Argentina Returning to Local Bond Market After Five Years By Camila Russo

Argentina is completing its first local bond sale in five years as part of its efforts to return to global credit markets.

The government is offering 4.4 billion pesos ($542 million) of three-year bonds today with yields tied to the benchmark Badlar rate plus 2 percentage points, or a total of about 26 percent. The Treasury issued 5.5 billion pesos of the 2017 notes in March, its first sale in local markets since 2009.

By tapping the local market, President Cristina Fernandez de Kirchner’s government is reducing its dependence on state agencies and the central bank to finance its deficit, while helping the monetary authority drain liquidity from the economy. Argentina is mending relations with international creditors, compensating Repsol SA for the takeover of YPF SA and paying the Paris Club, as it seeks to regain access to international financing.

“Since the default, investors were always more willing to lend to the central bank, but now the market is assigning the Treasury a similar risk,” said Aldo Pignanelli, a former central bank president who now runs research firm Saver in Buenos Aires. “It’s another step toward normalization.”

Argentina is still trying to move beyond a record $95 billion default in 2001 that locked it out of credit markets. The government is appealing lower court rulings in U.S. courts that ordered Fernandez to pay holdout creditors including billionaire Paul Singer in full for defaulted securities.

Yield Spread

The notes Argentina sold in September 2009 yielded Badlar plus 300 basis points, or 3 percentage points. Badlar, the benchmark rate private banks pay for 30-day deposits of 1 million pesos, was 12.2 percent at the time. The deposit rate was 23.81 percent on June 4, according to the latest data available from the central bank.

The notes being sold today yield less than local bonds due 2016 sold by state-controlled oil producer YPF yesterday, which pay 320 basis points over Badlar. YPF’s dollar notes yield less than Argentine government securities in the bond market.

The extra yield investors demand to own Argentine bonds over U.S. Treasuries narrowed 0.23 percentage point to 7.72 percentage points at 1:50 p.m. New York time, according to JPMorgan Chase & Co.’s EMBI Global indexes.

With annual inflation estimated at 39 percent in April, investors who buy the notes are betting the government will be successful in curbing consumer price increases, according to Mariano Tavelli, the president of brokerage Tavelli & Cia., who said he might buy the bonds.


Chinese President’s visit to Argentina

Chinese President comes to launch the largest foreign investment in Argentina.

China will invest  USD 4,714 million to build the mega-project and another USD 2,099 s for “Belgrano Cargas”. Interest in a bi-oceanic corridor in San Juan.

Chinese President Xi Jinping will arrive in the country on July 19 to kick off the largest Chinese investment abroad : the construction of dams santacruceñas Jorge Néstor Kirchner and Cepernic . They also speed up the modernization of the Belgrano charges , the other work of interest to the Asian power . The fifteen additional projects that Argentina hoped to excite the Chinese will wait.

This was made clear Chinese Foreign Minister Wang Yi to President Cristina Fernandez and ministers with whom he met during his visit to the country. They are not insignificant investments , totaling USD 6,800 million. But for now , there will be more .

On Wednesday, Wang and Hector Timerman foreign ministers outlined the agenda for Xi , which hit the country after attending the summit of BRIC countries Brazil, on July 15 , and will be one day, as reported by The Chronicle on 1 this month. The start of construction of dams santacruceñas was on top of Chinese priorities. That country will USD 4,714 million that the work is valued . This is an unprecedented outlay for the Chinese in a third country and , at the same time , the most expensive work conceived Kirchner . Possibly , Xi and Cristina involved a kind of foundation stone laying by videoconference.

A consortium composed Electroingeniería , Osvaldo Acosta company and Gerardo Ferreyra, and carry forward the Chinese Gezhouba dam construction . 100% financing is awarded the China Development Bank (CDB ), providing a 15 -year LIBOR rate plus 3.8%. Sinosure insurance is involved in the credit.
Financial negotiations are dilated and still in its final stages . In late March , a delegation from the Chinese Ministry of Commerce in the country finalized meetings with officials and businessmen early May and sent will reach the Chinese Ministry of Finance and Economy . Ministers of Economy and Planning , Axel Kicillof Julio De Vido , also traveled to China to define the details of the agreement.
The first disbursement of money, between USD 400 and USD 500 million , scheduled for May , but was delayed . XI ‘s visit , understand sources involved in the negotiations, should expedite the arrival of currencies , which swell the reserves of the Central Bank. In total , they come between u USD 3,800 and 3,900 million to the country ; the rest will be used to buy turbines in China.
The Belgrano Cargo is the other major priority of the Chinese government. There too the CDB financed much of the work, although the Argentine State shall provide s about USD 200 million. In this case , the CBD provides a loan of USD  2,099 million to 7.1 % , and a 15 year term . Of that money , USD 1,235 million will go to work (and therefore enter the country ) and the rest to buy cars and locomotives from China. The Belgrano charges is of strategic importance to China: it looks like the gateway to the port of raw materials to purchase to Argentina .

Similarly , a work in which the Chinese mildly put the eye is the bi-oceanic corridor Agua Negra , in San Juan , which would open a goods issue for the Pacific. The Binational Entity Agua Negra tunnel ( Ebitan ) should announce in the coming weeks what consortia are finalists in the bidding for the work, valued at USD 1,275 billions . Of the 22 consortia that were submitted to the competition, there are four Chinese involvement with China Railway 18th Bureau , China Communication Construction Company, China Railway Construction ( in partnership with Electroingeniería ) and Sinohydro .

To 2013 , De Vido and Kicillof traveled to China to present another 15 investment projects by some USD 19.000 million. But Wang made ​​it clear that , for now , must wait .

BTG Said to Open Commodities-Trading Unit in Argentina

Grupo BTG Pactual (BBTG11), the only investment bank publicly traded in Brazil, opened a commodities-trading unit in Buenos Aires this month, two people with direct knowledge of the matter said.

Julian Roberts will head the business, according to one of the people, who asked not to be identified because the decision hasn’t been made public. Roberts worked at agricultural companies El Tejar SA and Bunge Ltd. (BG) before joining BTG, according to his LinkedIn profile. The people didn’t say how many employees will work at the new office.

BTG Chief Executive Officer Andre Esteves, 45, said in January that the company planned to hire 80 bankers for commodities this year, boosting the total to 200, and open offices in Geneva, Houston and Singapore. Esteves called Latin America a hub for commodities and said BTG will focus on grains and metals. Argentina has begun to harvest its largest soybean crop on record.

BTG declined to comment on the new office in Argentina, according to an official who asked not to be named in keeping with company policy. Roberts didn’t immediately respond to an e-mail and phone message.

The firm is expanding its commodities business as some of the world’s largest banks scale back, including New York-based JPMorgan Chase & Co. and Morgan Stanley as well as Barclays Plc, which has its headquarters in London.

The biggest commodities traders in Argentina include the local units of Archer-Daniels-Midland Co., Bunge, Cargill Inc., Glencore Xstrata Plc, Louis Dreyfus Commodities BV, Nidera BV and Noble Group Ltd.

Soy Harvest

The soy harvest in Argentina, the world’s largest exporter of soybean oil and derivatives, will total a record 54.5 million tons this season with a total harvest of grains of 100 million tons, according to estimates by the Buenos Aires Grains Exchange.

BTG will also open representative offices with two or three people in Ukraine, Italy and South Africa, Esteves said in January.

The bank hired economist Andres Borenstein to focus on Argentina and head research for South America’s second-largest economy, according to a March 17 report from the company. Borenstein, 42, was previously an economist at the U.K. embassy in Argentina and a professor at Torcuato di Tella university in Buenos Aires.

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Chevron to Invest $1.6 Billion With YPF in Argentina Shale Wells – By Pablo Gonzalez

Chevron Corp. (CVX), the world’s third-largest oil company, signed an accord with Argentina’s YPF SA to invest $1.6 billion this year in shale development and become the country’s largest foreign producer of shale oil and natural gas.

Chevron and state-run YPF plan to drill 170 wells in a 96,000-acre area this year in Argentina’s Vaca Muerta formation, the world’s second-largest shale gas deposit and fourth-largest shale oil reservoir, both companies said today in separate statements.

Argentine President Cristina Fernandez de Kirchner’s government expropriated a 51 percent stake in YPF from Spain’s Repsol SA (REP) in April 2012 after saying the Spanish oil company hadn’t invested enough in exploration. Repsol’s board agreed in February to accept $5 billion in compensation for Argentina’s expropriation of the unit. Ending the two-year international dispute may help attract investors to the country.

“This is a significant step in our subsidiaries’ joint efforts with YPF to develop one of the most exciting shale plays in the world today,” Chevron Vice Chairman George Kirkland said in the company’s statement. “Vaca Muerta could become an important contributor to Chevron’s long-term production growth.”

Pilot Investment

The latest investment follows an initial $1.24 billion pilot investment financed by Chevron and paves the way for a total plan of $15 billion. The joint venture partners are targeting daily output of 50,000 barrels of shale oil and 3 million cubic meters of shale gas by drilling 1,500 wells.

Vaca Muerta, Spanish for dead cow, may hold 23 billion barrels of oil equivalent, according to a report by independent auditor Ryder Scott released in February 2012 by YPF.

YPF’s American depositary receipts were little changed at $30.65 at 11:52 a.m. in New YorkChevron fell 1.2 percent to $117.64.

Chevron late yesterday said it is on track to post its lowest first quarter production in eight years after bad weather disrupted operations in Central Asia and North America.

Chevron is the third most valuable oil producer after Exxon Mobil Corp., and Royal Dutch Shell Plc.


Argentine Utilities Surge on First Rates Increase Since 1999 By Camila Russo

Argentine natural gas distributor shares are having their best week since October after the government allowed the first rate increases in 15 years.

Transportadora de Gas del Norte SA shares have jumped 18 percent this week, the most since October, and were up 4.1 percent today to a six-year high of 2.02 pesos at 4:08 p.m. in Buenos Aires. Metrogas SA shares have rallied 13 percent this week to 1.98 pesos, the highest since 2004.

Argentina froze utility rates in 2002 to help fuel economic recovery after a financial crisis drove the country to default on $95 billion. While natural gas prices have been largely capped since, inflation at around 25 percent made costs surge, eroding companies’ income. This week’s increase is a step toward improving their finances, according to Mariano Tavelli, president of brokerage Tavelli & Cia.

“We’ll have to wait and see the real effect on balance sheets but any tariff increase is good,” he said in a telephone interview from Buenos Aires. “If this means the situation is beginning to normalize for these companies, prices are still very cheap.”

The government allowed natural gas distributors to increase rates charged to residential and commercial users by 200 percent to 650 percent, depending on the company, area and type of user, according to a resolution published in the official gazette April 7.

Part of the rates will be used to pay for the difference in natural gas prices, which also increased.

The higher rate won’t be applied to users who reduce consumption by 20 percent.

“While it probably won’t make a huge difference in the bottom line, it’s a very good sign,” said Andres Chambouleyron, a senior consultant at Chicago-based consultancy Compass Lexecon LLC. “The government recognized these companies are in trouble and did something about it.”