Gov't projects confidence as markets nervously eye Trump

Gov't projects confidence as markets nervously eye Trump

Officials unworried about impact on trade, investment as country rushes to sell bonds

Facing uncertainty in international markets about what a Donald Trump presidency will look like, the government has opted to project confidence that the local economy will not be affected.

While the United States is not a particularly large trading partner for Argentina, given the asyet- unclear impact that Trump will generate in terms of trade agreements and capital markets, the government has been taking steps to prepare for any turmoil while also suggesting that it has no major concerns.

Asked this week if he envisioned any problems associated with Trump's protectionist stance, President Mauricio Macri stuck to his message that cooperation with Washington was of mutual benefit. "I hope, and he said so in our telephone conversation and he publicly said so a few days ago, that he gives the relationship with Argentina importance. I think that there is a great deal of ground to be covered together between Argentina and the United States, in a relationship that must be of mutual benefit.
Given that our starting-point is a low level of trade, I don't think that any protectionist policies that the United States may enact would hurt us in any relevant way. So I am betting more on that we have much to improve on, on continuing with this path that westarted with President Obama and that with the president-elect after January 20, we expect to continue." Recent reports in the Clarín and 1M Nación dailies suggested that the US president-elect has told a group of regional experts that he views Argentina as an important country within Latin America for US interests.

Macri has made increased trade, investment and integration with global partners one of the hallmarks of his economic policy and has said that "the future is based on greater integration, more trade, and the most recent elections have shown an opposite trend, but today I reiterate that I believe that coming from an Argentina that was isolated from t h e world for more than a decade, that the future really is about benefitting from trade." Immediately after t h e US election, Argentine Ambassador the United States Martin Lousteau said that "Argentina is t h e country that is furthest away from the United States, it doesn't share a border, it dpepn't.haye citizens who are immigrating, and it doesn't have a free-trade deal," trying to play down the importance of the US election result.

Speaking at the World Economic Forum in Davos this week, Foreign Minister Susana Malcorra also said that she had not had "signals in these conversations about why one should invest or not in Argentina. There is indeed a cloud over Davos which is the global uncertainty about the changes in Europe and the United States. Everyone has questions and there are few answers. At the same there is a sensation that one thing is communication through social media and campaign rhetoric and another is the policy when it is set into motion." A trade war between the United States and China and a strengthening dollar are among the biggest threats to a brighter global economic outlook, according to leading economists attending the World Economic Forum in Davos. There are nonetheless hopes of a more benign economic picture and a rally in global stock markets on expectations of major stimulus under a new US administration led by Donald Trump. A trade war between the United States and China and a strengthening dollar are among the biggest threats to a brightening global economic outlook, according to leading economists at the World Economic For um in Davos consulted by Reuters.

Argentina currently chairs the Mercosur and it has made making progress on free trade negotiations with the European Union a priority, in line with Brazilian enthusiasm for greater "flexibility as such Malcorra has also noted that there is greater interest in Brussels for a trade deal with Mercosur in light of the collapse of negotiations between United States and the European Union in free trade negotiations of their own.
Macri will be travelling to Brazil in February to meet with his counterpart Michel Temer at a time when there are efforts to push for t h e Mercosur to consolidate further, including the lifting of intra-zone barriers to trade, at a time when trade protectionism is on the up on the global scale.

Treasury Minister Nicolás Dujovne held a bilateral meeting with his Brazilian counterpart Henrique Meirelles on Wednesday. It was "an excellent meeting between two friendly countries," stated Dujovne. The encounter took place at noon in the traditional Belvedere Hotel in Davos and the officials agreed on the importance of deepening the cooperation between Argentina and Brazil and remarked that for both countries growth is essential. The ministers analyzed the economic processes in Argentina and Brazil and the region. Dujovne was accompanied by Minister of Production Francisco Cabrera and by Central Bank Governor Federico Sturzenegger. In terms of investment, the Economic consultancy agency BDO published a study in late > 2016 indicating that interest in Iinventingii fallen from 88 to 67 percent amongst business executives since t h e beginning of t h e year.

The potential investors also responded that they were no longer ignoring the lingering recession.
In January 2016,50.8 percent said it wasn't a primary concern when deciding whether to invest in the country, but by October that figure had fallen to 40 percent.

BOND SALE

 

Altjiopgh Argentina returned to international capital markets in 2016 for t h e first time in more than a decade after the Macri administration settled with holdout creditors, the government has announced a fresh bond stance in order to take advantage of relative calm before Trump is sworn in.

Chile, Colombia and the Dominican Republic all sold bonds on Wednesday, a day after Trump himself said that the dollar had appreciated too much — enough to provoke a dip in the value of the greenback as traders reacted. As such, Colombia sold US$2.5 billion in bonds, even though there had been requests for up to US$ 9 billion. Chile also issued bonds in Chilean pesos worth an equivalent of US$1.5 billion at a 3.8 percent interest rate, of which 22 percent were sold to foreign investors.

A source cited by Reuter's IFR service noted that there is not much clarity about what may happen after today's inauguration and that interest rates are currently benefitting sovereign bond issuers.Argentine officials have been on a roadshow, first in the United Kingdom and then in the United States in order to d r um up support for the bond sale, conspicuously scheduled a day before Trump is given the presidential insignia and commences his four-year term.

Menciones: 

Speaking at the World Economic Forum in Davos this week, Foreign Minister Susana Malcorra also said that she had not had "signals in these conversations about why one should invest or not in Argentina. There is indeed a cloud over Davos which is the global uncertainty about the changes in Europe and the United States. Everyone has questions and there are few answers. At the same there is a sensation that one thing is communication through social media and campaign rhetoric and another is the policy when it is set into motion."

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