The Argentina Investment Report for April 20, 2016

By Patrick Archer

BUENOS AIRES – Argentina tested the international debt waters on Monday and received offers over four times greater than the US$15 billion needed to settle with the holdouts. The news is summarized in an excellent analysis in today’s iProfesional by Mariano Jaimovich titled “The Fever for Argentine Bonds Encourages Local Operators.” Jaimovich says renewed optimism stems from the US$67 billion in offers Argentina received on Monday. “The successful placement of Argentine bonds could generate a local boom in the short-term attracting billions of dollars.” The investors will come as soon as Argentina is upgraded to “emerging market” status on Morgan Stanley’s MSCI index. A Raymond James report forecasts demand for Argentine bonds will be between US$6.4 and US$18.85 billion. (iProfesional)

NEW YORK – Moody’s Investors Service has raised its rating on Argentine debt to “B3” from a previous rating of “Caa1” based on the expectation the country will resolve the unresolved issue with the holdouts. Moody’s, which issued a “Stable” outlook for Argentina, also based its decision on better economic policies since the election of Mauricio Macri in December. “These upgrades will lead to more investors adding Argentine bonds to their portfolios, although we are still far from the desired investment grade,” concludes Ambito Financiero which predicted the upgrade last month and anticipates a similar upgrade from S&P. (Ambito Financiero)

BUENOS AIRES – Argentina’s federal government is expected to launch an ambitious infrastructure investment program within the next sixty days. Production Minister Francisco Cabrera offered a preview: “Transportation infrastructure—roads, waterways, freight trains, ports and commuter trains—will create jobs for many people. This will begin in the next 60 days. Plans for potable water and sewer infrastructure will also generate a significant amount of employment. The financing will come from debt….international debt to generate infrastructure. The good news is there is an appetite for Argentine debt. Now we need to define what are the priorities.” (infobae)

PARISSaint-Gobain, one of the world’s leading manufacturers of construction and high-performance materials, announced on Monday it will open a new plant in Argentina to manufacture windshields for the local auto industry. The new plant, which is expected to produce 200,000 windshields a year and employ 100 workers, is scheduled to open in August. Saint-Gobain already has 1,600 employees producing construction materials at nine plants in Greater Buenos Aires and other facilities in the Argentine provinces of Cordoba, Entre Rios, Santa Fe and Tucuman. Saint-Gobain employs over 170,000 employees in 66 countries worldwide. (La Prensa)

BUENOS AIRES – In recent weeks, real estate developers have announced over US$1.2 billion in new construction projects in Buenos Aires ranging from housing to offices to shopping centers. “Real Estate Resurrection: After the Collapse, Investors Return to the Real Estate Market” is the title of Alfredo Sainz’ analysis in La Nacion which emphasizes the BA value proposition. “Local prices are much lower than cities like São Paulo, Santiago or Bogotá which are not accessible for the majority of middle class families compared to Buenos Aires. Large developers are encouraged by the possibility of recovering in a relatively short period all of the terrain lost over the past four years when currency controls collapsed the local real estate market. According to Reporte Inmobiliario, the last three years were the worst three-year period in BA new construction permit requests since 1935.(La Nacion)

SÃO PAULO – The outlook for the hotel sector in Argentina and the region is summarized in a new report from HVS titled “Trends and Opportunities in South America 2015-2016. “In general, the outlook for the hotel sector in South America is positive. The region is cheap for international investors and new funding alternatives for hotel development are being structured,” says HVS South America director Diogo Canteras. The REPORTUR summary says “The report, focusing on Buenos Aires, Lima, Santiago, Bogotá and five cities in Brazil, says the emerging market slowdown impacts demand and hotel occupancy, but the expectation is that results will improve over the medium-term which will renew interest among national and international investors. (REPORTUR)

MONTEVIDEO – Argentina’s Monday test of international debt waters generated waves of interest just across the River Plate, as Uruguay investors seek alternatives to the negative interest rates on their local paper. Mariano Sardans, CEO of financial services advisory firm FDI says the Bonar 2017 and 2020 are probably the most interesting options for Uruguay investors,”because the rates practically triple what Uruguay bonds are paying.” Sardans and FDI compiled a regional rate comparison and found Uruguay’s 2017 bond currently has a negative interest rate of 1.12% and the 2020 pays a scant 2.7% compared to annual returns of 6.5% and 7.2% respectively for the same time horizon in Argentina. (El Observador)

ROSARIO – Heavy rainfall in the central growing regions of Argentina may have already caused US$1 billion worth of damage to this year’s soybean crop. An analysis in Noticias Agrícolas says almost 3 million tons of soybeans may already be lost. A map from the Rosario Grains Exchange shows average accumulated precipitation in the first two weeks of April between three and ten inches with some regions receiving as much as fifteen inches. The excess rainfall has dealt a serious setback to this year’s harvest which lags 17.5 percentage points behind the same time last year. The news reverberated this week in Chicago where soybean futures are trading at their highest levels since August.  (Noticias Agrícolas)

BUENOS AIRES – Uber officially launched in Argentina on Tuesday, April 12 and received 20,000 passenger requests, 25,000 new driver applications and 90,000 app downloads in one day. Local passengers crave an alternative to the typical BA cab, while local drivers are seeking the autonomy and income potential ($12,000 pesos per week for 60 hours of service) that Uber offers. Since last week’s launch, BA taxi drivers have led citywide protests with roadblocks, lobbied for government intervention and threatened both Uber drivers and passengers. This week the Public Prosecutor’s office ordered the National Telecommunications Agency to block the online platforms of Uber in Argentina. To be continued. (La Capital)

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