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3/2/2016 Argentina’s Macri steps on the gas – The Northern Miner
http://www.northernminer.com/news/argentinasmacristepsonthegas/1003768532/ 1/8
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LATEST GOLDCORP’S NEW-LOOK ‘CONSERVATISM’ FAILS TO IMPRESS
Argentina’s Macri steps onthe gasBY: TRISH SAYWELL AND ELENA MAYER MARCH 1, 2016
BUENOS AIRES, ARGENTINA — In the two monthssince taking the helm of Argentina, PresidentMauricio Macri has moved quickly to reverse theinterventionist course of more than a decade ofArgentine history.
He has removed almost all restrictions imposed bythe previous administration of Cristina Kirchner onthe purchase of foreign currency, expatriation andrepatriation of funds and compulsory deposit offoreign investments.
The former mayor of Buenos Aires has also unifiedthe exchange market and floated the peso, allowingforeign companies to send money to Argentina at
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3/2/2016 Argentina’s Macri steps on the gas – The Northern Miner
http://www.northernminer.com/news/argentinasmacristepsonthegas/1003768532/ 2/8
the unified exchange rate, and abrogatedrestrictions on the repayment of foreign debt(principal or interest) in a bid to reach a deal withinternational creditors and regain access tointernational credit markets. This week the countryand a group of holdout creditors agreed in principleto bring an end to their 15-year legal dispute overdefaulted debt.
In addition, Macri has removed export taxes on allmetals as well as industrial and agriculturalproducts, and taken steps to eliminate restrictionson imports, slashing the list of items requiringimport approval permits from about 19,000 down toabout 1,000.
“The changes that we have seen in the last twomonths in terms of making changes to the economyand putting the economy back on track, have reallybeen impressive,” says Canada’s ambassador toArgentina, Robert Fry. “My sense of the newgovernment is that they are straight shooters,they’re frank, they´re much more transparent.”
Fry has met Macri four or five times since hisposting to Buenos Aires in April 2015. The first timewas when the 56-year-old politician and presidentof the country’s most popular soccer team wasentering the final laps of the presidential campaign.
The second time was in early February when thepresident-elect hosted the diplomatic corps at theCasa Rosada (Pink House), Argentina’s equivalent tothe White House in Washington, D.C. “It was a signof change,” Fry says. “That is the first time that hashappened in a very long time. The previousadministration did not engage a lot with thediplomatic corps, shall we say.”
Two days after he was sworn in, Macri also invitedthe governors of each province to his home, anevent, Fry says he was told privately by some inattendance, that hadn’t happened in many years.
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3/2/2016 Argentina’s Macri steps on the gas – The Northern Miner
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Macri has reached out to politicians from rivalparties, too, taking Sergio Massa, a Peronistpolitician from the opposition party, with him to theEconomic Forum in Davos, Switzerland.
While he extends a hand across the political aisle,Macri also champions consensus-building andteamwork, local pundits claim.
“It’s not all about him, he is a team builder and ateam player and he’s also appointing people whoknow how to work with others,” says Alberto MarioCarlocchia, an independent consultant on businessdevelopment and corporate affairs, who spent 17years of his career working for major miningcompanies including AngloGold Ashanti, Goldcorpand Yamana Gold.
The new president also has surrounded himself withministers who have experience in the businessworld. Alfonso Prat-Gay, Macri’s finance minister,used to lead J.P. Morgan Chase & Co.’s currencyresearch unit, while the Minister of Mines andEnergy, Juan Jose Aranguren, is a former CEO ofShell Argentina.
“They’ve put together the best Cabinet I thinkArgentina has ever had and it’s a huge opportunityto really turn the country around,” says MiguelMorley, Agrium’s managing director for SouthAmerica and the president of the ArgentineChamber of Commerce.
Martin Dedeu, a lawyer, president of the UnionIndustrial Argentina, and past president ofArgentina’s Mining Chamber, points out thatAranguren is one of the few businessmen in thecountry who wasn’t afraid of taking the formerPeronist government to task for policies he thoughtwere ill-advised, like keeping oil prices artificiallylow. “Not many other people had the courage tostand up to the previous government,” he says.“Aranguren was an exception.”
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3/2/2016 Argentina’s Macri steps on the gas – The Northern Miner
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Carlos Saravia Frias, a Buenos Aires-based lawyerwith his own firm, who also spent several years ofhis career as Secretary of Mining and was involvedin drafting certain amendments to Argentina’s 1993Mining Investment Law, shares Dedeu’s view.
“We spent 15 years in a nightmare in politicalterms,” he says. “If you tried to say somethingagainst the government, or something that was notin line with what the government was trying to do, itwas a problem … Aranguren was saying what hewanted. He has really committed to this governmentand those are the guys that we need to make thechanges.”
Aranguren did not respond to questions before thisarticle went to press.
On the mining file, Macri has created an entirelynew ministry called the Ministry of Energy andMines (previously responsibility for mining waslumped together under the Ministry of Production)and appointed Daniel Meilan as its Secretary.Meilan, a geologist, was also the former Secretary ofMines during part of the heyday of mineralexploration in the country during the 1990s.
The government has shown the importance ofmining by creating two new posts: theUndersecretary of Mining Development, which is incharge of international relations and liaison withmining companies (Mario Cappello), andUndersecretary of Mining Policy, which isresponsible for local issues (Santiago Dondo).
In addition, Argentina’s Mining Investment Law isviewed by most people in the industry as quite acompetitive one, as it guarantees fiscal stability tomining companies for a period of thirty years.Lawyers familiar with the code point out thatchanges were never imposed on the mining law bythe previous government so the legislation is stillintact.
3/2/2016 Argentina’s Macri steps on the gas – The Northern Miner
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“Argentina has maintained the legal framework ofthe 1990s,” says Ignacio Celorrio, a lawyer atQuevedo Law Firm. “To its credit the previousgovernment didn’t change the mining laws. It mightnot have respected the rules, but it never changedthem. So now, with a new administration, they cansit down and say: “’We have one of the mostattractive mining frameworks in the world’ and itwould be true.”
Celorrio also points out that while Argentina doesn’tshare any of the water problems that neighboringChile has (“water permits are all straightforwardhere”), it does have “incredible” geology.
Paola Rojas, director of business development atSynergy Resource Capital, an investment andcorporate advisory firm that connects LatinAmerican resource projects with investorsworldwide, says that within days of Macri’s electionand his removal of currency controls, people startedcontacting her office from Brazil, Canada, the U.S.and Australia.
“I instantly got calls from investors asking mewhether it was time to go back, saying ‘Can we lookat projects,’” she recalls in a telephone interviewfrom her office in Sydney, Australia, noting that shereceived inquiries from about 15 different groups inthe last two months, compared with perhaps one ortwo in all of 2015. “I was surprised. I expected theattitude towards the country would change, but Ididn’t expect it to happen so quickly.”
Rojas, whose family has for decades owned a privatecompany providing exploration, management andother consulting services to the mining sector inArgentina, Chile and Colombia, also notes thatMacri is familiar with the sector because at one timehis father was connected with an explorationcompany, Minera Geometales, that had tenementsin the country.
3/2/2016 Argentina’s Macri steps on the gas – The Northern Miner
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“I’m not sure if they’re active now, but they used toexplore maybe ten years ago, so he knows themining sector and he knows it needs foreigninvestment,” she says, adding that Macri is wellaware that projects like Pachon, and other hugecopper porphyries, require billions of investmentdollars that simply aren’t available locally.
“He knows that mining is one of the sectors that isgoing to bring in investment,” she continues. “I’mnot going to say it’s one of his biggest priorities, butwithin his priorities it’s high.”
According to Saravia Frias, Macri believes miningshould become one of the pillars of Argentina’seconomy, particularly for have-not provinces thatlack, in his words, the country’s other traditionalsources of income, such as cows, soybeans andwheat.
“He really knows what the mining sector means forthe economy,” Saravia Frias argues. “Thediversification of the economy is just common sense… and he’s convinced that an alternative for theAndean mountain range provinces is mining, that’sit.”
Jose Bordogna, corporate financial controller atAustral Gold (ASX: AGD), which has projects inArgentina and Chile, says Macri´s immediate effortsto strike a deal in the conflict with holdouts relatedto Argentina’s 2005/2010 debt negotiations, and hismove to eliminate export taxes, along with theliberalization of foreign exchange controls, arecrucial steps in fostering a better investment climateand lowering the cost of debt.
“An agreement with the holdouts will definitely helpreduce the cost of equity and debt financing for bothArgentina and foreign companies, bring new sourcesof funds, and help change the sentiment about thecountry,” Bordgona says. ¨All these expectedoutcomes will consequently improve the valuations
3/2/2016 Argentina’s Macri steps on the gas – The Northern Miner
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and the NPV of mining projects, a key metric that isrelevant for any analyst or investor looking at acompany.¨
The expected upgrade of Argentina from frontiermarket to emerging market may also trigger a surgeof capital inflows, he says.
In the meantime, the Argentine mining sector alsoneeds to catch up with new global ways of financing,he argues, and be able to secure long-term financingin both local and foreign currencies. “Localfinancing is important, as Argentine investors canalso play a key role to boost the sector.”
Of course, no one believes that Macri and his teamcan overhaul the economy over night, particularlygiven Argentina’s long history of fractious politicsand the fact that the president’s party lacksmajorities in both chambers of Congress. Still, manyare hopeful that the new government is laying thegroundwork for sustainable improvements that canlast longer than his term in office.
“Argentina has to make up for lost time,” saysDedeu, the past president of Argentina’s MiningChamber. “And I’m really confident that it will.”
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3/2/2016 Argentina’s Macri steps on the gas – The Northern Miner
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