Real Estate: Argentina April Construction up 3.6% on Year, Down 2.3% on Month

The Wall Street Journal – By Shane Romig

BUENOS AIRES–Argentina’s construction activity showed a moderate rebound in April, although the pace of building continues to suffer from government capital controls that have made the U.S. dollars traditionally used for real-estate transactions scarce.

Construction activity in April was up 3.6% on the year, but down 2.3% on the month, the national statistics agency, Indec, reported Friday.

Construction started to show small gains starting in February, but it has been slow to recover from a contraction last year. In 2012, construction was down 3.2% on the year, according to Indec.

In a bid to slow capital flight, the government has made it all but impossible for most people to legally buy dollars. The limits were first imposed in late 2011, but have been progressively stepped up since then.

That has rattled the real-estate and construction sectors, where values are usually pegged in dollars due to the country’s long history of inflation and repeated devaluations of the peso.

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Argentina Money Laundering Attorney: Argentina Tax Amnesty Laundering Free Pass, Opposition Says

Argentina Money Laundering Attorney

Argentina’s lower house of congress is debating today legislation that pardons tax dodgers who spend undeclared funds in either the building sector or in connections to fund increased oil and gas production.

While the federal government states the amnesty intends to bring component of the $160 billion concealed from the authorities in to the legal economy, opposition legislators say the supply is a carte blanche for drug supplier and various other crooks to launder money.

“We are starting the course of a narco economic situation,” said resistance Senator Liliana Negre de Alonso in a telephone interview, before the start these days’s dispute. “It’s totally immoral. The federal government doesn’t appreciate the means to reach its objective– increase additional investment.”.

The expense, which will probably be gone by President Cristina Fernandez de Kirchner’s majority union today, mirrors her demand for funds to finance YPF SA, the oil producer she seized a year back on promises to broaden output and minimize power imports, stated resistance legislator Federico Pinedo. The government took possession of 51 percent of YPF last year from Spain’s Repsol SA to stem fuel imports that doubled to $9.4 billion in 2011 and are anticipated to increase to as long as $15 billion this year.

The scarcity of dollars in the Argentine economic climate and Fernandez’s partial restriction on their investment has actually crushed the real property market, nearly halving home sales given that she started to tighten up currency controls to stem record resources flight in 2011.

Dollar Purchases.

Under the amnesty, Argentines with undeclared foreign-currency cost savings will certainly have the ability to purchase dollar bonds to fund raised power manufacturing, or a dollar-denominated central bank certificate that can be utilized to acquire realty or structure products. Property offers are generally carried out in the U.S. money in Argentina.

Those accepting the amnesty will not need to pay past-due taxes or describe the beginning of the funds. The power connection pays 4 percent passion and matures in 2016.

The bill was approved by the Senate on Might 22.

In 2009, concerning $4 billion of concealed money was stated to the authorities under a law that allowed savers to whitewash funds by paying a tax of as long as 8 percent. Baseding on replacement Economy Minister Axel Kicillof, Argentines held concerning $160 billion in undeclared funds in 2006, of which $120 billion had actually been channelled into foreign savings account.

Violence, Laundering.

The Financial Activity Activity Pressure, a Paris-based intergovernmental cash laundering guard dog, in February consisted of Argentina, Zimbabwe, Afghanistan, Cuba and Bolivia in a listing of nations that required stricter controls and sanctions to fight cash laundering and funding of terrorism.

Although lawmakers from Fernandez’s judgment Triumph Front union claim they have carried out steps to comply with all the FATF needs, Negre de Alonso claimed the bill contradicts those needs.

Argentina’s anti – money-laundering workplace and tax firm will certainly keep policies of reporting any type of suspicious funds, Triumph Front Senator Anibal Fernandez stated during the May 22 argument.

“Examinations will be made into just what folks that revive funds do for a living,” Statesman Fernandez said. “The Financial Library and the tax firm have a control system that will be quite hard to avoid.”.

Paid back Dollars.

The federal government has vowed that those who turn over bucks in exchange for the bonds will be paid back in greenbacks when they develop.

Property purchases in Buenos Aires dropped 48 percent in the first quarter of this year from the same period two years previously, baseding on the capital’s college of public notaries. Building task has gotten in 11 of the YEAR to March, government information show.

“The plan does not have a target of improving tax earnings or boost reserve bank reserves,” reserve bank Head of state Mercedes Marco del Pont shared on Might 7.

Concerned that 24 percent yearly rising cost of living, a broadening deficit spending and declining central bank reserves would oblige the government to devalue the peso, Argentines took $21.5 billion out of South The united state’s second-biggest economic situation in 2011.

Within days of her re-election in October that year, Fernandez started to tighten up money controls, consisting of limitations on reward remittances abroad, taxes on overseas use of credit report and debit cards and a restriction on dollar purchases for savings. While her measures reduced capital outflows to $3.4 billion in 2012, reserve bank reserves, which she uses to pay the country’s overseas debt, continued to decrease, reaching $38.7 billion on May 28 from a document $52.6 billion in January 2011.

‘Desperate Move’.

The amnesty is “a hopeless move by the government in an attempt to return a come by reserves,” stated Juan Pablo Fuentes, a financial expert at Moody’s Analytics Inc. “They will not have much success in reviving resources considering that the major trouble is the lack of confidence in the federal government.”.

Argentina’s history of federal government horning in cost savings has actually induced many of the country’s 40 million citizens to send cash abroad, put it in bank protection down payments boxes or hide it in their houses. Savers are worried they could see a repeat of 2002, when then-President Eduardo Duhalde changed buck deposits in to pesos, which weakened as long as 70 percent versus the UNITED STATE money that year. In 2008, Fernandez took regarding $24 billion held in exclusive pension funds and handed the cash to the national social safety agency.

“This costs develops a window for those who took money abroad to bring it back,” Carlos Heller, a legislator from the ruling union, said in a telephone meeting. “It’s a costs that has a harsh preference because it gives an advantage to somebody which hasn’t followed the regulation. But this will certainly also aid all of society by getting additional investment for electricity and construction.”.

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The currency exchange controls had practically frozen the real estate market in Buenos Aires City

Buenos Aires Herald

By: Martín Gambarotta

Out of dollars? Five officials have a plan

Argentina, like Australia, is the land down under. But Argentina, as V.S. Naipaul once wrote, is also the land made for plunder. Voilà: you live down under in the land of plunder. There’s nothing new about this. Old V.S. said as much way back when. But it’s good to keep that impression in mind as you navigate the news of the day. There are, after all, new suspicions of plundering. The public works tycoon Lázaro Báez, who amassed a fortune in the Patagonian province of Santa Cruz that was ruled in the nineties by the late former president Néstor Kirchner, has been charged with money-laundering. Báez and five others, including his son, are under investigation — meaning that they have not been indicted. Yet already things are happening. On Friday, the head of the state-run energy company ENARSA, Exequiel Espinosa, quit amid allegations that he was connected to Báez’s dealings. Espinosa’s resignation is possibly linked to the Báez case. But the outgoing head of ENARSA, a company involved in the bulk import of fuel by Argentina, is also very much an old school Kirchnerite linked to the Federal Planning Minister Julio De Vido. The administration of President Cristina Fernández de Kirchner is now packed with young officials, many members of the youth group La Cámpora, who are out to change things. Maybe Espinosa’s resignation is about the younger Kirchnerites gaining ground in the administration.

Even with the money-laundering allegations in the news, and the spectacular stories ventilated on private television about Kirchnerite officials purportedly hoarding bags full of cash in and out of Kirchner’s office, there are other matters of concern. For Argentina is not only about sleaze. It is also a land full of experimental economists.

The critics will tell you that there are many things wrong with the economy: underreported inflation, strict currency exchange controls, a black market dollar and high export duties. The black market dollar is making negative headlines that can no longer go unnoticed. A dollar is officially worth about 5.20 pesos. But because of the currency controls introduced in November 2011 and since then tightened, a dollar in the black market was going for 10.45 pesos on Wednesday.

The black market dollar, like Argentina’s problems with plunder, are nothing new. Since the start of the year Fernández de Kirchner had held a number of meetings with her “economic team”: Economy Minister Hernán Lorenzino, Deputy Economy Minister Axel Kicillof, Domestic Trade Secretary Guillermo Moreno, Central Bank Governor Mercedes Marcó del Pont and AFIP tax bureau chief Ricardo Echegaray. The difference between the official dollar and the black market dollar has increased consistently. But the national government had kept mostly mum about the situation. Then on Monday Fernández de Kirchner declared that her government was under pressure to drastically devalue the peso. Devaluation, she said, is not going to happen. “To devalue, you will have to wait for another government,” CFK said.

That was not all. On Tuesday, the five members of the President’s “economic team” called a press conference. Lorenzino, Kicillof, Moreno, Marcó del Pont and Echegaray announced on Tuesday a sweeping tax amnesty for undeclared dollar deposits, in the form of a bill that has been submitted to Congress for swift approval by the Kirchnerite Victory Front coalition that controls it.

The new tax amnesty (an opportunity to whitewash dollars) includes a certificate, Cedin, to deposit dollars in the Central Bank to then purchase properties or undertake construction projects. The buyer of a property will pay with the Cedin certificate that the seller can then cash in the Central Bank for dollars, according to the official story trumpeted on Tuesday. It’s quasi money that can eventually translate into dollars filling people’s pockets once again.

The currency exchange controls had practically frozen the real estate market in Buenos Aires City where properties have traditionally been priced in dollars. Real estate transactions in the first quarter of this year dropped 41 percent in Buenos Aires City. The Cedin certificate is designed to rescue the local real estate market from oblivion and the national government seems to be admitting that it lost the battle for properties to carry price tags in pesos.

An energy bond in dollars, paying an annual interest rate of four percent and maturing in 2016, is also part of the amnesty menu (along with a third bond). No questions will be asked, Echegaray said. But Echegaray added that those suspected of tax evasion, like Báez and members of the opposition media group Clarín, will not be allowed to take part in the amnesty.

The Famous Five took difficult questions during the press conference on Tuesday. Moreno insisted that the inflation rate is the official one as measured by the state-run statistics bureau INDEC. Kicillof, a Keynesian economic doctor in his forties trained at the University of Buenos Aires, estimated that Argentines have 40 billion dollars under the mattress at home and a total of 200 billion dollars counting funds stashed abroad.

The plan, the Famous Five said, is about issuing “transparent instruments for undeclared assets.” Kicillof said there is nothing substantially wrong with the Argentine economy, especially when compared to the dire situation in Europe. He complained about bank runs and operations with black market dollars to ruin Argentina. He spent a lot of time on Tuesday, and again in the Senate on Thursday, explaining that a drastic devaluation overnight (like the one decreed by the Peronist administration in 1975) would lead to disaster and ruin the purchasing power of the working classes.

Doctor Kicillof could be right. Doctor Kicillof could be wrong. But Naipaul’s Argentina is used to catastrophic economic crashes and such an event has not happened just yet in the Kirchnerite era. Massive anti-government demonstrations have been staged recently against the sweeping reform of the justice system sponsored by Fernández de Kirchner and the economic measures. But unemployment is low and the chugging economy has not blown its engine just yet, even when growth is sluggish at best and there are loud cracking noises (like a five-day strike by long-distance bus drivers for better pay).

There was a pleasant whiff of spring to the massive nationwide demonstrations. But there was also some unsavoury stuff going on under the surface. During the protests in April a small group of protesters tried to storm Congress. When activists of the centre-right party PRO tried to stop them they were showered with homophobic abuse and called “Kirchnerites.”

The reform of the Magistrates Council was passed into law on Wednesday by the Senate 38-30. A demonstration was staged outside. The protest was called by political opposition groups this time and not by wildcat demonstrators. The anti-government protests have raged. But now getting ready to answer back are the Kirchnerites, who are planning to march on Plaza de Mayo on May 25 to mark the 10th anniversary of Kirchner’s inauguration as president in 2003.

The dollar whitewash is also an effort by the CFK administration to deal with the criticism that has been hurled upon its management of the court system and the economy. Kirchnerite officials rarely do a lot of talking. But the Famous Five now clearly have been allowed by the President to explain their policies to the public. They took difficult questions. They argued loudly with opposition senators during a plenary meeting of Upper House committees on Thursday.

There’s a lot of talk of CFK’s supremacy verging on dictatorship. But others argue that the President is only making use of a parliamentary majority bestowed upon her by her landslide victory in the presidential elections of 2011. The Kirchnerites did not enjoy such supremacy when they lost the midterm elections in 2009 in Buenos Aires province. Parliamentary majorities come and go. Midterm elections have been formally called for October 27. All political parties will hold open primaries on August 11. The Victory Front will lose its parliamentary majority if it does not perform well. It will boost its might if it performs relatively well because it only has to improve on the dire result of 2009 to win more seats.

The President has used the parliamentary majority to limit court injunctions in cases involving the state and to promote the partisan election of Magistrates Council members. A Kirchnerite lawmaker on Thursday unveiled a bill for the state to seize the newsprint company Papel Prensa, which is currently controlled by the anti-government media group Clarín and the conservative daily La Nación.

Such drastic reforms, say many, make Argentina look more and more like socialist Venezuela. Nicolás Maduro, Venezuela’s new Bolivarian president, was on a regional tour that included a stop in Argentina (and a meeting with CFK) on Wednesday. Maduro only just won the elections in Venezuela and the result is still being challenged by the opposition candidate, Henrique Capriles. But Maduro’s tour of Uruguay, Argentina and Brazil shows that he has the support of its main regional neighbours. Maduro headed a militant rally of Kirchnerite activists at the All Boys soccer club stadium in Buenos Aires during his visit.

Argentina’s atomized opposition, like in Venezuela before Capriles, has a lot of engineering to do if it is going to defeat the Victory Front. All eyes are currently on Sergio Massa, the Peronist mayor of Tigre (a northern district in Greater Buenos Aires). Massa, who served briefly as cabinet chief to Fernández de Kirchner, performs well in polls and is still technically a Kirchnerite. Many observers think that this year’s election outlook will change if Massa decides to run in October either for or against the national government.

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Real Estate: Argentina Tries to Coax Undeclared U.S. Dollars Into Energy, Construction Projects

The Wall Street Journal – By Ken Parks

BUENOS AIRES–Argentina’s government will ask Congress to approve legislation that will allow Argentines to invest their undeclared U.S. dollar savings in local bonds to finance energy and construction projects, Economy Minister Hernan Lorenzino said Tuesday.

Argentines are thought to hold tens of billions of undeclared dollars in Argentina or offshore bank accounts.

Mr. Lorenzino’s announcement coincides with the weakening of the Argentine peso to historic levels against the dollar on the black market. At the same time, the central bank has struggled to rebuild its foreign currency reserves due in part to persistent capital outflows.

“People might have their cash in a safety deposit box, or under the bed, or worse, in a tax haven. This [measure] means taking those resources and incorporating them into the productive sector,” Mr. Lorenzino said in a televised press conference.

Mr. Lorenzino said the administration of President Cristina Kirchner will submit the legislation to Congress immediately.

All the senior members of Mrs. Kirchner’s economic team were present at the event: Commerce Secretary Guillermo Moreno, who is in charge of import and price controls; Deputy Economy Minister Axel Kicillof; Central Bank President Mercedes Marco del Pont; and tax chief Ricardo Echegaray.

Argentines have long viewed the dollar as a store of value due to their country’s long history of high inflation and economic crisis that frequently ended in major devaluations of the peso. The unrelenting weakness of the peso on the black market in the last six months is feeding fears that a devaluation might be in the works, and stoking even more demand for scarce dollars.

In an attempt to calm the public, Mrs. Kirchner said Monday that her administration won’t devalue the peso.

Inflation that most economists say is around 24% a year coupled with government restrictions on the dollars people and businesses can legally purchase are driving some Argentines into the arms of black market currency dealers.

The peso has lost about 64 cents this month to set a record low of around 10.04 to the dollar Tuesday, according to newspaper El Cronista, which publishes an average of underground exchange rates.

The black market is thought to be small, but does influence prices in some parts of the economy, especially real estate, which for decades has overwhelmingly used the dollar in transactions.

On the regulated currency market the dollar sold for 5.2090 pesos, though dollar rationing means that for most Argentines the official exchange rate is a mirage.

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