Grupo Clarín S.A

GRUPO CLARÍN S.A. Annual Report and Consolidated Financial Statements For the year ended December 31, 2019, presented on a comparative basis GRUPO CLARÍN S.A. 2019 ANNUAL REPORT To the Shareholders of Grupo Clarín S.A. We hereby submit for your consideration the Annual Report and Exhibit, the Consolidated Statement of Financial Position, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Shareholders' Equity and the Consolidated Statement of Cash Flows and Notes of Grupo Clarín S.A. (hereinafter, “the Company” or “Grupo Clarín”) for fiscal year No. 21 ended December 31, 2019. The main subsidiaries in which Grupo Clarín S.A. has a direct or indirect controlling interest are: Arte Gráfico Editorial Argentino S.A. (AGEA), Compañía Inversora en Medios de Comunicación S.A. (CIMECO), Arte Radiotelevisivo Argentino S.A.(ARTEAR), GC Gestión Compartida S.A., Inversora de Eventos S.A.(IESA) and Radio Mitre S.A. 2019 MACROECONOMIC ENVIRONMENT During 2019, the performance of the Argentine economy was marked by an environment of uncertainty associated, among other factors, with the development of the presidential elections and the attempt of the Government then in office to make up for some of the damages derived from the 2018 balance of payments crisis. The economic performance during 2019 can be divided, broadly, into two periods. The primary elections (called Simultaneous and Mandatory Open Primaries, PASO, for its Spanish acronym) held on August 11 and the presidential elections held on October 27 were, to some extent, the turning points that marked these stages. The economic policies adopted by the outgoing administration were focused on furthering the process (already underway) of closing the fiscal gap and on attempting to preserve the stability of the exchange rate. It was expected that if the main quantitative targets undertaken with the IMF (primary fiscal balance at national level and freezing of the monetary base during the first semester) were met, the country would be granted disbursements for slightly more than US$ 22.0 Bn during 2019. In this sense, the National Government focused on stabilizing the $/US$ exchange rate in order to help improve the possibilities of achieving lower inflation rates and, therefore, gradual improvements in the purchasing power of people's income, and admitted that it would have been difficult to achieve a tangible recovery of the GDP given the contractionary bias of the stabilization scheme. But this was the case only in part. During the first half of the year, even with a relative exchange rate stability, the GDP deepened its decline and contracted by nearly 3% y/y, despite the good harvest achieved by the agricultural sector. Inflation accelerated driven by its own inertia and the adjustment in utility tariffs made during the first months of the year. This acceleration (from 47% in 2018 to about 55% y/y by the first half of 2019) prevented the recovery of revenues. By the time the primary elections were held, the Argentine economy had few positive macroeconomic indicators, marked by a marginal recovery of the GDP circumscribed to the agricultural sector, a generalized erosion of the purchasing power of people's income and financial fragility. In this context, the election results achieved by the main opposition political party (“Frente de Todos”, 47.79%) and the gap of almost 16 percentage points with respect to the political party then in office “Juntos por el cambio” represented a new turning point in the downward trajectory of Argentine economy. The collapse in the demand for Argentine pesos and assets caused a significant devaluation of the national currency and a significant loss of the Central Bank's reserves. In the days following the primary elections, the $/US$ nominal exchange rate recorded an abrupt jump of 25% (from US$45.40 to about US$57.0), exceeding the upper limit of the reference zone established by the Central Bank of Argentina (BCRA, for its Spanish acronym). In addition, the stock of gross reserves held by the BCRA decreased by approximately USD 23.0 Bn (from US$66.3 to US$43.6 Bn) in the 77 calendar days elapsed between the primary and the presidential elections. There was also a sudden drain of USD deposits (which decreased by almost US$13.0 Bn, from US$32.5 to US$19.8 Bn during this transition period) and a growing decision of the investors not to renew the short-term maturities of sovereign debt after the primary elections. This new depreciation of the Argentine peso, apart from deepening the stagflation, inhibited the possibility of preserving the exchange rate stability, which was a key pillar of the National Government's electoral strategy, and ultimately caused the replacement of the economic authorities by mid-August. By the end of August, the new economic authorities decided to reschedule the interest payments on short- term treasury bills (in particular, LETES (dollar-denominated treasury bills) and LECAPs (peso-denominated treasury bills) - except for individuals))). At the same time, they announced that they also wanted to reschedule the terms of the sovereign debt with longer maturities. The IMF's decision to suspend the US$5.4 Bn disbursement scheduled for September exacerbated the private sector's demand for foreign currency and led to the reinforcement of the above-mentioned measures through the implementation of exchange control. Through these measures, the National Government set a monthly limit to the purchase of foreign currency by individuals of US$10,000, reduced the terms within which exporters must exchange their foreign currency earnings in the domestic market, and imposed several restrictions on profit remittances. The presidential elections held in October confirmed the party that won the primary elections and accentuated the portfolio dollarization process. As a result, and with the stated goal of safeguarding the position of the Central Bank, a new monthly limit to the purchase of foreign currency by individuals was set at US$200. Through this rationing, the foreign exchange market began to stabilize, and the drain of reserves began to cease as the new administration took office. The closing figures of the main variables reflect the complexity of the current economic and social crisis and the hard effects of the devaluations in a dual currency economy such as Argentina. In 2019, the GDP contracted for the second consecutive year and, according to several estimates, it closed the year with a decrease even higher than the negative 2.5% recorded in 2018. The inflation rose to 53.8% in December, an annual record high since 1991. In the fiscal front, the efforts made by the Government contrast with the burden of interest derived from the debt. In fact, the national primary deficit, rose from almost 0.5% of the GDP to 3.8% of the Product if interest payments are considered. In addition, the new decrease of the GDP in dollars increased the debt-to-GDP ratio to almost 90% of the GDP. In the external front, the devaluation of the Argentine peso and its recessive effects generated a significant adjustment. In 2019, the trade balance recorded a surplus of almost US$16.0 Bn which contrasts with the US$3.7 Bn deficit recorded in 2018. The collapse of imports accounts for such reversal (which virtually balances the current account of the balance of payments). However and as a direct consequence of the lack of confidence, the stock of reserves of the Central Bank closed the year 2019 with US$21.0 Bn below the US$65.8 Bn recorded at the end of 2018. Finally, the seriousness of the social context is reflected in the magnitude of the adjustment of the real wage (slightly more than 6% as of December 2019 according to the Registered Workers’ Average Taxable Remuneration index (RIPTE, for its Spanish acronym), in addition to the almost 12% negative observed in 2018)), an unemployment rate that already exceeds 10% and poverty rates of 35% (INDEC). Perspectives for the Upcoming Year As of the date of this Annual Report, the new economic authorities are in the process of restructuring the sovereign debt. It should be noted that the outcome of this complex negotiation is a condition required in order to stabilize the economy in the short term with a reduction in interest rates and to begin to curb the carryover inflationary inertia. For the year 2020, the aggregate of the debt maturities held with the private sector including the rescheduled treasury bills amounts to US$30.0 Bn. Slightly more than half of those maturities are denominated in Argentine pesos (Bills and Bonds issued under local law) and the rest is denominated in US dollars (a third under international law and two thirds under local law). In addition, the bulk of the 2020 maturities corresponds to bonds issued under local law, which do not include the collective action clauses (CACs). In the view of the new economic authorities, the current recession is mainly a consequence of the weakness of the aggregate demand. According to this viewpoint, the heavy burden of sovereign debt currently carried by the economy, deepens the drop in activity because it reduces the potential for effective demand. Under normal conditions, this diagnosis would allow for applying expansionary macroeconomic policies to shore up demand. However, there is a limited margin to achieve this in Argentina. The country lacks voluntary financing to implement expansionary fiscal policies and despite the restrictions on the purchase of foreign currency, there seems to be no ceiling for an expansive monetary policy with inflation rates of around 55%. The new administration maintained the priority of closing the fiscal gap, mainly through a heavier tax burden and, to a lesser extent, controlling spending (such as social security).

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