G.BREUER
DESDE 1869
G. BREUER's Newsletter
March 2006
Dear Clients & Friends,
We are sending you the March edition of our monthly Newsletter to offer a review of the relevant news in the Argentine political, economical and legal fields.
Please, do not hesitate to contact partners Jorge Otamendi (joo@gbreuer.com.ar) and Alberto Navarro (anavarro@gbreuer.com.ar) for any specific question that may arise after reading it as well as for any other issue should you need advise on.
Sincerely,
With warmest regards,
G.BREUER
Buenos Aires - Argentina
Tel: +54 114313 8100
Political News
This month’s headlines were dominated by measures against inflation through the tightening of the domestic beef price, the conflict with Uruguay around the pulp-mill projects and the political crisis in Santa Cruz.
All three matters could be seen as not-so-problematic, but in Argentina they are very important since beef, Uruguay and the domestic land of the President are always issues that capture attention.
The fight against inflation seems to be a very difficult mission. Beef prices were skyrocketing. And the high impact that beef prices have over inflation prompted very controversial measures by the Kirchner administration. Given that the agreements reached with some companies in that respect in the past seemed not to have worked, the government implemented a measure consisting in suspending beef exports for 180 days, thus tightening the control of beef prices.
This new measure did not prove effective so far, since the offer of cattle in the market remained very low. The press reported a drop in volume at the Liniers’ Market –main beef market in Buenos Aires- as a boycott by cattle producers.
In a threatening message, President Kirchner announced that this measure would be extended if producers persist with their policy of restricting the sending of cattle to the markets.
As we can see, the government is favoring subsidies of present consumption levels to avoid inflation over the increase in production and investments. And this measure comes at a very important time, when finally the world markets were opening for the Argentine beef after years of bans due to the foot and mouth disease.
This measure has not been well received by independent economists and press –and it was lambasted by cattle producers-, who remark that it implies a short term view of the beef problem, because if investments and earnings are not favored in the cattle industry, local production -even without exports- will not be enough to cover the domestic consumption artificially inflated by subsidized prices.
The result of this fights, the ones of the Government against inflation and against cattle producers, are not clear. The only sure thing seems to be that Argentine exporters are certainly the losers.
On another front, and regarding the conflict between Argentina and Uruguay for the construction of two paper pulp mills on the Uruguay River bank, the presidents of both countries met in Chile in an attempt to reach an agreement to put an end to this conflict.
Presidents Kirchner and Tabaré Vazquez seemed to have agreed to halt pulp-mills projects constructions and blockades to the bridges that link both countries for 90 days, so that in the meantime all parties could meet and reach a solution. Then, the agreement was denied by the Uruguayan president and, in practice, blockades did not stop and Uruguay was about to file a claim before Argentina’s courts claiming compensation for the loss suffered. Finally, blockades did stop, but the paper-mills construction did not. Today, the future of this matter remains uncertain.
One of the major consequences suffered by Uruguay due to the existing conflict is the blockade of the bridges that linked both countries, which not only prevents the circulation of trucks carrying construction materials to the mills, but also brought about a decrease in the tourism revenues for Uruguay. Tourism is one of the most important industries in Uruguay. President Vazquez announced that the loss amounts to 200 and 300 billion dollars.
Finally, the other major political news of this month has been the resignation of Santa Cruz Governor, Sergio Acevedo, who used to belong to President Kirchner’s inner circle.
Former Governor Acevedo mentioned that he resigned for personal reasons. The tragedy that took place last month in a small Santa Cruz oil town called Las Heras, where a police officer was murdered during a riot organized by oil union workers, was quoted as the most evident reason for the distance created between President Kirchner and the Governor, resulting in his resignation.
However, there are many grounded rumors claiming that the differences between Governor Acevedo and Kirchner’s aids related to the handling of the money for public works in Santa Cruz were the actual factor that made the Governor to step down. In the President’s circles, Acevedo is accused of trying to create an independent political base from Kirchner in Santa Cruz. And this does not seem to be accepted in Kirchner’s world.
As we can see, Argentina always has political news of interest.
Economic News
The fierce fight against inflation constituted our first comment on the Politics section of this month’s report. It is worth mentioning that inflation is also –or mostly- a political issue in Argentina.
With respect to the economy -and also very related to inflation-, as it happened all throughout the current administration, President Kirchner’s government continues to keep a weak exchange rate of the AR peso (around 3 Pesos per Dollar) to boost Argentine exports and to make Argentina more competitive at the international markets.
However –since there is no such a thing as a free lunch- this policy may not be helping the government with its anti-inflation policy, and that is why the Central Bank sells Dollars each time the exchange rate climbs up to the rate fixed for the current year.
It will be interesting to see how the Central Bank manages this policy in the forthcoming months, when it faces some payments, and therefore the market expects said entity to start buying more dollars at the foreign exchange market, injecting pesos which can affect directly the Consumer Prices Index, at a market that already has enough pesos and prices that are being kept under control with very unorthodox measures.
We will see.
Legal News
Within the most relevant legal news of this month, it is worth mentioning the passing of Law No. 26,084, which extends the term for the suspension of the foreclosures on mortgages over single-family homes for 90 days.
The Law provides for the suspension of actions for eviction for an equal term in those cases in which the foreclosures on mortgages are over single-family homes. This Law has been declared of public order and it is included within the frame of Emergency Law No. 25,561.
Also of importance is General Resolution No. 1/2006, issued by the Office of Corporations (IGJ), providing that Resolution No. 7/2005, which approved the new regulations of IGJ, is effective as from February 21, 2006.
Finally, the National Data Base Registry issued Resolution No. 5/2006 whereby the National Data Base Registry is implemented for the purpose of including the registration of files, registries, banks or public data bases under Law No. 25,326.
Law No. 25,326 is also of public order and it was issued with the purpose of protecting personal databases. Its provisions are mandatory to all data bases, regardless of the application of specific regulations for each entity.
The basic innovation of the new resolution is that all holders of databases (without a clear definition of holders of databases and of databases themselves) have to register and pay a fee.
G.BREUER NEWS
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You may consult the March editions of our Boletín Informativo and Boletín Informativo Tributario, G. BREUER's publications focus on general legal information and tax issues, respectively, sent to our Argentine Clients & Friends.
Please, do not hesitate to contact partners Jorge Otamendi (joo@gbreuer.com.ar) and Alberto Navarro (anavarro@gbreuer.com.ar) for any specific question that may arise after reading this edition as well as for any other issue should you need advise on.
G.BREUER
25 de Mayo 460
Buenos Aires - Argentina
Tel: +54 11 4313-8100
Fax: +54 11 4313-8180
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© G. BREUER, 2006