January 24, 2020
1. Alberto Fernández makes first official trip to Israel
President Alberto Fernández traveled to Jerusalem for his first official trip as president, participating at an international forum of leaders to commemorate victims of the Jewish Holocaust. Today, before returning to Buenos Aires, Fernández met with Israeli President Reuven Rivlin and Prime Minister Benjamin Netanyahu. The Argentine leader traveled with a committee of five others: Secretary of State of Strategic Issues, Gustavo Béliz; first lady, Fabiola Yáñez; Buenos Aires Governor, Axel Kicillof; legislator Eduardo Valdés; and press secretary Juan Pablo Biondi. Next week, Fernández will travel to Europe to meet with Pope Francis at the Vatican, followed by a diplomatic trip with stops in Italy, Spain, France and Germany.
2. Government to modify norms of the Knowledge Economy Law
The Fernández administration halted the special registration of knowledge economy-related businesses that hoped to enter a special tax regimen that would allow them to pay income tax of 15%, as opposed to the 35% rate normally paid. The special regimen, passed in October 2019 (two weeks before general elections), was created to incentivize productive activity related to the use of technology. According to the current administration, the suspension of the law – which would have taken effect in February – is to analyze and process applications and review certain points that business chambers wished to have clarified. The Knowledge Economy Law plans to replace the Law of Software Promotion to include more sectors as beneficiaries.
Ámbito Financiero: Gobierno suspende la aplicación de la ley de Economía del Conocimiento
3. Executive branch sends bill to Congress, setting stage for the renegotiation of Argentina’s external debt
Economy Minister Martín Guzmán held a press conference on Tuesday where he confirmed the submission of the Debt Sustainability Bill, which will be debated in the legislature at the end of the month. The bill hopes to grant broader powers to the executive branch, generally, and the Ministry of the Economy, specifically, regarding the renegotiation of external debt. “We hope there is a desire among bondholders to come to an orderly solution, because if the situation ends [badly], all stakeholders will be affected,” stated Guzmán. Concurrently, the clock is ticking for the province of Buenos Aires to resolve the payment of its 2021 bond, which could force the province into default. Governor Axel Kicillof extended the deadline to January 31st, so that at least 75% of bondholders consent to the postponement of payments to May 1st, and receipt of pending interest to the beginning of February.
4. A week of news for the Vaca Muerta
On Tuesday, during a meeting at the World Economic Forum in Davos, Switzerland, president of state-owned hydrocarbon producer YPF, Guillermo Nielsen, spoke with Brazilian Economy Minister Paulo Guedes regarding the supply of gas from the Vaca Muerta shale formation to Brazil. Nielsen remarked that “a gas pipeline to connect the Argentine gas pipeline network to the south of Brazil is an attractive market for us.” The next day, following its return to capital markets, YPF issued debt through four negotiable bonds for ARS $8.37 billion (USD $139.2 million) and USD $9.9 million, totaling USD $149.2 million, in order to develop the company’s interests in Vaca Muerta. Moreover, amidst the announcements, businesses and labor unions from the O&G sector signed an agreement with the Ministry of Labor that reverses the dismissal of 600 workers and the formation of a multisectoral advisory table, that will include the national executive branch and provinces in a bid to revive the sector.
5. IMF projects that Brazilian economic growth will benefit Argentina
According to the IMF’s quarterly World Economic Outlook, the global economy is slated to grow 3.3% in 2020 and 3.4% in 2021. With this in mind, chief economist of the multilateral lender, Gita Gopinath, signaled that recuperation of global growth this year remains uncertain, as it depends on the economic growth of markets like Argentina, Iran and Turkey, as well as emerging and underperforming developing markets like Brazil, India and Mexico. The uptick in the expected performance of Brazil – which comes off of 2019 with growth of 1.2% – is attributed to an improved attitude following the approval of the pension reform and the dissipation of disturbances in the supply of the country’s mining sector. Moreover, the report clarifies that growth in Brazil will help the economic performance of the region as a whole – especially Argentina, their principal trading partner.