... Jessica a flashback to Argentina from the pans ...

*** Chavez nationalizing disbelieves his hobby, and comes more ... increasingly ... in Venezuela the "arrogant? is nationalized ...

Positive Latam markets yesterday:

BVSP +0.08% 63,527 points. The index is still unable to break the strong resistance at 65000-66500 points and drag a drop of 2.35% for the week. Many people in love with Brazil recently emerging is it? ... Hmmm.

Banks and builders fell for fear of higher interest rates, generating a decline in growth. Rossi Residencial fell 6% and 3% Banco do Brasil. Real 0.3% rise. Rose 20.1% in the last 12 months, according to Bloomberg, is the second largest gain among the 16 operated currencies against the dollar.

IPC +0.7% Mexico 31,649. Inflation in Mexico surpassed limted to the Bank of Mexico considered acceptable and expected higher interest rates. The Mexican peso appreciating 0.34%, highest in two years.

Argentina Merval 2135 -0.67% points. Consumer price inflation 1.1% in March, a third of that estimated by the private sector. According to Standard & Poors, Venezuela, Bolivia, Ecuador and Argentina are uncertain politically. And political uncertainty is the food of financial uncertainty.

Caracas IBC +2.25% 41,450 points. The star of Latam. The largest amount was negotiated for the CANTV telephone rose 5%.

+0,44% DJIA 12,582 points. WMT rose 1% after good earnings prospects. There is speculation that a U.S. recession would overturn consumers to stores like WMT for their convenient prices. YHOO + 3% would join AOL and negotiate advertising and GOOG to combine their Internet operations, trying to shoot out of reach of MSFT and its hostile takeover.

June gold contract down from U.S. $ 5.70 to U.S. $ 931.80.

Oil -0.7% U.S. $ 110.11, after hitting U.S. $ 112.21 new record.

Argentina seemed they were doing their homework. At least that was deducted from the aid that the country got in the 90s and in 2001 by the International Monetary Fund.

Argentina was an example to the world, what was that "Do, and was the model for other countries that were in financial difficulty. The IMF lectured.

We loved with the IMF as never before. The economy grew in 1990-1997 to 6%. But as usually happens in Argentina, good times have not been well used (read: make structural reforms and syrups not live a better-surface) ...

Came the tequila crisis in 1995 and Asia in 1997 ... Argentina could not overcome the latest crisis: fiscal accounts were too deteriorated since the end of 1998 falls into deep recession. The funds were fleeing the country like swallows in winter, the country needed more money to finance fresh. There were four financing agreements, with names that seemed straight out of a James Bond movie "armor?" Mega?, And carefully chosen names likely to try to get away from reality and fiction in the happy soporizarnos we wanted to live . Argentina was a "party?. The world we loved and admired ... until we stop paying them. It happens in good families too.

A strong economic and financial crisis erupted over Argentina in December 2001 and January 2002 because there was simply no more money to continue supporting a rigid-perverse exchange rate, the treasury were broken, and the private and public debt was intolerable levels for the country. There was no flexibility to allow the model where a puff of air, or labor, or exchange, or tax.

The country still blindly orthodox policy dictated by the IMF in its program. But the program is deprogrammed, and Argentina experienced a new crisis, a crisis that is repeated recursively on average every 10 years ... the minstrel cycle.

Would Jessica reason, Secretary Argentina? 7 years ago, told Reuters: "I work all day and I have no time to watch news. But I think the country is experiencing a difficult situation to pressure over the money owed. They provide knowledge that can not be back. "

The IMF was absolutely ridiculed internationally, to the point that today they are selling gold reserves to be solved. It seems that its policies have not served in your own home.

But often the reality surpasses fiction and "The Return of the Living Dead? longer film to become a reality: The IMF strikes again today, validating inflation measured by the Argentine government agency akin to the INDEC, 9.2% projected for 2008 in Argentina (and no private economists measure inflation at 40% annually). For 2009, forecasts a 9.1%. However, it is possible to suspect that: "In Argentina, although measured inflation has fallen, most private sector analysts believe that actual inflation is considerably higher than reflected in official data."

What is striking about the inflation forecast by the IMF for 2008 in Latin America, for Venezuela, which, although at the other end of America is still America, predicts a 25.7% and for 2009 an ... 31%! When Venezuela * also * real inflation publicly known.

Why this aggression towards Venezuela?

*** "In the morning, during a meeting with directors of Sidor, the Venezuelan Vice President Ramon Carrizales, had dropped the warning: the pay dispute, he said, came to a point for nationalization.?

Do you remind the Congress of Soviets in 1914 in the USSR? No, Venezuela is a 2008 model.

It seems that in Venezuela today, and since early 2007, any company that does not work as its president (not the company, but of the Republic) want, is nationalized. There is no alternative. I guess that by the death penalty outright or decapitation of the directors of the company "rebel? should mediate only one step.

The Venezuelan government already controls oil companies such as Chevron, BP, Statoil, Total, who accepted the proposed terms and remain as minority partners in projects. Same for CANTV, the largest telecommunications company in the country, and Electricidad de Caracas, it is the same in sugarcane fields, expropriation of land there ...

Last week it was announced that they will continue pouring cement sector hand, they want companies like Cemex, Switzerland's and France's Lafarge Holcin.

"The Chavez government needs to steel and cement for construction plan housing.?, Says the Venezuelan newspaper El Carabobeño.

Siderúrgica del Orinoco (Sidor) is controlled by Argentina's Techint company by 60% since 1998. 20% is held by the Venezuelan State and the other 20%, in the hands of workers and retirees of the company. But these percentages be reversed: the government plan would leave 20% to 60% Techint and the State.

Nucleated workers in unions, clashed with directors of the company. Request reinstatement of disaffected workers and wage increases. Sidor management applications that have attempted to meet through a counterproposal.

Do not rinse dark, Carrizales, "Carrizales said the decision was taken because the company had shown 'arrogance' in the negotiations, for which he had" steadfastly refused to offer a counterproposal. " The measure is meant, he said, to "protect the rights of workers."

The measure is meant to protect the rights of self-imposed by the president of Venezuela.

Chavez 'nationalization and sovietazo clean? sweeps opponents to do so staggering in its increasingly fragile political position. So you need a proper and related unions to carry out their political and economic propelías follow him in power.

Ternium (TX: NYSE), publicly traded since 2006, controlled by Techint and shareholder of Sidor, fell 20% in the week.

He told La Nacion of Argentina from Venezuela, economist Orlando Ochoa: "It's part of the scheme of government. The initiative has two origins: it is ideological and is based on the scarcity of products by the controlled prices. Marxist ideology indicates that the controls can not be touched, so the nationalization drive. "

However, the Soviet Venezuela seems to like to frequent the Hollywood environment: international mannequins that pass through his office and the last one: the $ 10 million to the American actor Danny Glover linked by Venezuela, to plead for a while fervent "fan ? Hugo Chavez to make a movie in Venezuela.

Hector Palma, AP independent Venezuelan director, the newspaper The Digital Pulse: "That amount of money can even be the sum of money has given a lot of Venezuelan films in years ... this disproportion (monetary) and the selection criteria, is what draws attention.''

Fellini film director, having been born in Venezuela and Argentina, have been without doubt librarian.

Until next Friday,

Paola Pecora

Editor's note: Back. Nobody believes us. Inflation in Argentina are still firing, but only the government itself believes. This movie so false and repeated and boring. One could even mount an operative on spreads between the official inflation gap and the real, which expands more and more. Same bets. Since neither the friends of the government economists believe him. Horacio has a proposal. I can send your comments to: paola@moneyweekes.com

Inflation data is not the real problem in Argentina

Buenos Aires, Argentina

By Horacio Pozzo

As more is known inflation figure in Argentina, the controversy turns. And yesterday was no exception. Logically, widespread disbelief that is something you do not like the government, to the extent that the variation inflation data published increasingly more delay. Inflation data are usually published three working days, but then, with the start of the doubts about the veracity of the inflation data was passed to the fourth business day, and as seems to be increasingly difficult to estimate, the latter data was published the seventh working day ... and the data returned to Disappoint: 1.1%. The skepticism comes to the point that in a survey published in the Argentine site infobae.com 95.6% of respondents reported disagreeing with the official data.

Even the IMF is allowed to declare their suspicions about the official figures: "In Argentina, although measured inflation has fallen, most private sector analysts believe that actual inflation is considerably higher than reflected in official data" .

How much is the real inflation? Before risking a number, I prefer to share a few estimates from different reputable private consultants in the country: for Bein & Associates study, the actual consumer price inflation would be 3% to 3.2% Ecolatina for M & S 4.2% and Macroeconomics for RSH 3.6%. Clearly something is not working quite right, because otherwise how do you explain such a difference between private estimates and the data from INDEC.

Something that gives me great concern is that as the months go by, the gap between the official inflation and private analysts estimate will grow even more. And actually this problem has reached the point of doing, as the newspaper? "The business finance?, Worry economists who defend the current economic model. One of them, Roberto Frenkel said: "The rising prices are eating to the model?. Another, Eduardo Conesa, alarmist tone also said "If the government does not correct for inflation, the model is going to sink.

Honestly for me, as the inflation data is anecdotal. The certainty that exists in the environment is that once and for all you have to attack the underlying problem to prevent it from becoming uncontrollable. Since all sectors are clamoring for the government out of its slumber and to implement concrete measures. Eduardo Curia, an economist at the pleasure of the government, calls for the implementation of inflation targeting policies (although unorthodox dye). For Roberto Frenkel, "lack an anti-inflationary policy? and calls for a slowdown in demand on the fiscal side and increased interest rates to direct consumer incentives and household saving.

Despite these demands, the Ministry of Economy has not yet seen any concrete action. Only actions that are controversial as the implementation of export duties on agricultural exports.

The decision to deploy mobile retentions and generate a historical conflict with the Find field, according to the government, avoid "sojización? activity and achieve an increase in the variety of crops while controlling prices hikes (with subsidies included). But a very good job of IDEAS, gives no less a figure who benefit on such measures to control the rise in food prices: in Argentina, the poorest households consume only 21% of the food (this to Although they have a higher weighting in relation to the basket with food in the basket of the highest income), so that the policies of subsidies and price controls benefit the wealthy more than the most poor ... Would not it be better to give a direct subsidy to low-income social classes? Obviously this is not the only example of policies that end up benefiting more affluent classes.

And beyond that such policies end up benefiting less to the poor people, the worst part is that prices continue to distort the economy with subsidies, tax withholdings and price controls which hampers investment, since the limit (by the great uncertainty that generates the expected profitability of projects) and incorrect addresses (to lower social welfare activities). One thing that worries and which shows the disincentive to investment: the 1009 head of cattle that were sent yesterday to Liniers (the main market where trades cattle), 941 head were dairy cows that were sent by farmers as a clear signal that the dairy business is not profitable (at least for small and medium business with less than 1,000 head).

At a meeting I had with a group of colleagues, one of them warned of what it will cost this distortion in the inflation data when Argentina wants to regain access to international financial markets. Since the government has initiated discussions to arrange payment of the debt with the Paris Club, which shows the desire (and need), to return to be accepted by the markets. But in particular the possibility of access to international financing, will not come cheap for Argentina, because its country risk is currently above the 530 basis points.

Therefore, as the title of this article, the real problem is not inflation figure, but inflation itself and the consequences of not addressing the problem from its causes. We hope that the government will react in time and no buries everything achieved in recent years. Of course, going to have to hurry in their reaction because for the next few months, energy problems can be faced uncontrollable inflation dynamics ... A few details to keep in mind the seriousness of the energy problem: from Brazil already has advanced is not assured energy supplies to Argentina by the drought problems that are going through to what is the fact that Bolivia is not going to send the gas committed long ago .... And on top of drought in Argentina is also a problem and therefore one of the major hydroelectric plants are working with limited capacity and is "keeping? water to generate energy in the most critical moment ...

We will meet again tomorrow,

Horacio Pozzo