U.S. companies, Argentine reforms may be worth the pain
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[March 11, 2016]
By Rodrigo Campos
NEW YORK (Reuters) - U.S. companies hit
hard by a 37 percent devaluation in the Argentine peso are nonetheless
gearing up to do more business there, betting short-term pain as the
South American country liberalizes its economy will lead to long term
The rekindled relationship between the United States and Argentina,
brought on by the country's new center-right government and its
willingness to end a 14-year debt battle, is underscored by a visit
later this month from U.S. President Barack Obama, the first of its
kind in almost two decades.
A Reuters analysis of corporate statements made during the last
round of earnings reports found companies ranging from Ford and
Pepsi to Discovery Communications grousing that the devaluation put
in play by new Argentine President Mauricio Macri would cost them
But many also noted the currency moves were part of a broader
package of reforms that would in the long run help them grow in
Latin America's third largest economy.
Macri lifted Argentina's currency controls less than a week after
taking office on Dec. 10, seeking to revive an economy hobbled by
the interventionist policies of his predecessor President Cristina
Already weak against the dollar, the peso has since fallen from a
value of 10 U.S. cents to just over 6 U.S. cents.
Typical of U.S. companies that see a silver lining to the peso's
weakness is Ford Motor Co <F.N>. Ford "had over $100 million of bad
news" from the currency's devaluation at the end of 2015, Chief
Financial Officer Bob Shanks said on an earnings call.
Yet Shanks said Macri's restructuring "is good for the longer term."
Procter & Gamble also took a currency hit. Devaluations - mostly
from Argentina but also Russia and Mexico - cost P&G roughly $300
million in December and January, Chief Financial Officer Jon Moeller
Still, the consumer goods company said it was "well positioned to
participate" in growth it expected to flow from Macri's reforms.
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A former civil engineer, Macri has cut taxes and trade barriers and
eliminated thousands of public jobs as he faces the challenge of
reducing government spending while stimulating growth.
Seed and agrochemicals company Monsanto Co <MON.N> cut full-year
ongoing earnings per share guidance to a $4.40-$5.10 range from
$5.10-$5.60, due in part to the peso's devaluation.
Though Monsanto said currency pressure could persist through this
year, it saw a possible bounce back in 2017.
Besides floating the peso, Macri has reached settlements to end
legal disputes over the country's 2002 debt default. The deals
should allow Argentina to return to global capital markets and ease
credit conditions for companies and consumers.
Focus will sharpen on Argentina's improved business environment
during Obama's March 23-24 visit. The agenda includes efforts to
increase cooperation in trade and investment.
(With reporting by Karl Plume and Tom Polansek in Chicago; Editing
by Andrew Hay)
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