September 2006
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THE ARGENTINE EMBASSY IN THE UNITED KINGDOM ECONOMIC & COMMERCIAL SECTION 65 Brook St. London W1K 4AH Tel: 020 7318-1300 Fax: 020 7318-1301 [email protected] www.argentine-embassy-uk.org NEWSLETTER SEPTEMBER 2006 Content ARGENTINE ECONOMIC OVERVIEW *Extracts from the statement made by Dr. Néstor Kirchner, President of the Argentine Republic, at the United Nations General Assembly (New York, 20 th of September 2006) *Extracts from the statement made by the Argentine Minister of Economy and Production, Felisa Miceli, at the IMF´s International Monetary and Financial Committee (Singapore, 17 th of September 2006) FINANCIAL SECTOR *New placement of dollar bond by the Argentine government ARGENTINE TRADE INVESTMENTS IN ARGENTINA *Occidental Petroleum to double oil production in Argentina *Wal-Mart to invest US$ 150 million in new stores *Avex Company to invest US$ 44 million in chicken production *Peugeot-Citroen to invest US$ 20 million in auto parts production *Mosaic Company invested US$ 20 million in a fertilizer plant *Real estate development Company to invest US$ 26.5 million in a shopping centre *Peruvian Group invests US$ 19 million in the milk sector *French investments in the food industry *Pacheco Pereda´s wines have a new owner NEWS *The Argentine economy grew 9.1% in July 2006 *Industrial activity grew by 7.2% in August 2006 *Primary fiscal surplus of 2.2bn pesos (US$ 712 million) in August 2006 *Tax collection rose by 26.9% in August 2006 *Consumer prices index (CPI) increased by 0.6% in August 2006 *International reserves of the Argentine Central Bank (BCRA) reached US$ 28.1bn *Poverty and extreme poverty fell to 31.4% and 11.2% of the population, respectively *Increases of overseas visitors during first semester 2006 *IMF lifts Argentina economic growth estimates *New partial lifting of beef export ban in Argentina *National and International open bid to build, operate and maintain a railway service in Mendoza *IDB approves US$ 50 million to Argentina in first multilateral loan to develop a satellite system for applications based on earth observation *IDB Fund approves US$ 1.9 million grant to strengthen competitiveness clusters in province of Santa Fe, Argentina *Argentine delegation from Tucumán province visits London between the 8 th and 16 th of October ARGENTINE ECONOMIC OVERVIEW Extracts from the statement made by Dr. Néstor Kirchner, President of the Argentine Republic, at the United Nations General Assembly (New York, 20 th of September 2006): - We must understand that the world will come closer to peace insofar as it promotes equality and struggles to eradicate poverty and exclusion. This is true both for the global system and for each country nationally. - Argentina supports the building of societies that are fairer, more equitable and with a better distribution of the benefits of economic growth. We also believe that each country has the right to search for its own development model, without any external conditionality. We not only aspire to generate a sustainable growth, we also want for it to reach everyone. There must be a harmonized growth that translates into a balanced income distribution - we know that what is needed is not development for only a few, but the development of the whole country. - In the region and in MERCOSUR, we want to have an efficient instrument to deal with poverty and exclusion - for the common good to prevail over sectarian interests and to overcome stagnation and the technology gap. And to define a sustainable and productive development model that appreciates our competitive advantages and that fosters our vast wealth in human and material resources. - The economic situation of the Republic is very different than it was when our administration began. We are achieving a true structural change. Uninterrupted growth at rates around 9%; growing participation of investment in the GDP; record local saving rates; resurrection of the local industry; fiscal surplus at historic levels; clear expansion of our industrial sales to the world; systematic decrease of the local and external public debt; preventive accumulation of reserves; lesser external exposure; marked drop in unemployment; strengthening of the income of the wage-earning and of retirees; significant fall of poverty and destitution levels. - With a prudent monetary policy, an orderly fiscal policy, fiscal and commercial surplus and a responsible management of indebtedness, we are increasingly reducing the vulnerability and uncertainty that characterized Argentine economy in the past. - Decent work, social inclusion, national production, internal consumption and sustained growth have allowed us to fulfil the Millennium Goals, although there is still a long way to go to recover from the hell we had fell into. - Argentina is preoccupied to observe the stagnation in the negotiations of the Doha Round for the development of the WTO. It is imperative, within the current globalization process -of which developing countries must also profit- to reach a successful and 2 balanced result, fully consistent with the mandate of the Doha Declaration. Thus, we reaffirm the need to reach a satisfactory result in agriculture in this WTO Round, including a substantial reduction in domestic subsidies, the elimination of export subsidies and ample access to the markets of developed countries. For further details about this Statement, please visit www.un.org/webcast/ga/61/pdfs/argentina-e.pdf . Extracts from the statement made by the Argentine Minister of Economy and Production, Felisa Miceli, at the IMF´s International Monetary and Financial Committee (Singapore, 17 th of September, 2006): - Argentina’s recent Article IV consultation was the first carried out since 1984 without a Fund arrangement in place and, even more importantly, without any outstanding credit to the Fund. This has helped to improve the quality of the policy dialogue both with the Fund staff and within the country. The foremost goal of Argentina government is to bring as many people as possible out of poverty and to lay the foundations for a socially inclusive society. After 16 quarters of uninterrupted strong growth, at an average rate close to 9 percent a year, unemployment rate fell to 10.4 percent by 2006 from 17.8 percent in 2003 and poverty declined to 33.8% from a peak of 57% in 2002. The government is fully aware that growth is a necessary but not a sufficient condition to reduce poverty and inequality. Thus, it is committed to use active public policies effectively to further progress on this front. With this goal in mind, it has introduced programmes of direct support and training for the unemployed; it has increased, inter alia, the minimum pension benefits, as well as introduces subsidies for public transportation and education, which help the most needed in the population. Perhaps education is the most relevant sector to ensure equal opportunities for all and the capacity of the economy to sustain growth overtime. In this respect, the government has steadily increased the budget devoted to education and is bound, by law, to bring it up to a 6 per cent of the Gross Domestic Product by 2010 (from a 3 percent or less in 2002). - Strong and sustainable growth has been accompanied by an overall macroeconomic stance that is rendering significant primary and overall fiscal surpluses, 4.4 percent and 2.4 percent respectively in 2005, as well as external current account surpluses (1.9 percent in 2005) consistent with our financial needs. The combination of strong growth with fiscal and current account surplus is an unprecedented feat in Argentina’s economic history. - All this in the context of an unambiguous commitment by the government to contain inflation at tolerable levels, namely, those that would not jeopardize growth by prompting the practice of indexation. In sum, the government has all available macroeconomic instruments at hand and is using them in appropriate combination, as circumstances evolve. In the meantime, inflation expectation is on a clear downward trend and is now below the 11 percent inflation projected in the budget for the current year. 3 - Finally it is worth mentioning that the current level of investment, largely oriented to the tradable sector, is at record levels and supported by high domestic savings. At a year over year measurement, growth in investment at the end of the first quarter of this year has been 24.6 percent – another exceptional performance. As a percentage of GDP in nominal terms, investment reached 22 percent, exceeding the peak levels of the Convertibility years. For further details about this Statement, please visit www.imf.org/External/AM/2006/imfc/statement/eng/arg.pdf . FINANCIAL SECTOR New placement of dollar bond by the Argentine government: On the 7 th of September, the Argentine government sold US$ 500 million of dollar denominated 2013 bonds (Bonar VII) to yield 8.40%, with a demand that reached 1.44bn dollars. It was the first portion of a US$ 2bn sale. ARGENTINE TRADE In the first seven months of 2006, Argentine exports reached US$ 25.3bn, a rise of 12% over the same period last year. On the other hand, Argentine imports reached US$ 18.5bn, 16% higher than in the first seven months of 2005. As a result, the country recorded a trade surplus of nearly US$ 6.9bn, 1.7% above than the same period of 2005. Exports of practically all sectors grew in value during the above mentioned period, due to 8% increase in prices and 4% in quantities, being primary products the only exception, with a decrease of 2%. Manufactures of agricultural origin (MAO) and of industrial origin (MIO) jointly represented 63% of total external sales, thus accounting for 34% and 45% of the increase, respectively. Regarding Argentine imports, the increase during the first seven months of 2006 was lead by a rise of 13% in quantities and 3% in prices.