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Argentine June Tax Revenue May Show Slower Growth
Bloomberg
June 30, 2008

By Bill Faries

Growth in Argentina's tax revenue may have slowed in June as quickening inflation, declining consumer confidence and a three-month farm strike took their toll on South America's second-biggest economy.

``I certainly see some deceleration in revenue,'' said Bertrand Delgado, an economist at IDEAglobal Inc. in New York.

Slowing tax income may endanger President Cristina Fernandez de Kirchner's economic policy of maintaining budget surpluses as a way of insulating the country from turmoil in international financial markets.

Government spending rose 39 percent in May compared with an increase in tax revenue of 28.5 percent. Consumer confidence fell to a five-year low this month as a farmers strike and inflation concerns led families to put off purchases of durable goods. Sales taxes account for nearly one-third of government tax revenue, the biggest single contributor.

Argentina will report June tax revenue figures tomorrow at 5 p.m. New York time.

Economists including Eduardo Levy-Yeyati at Barclays Capital have slashed their growth forecasts for Argentina and said that consumer prices may be rising three times faster than government reports indicate. Levy-Yeyati estimates 2008 growth at 5.5 percent and at 2.5 percent next year. He said Argentina was likely headed for a ``hard landing'' after more than five years of more than 8.5 percent annual expansion.

The government said consumer prices rose at an annual rate of 9.1 percent in May, the fastest since March 2007.

Inflation Questioned

Inflation reports released by Argentina's national statistics institute have been questioned by institute employees and independent economists since January 2007, when then- President Nestor Kirchner began changing personnel at the agency in order to ``improve operations.''

Argentina's Congress will continue debating changes to agricultural export taxes Fernandez introduced March 11, setting off the biggest anti-government protests since 2001 as farmers blocked roads and halted grain exports. Farmers called off their strike for a fourth time June 20 to re-enter talks with the government.

``Let's have the patience to get through this week and the one coming,'' farm leader Eduardo Buzzi told reporters June 27.

Markets Last Week

Last week, the yield on Argentina's benchmark 8.28 percent dollar bonds due in 2033 rose 22 basis points, or 0.22 percentage point, to 10.894 percent, according to Bloomberg data. The bond's price fell 0.16 cent on the dollar to 76.352 cents.

The Buenos Aires benchmark stock index Merval rose 1.3 percent last week to 2093.01. Morixe Hermanos SA (MORI AR), a pasta and cereal maker, rose 14 percent while Banco Macro SA, Argentina's fourth-largest private bank, fell 8.7 percent