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The slum that appeared in the night

Immigrants versus the neighbors, the president versus the mayor. La Nina drought threat stokes grain trading. China snaps up Argentine oil assets, as a massive labor strikes shuts down national oil production. The return of the IMF and a dash of foreign relations fracas.

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Nearly 6,000 immigrant squatters overtook the IndoAmerican Park, Buenos Aries's second largest public green space, setting up makeshift shelters and staking off land in an attempt to create a new slum. Three people were killed as angry mobs of nearby residents began torching tents of the mostly Paraguayans, Bolivian and Peruvian laborers.  The sudden seizure and violence shocked locals, but  underscored the shortage of decent housing for about half a million residents, mostly immigrants, in the the Argentine capital. An estimated 1,500 families swore not leave the camp until the city government provided them with housing.

The confrontation quickly developed into a political litmus test for the candidates in next year's presidential election: President Cristina Fernandez de Kirchner and Buenos Aires Mayor Mauricio Macri.

Macri demanded the national government deploy the Federal Police to force the squatter families off of public property. He also alluded to a link between massive immigration to Buenos Aires and increase in crime and drugs trafficking. Kirchner refused to send the Federal Police and accused Macri of xenophobia.

The standoff ended last week, with the squatters finally agreeing to move out of the park. In the end, Macri and Fernandez were forced to work together on an agreement to jointly develop housing projects.

Meanwhile, Fernandez took further political advantage of the situation by creating a new Security Ministry, which joins the Federal Police, the border patrol and the Coast Guard. She appointed Defense Minister Nilda Garre to head the new force.

Still, with three dead and squatters moving into other areas of the city, Macri may have suffered political damage after the incident. just as Amado Boudou, Argentina's economy minister and staunch supporter of Fernandez, announced his candidacy for mayor next year.

 With more hot and dry weather in the forecast, Argentina's corn and soy crops may not get enough rain. Argentina is the world's second largest exporter of grain after the United States, and the weeks around the start of the new year are a critical time for pollination, with rain making or breaking the year's crop. Grain traders are on full alert, with added activity in corn futures after the extenuation of an ethanol tax credit.

Argentine corn is also the focus of China's attention lately, with the Minister of Agriculture Julian Dominquez announcing a trade agreement on corn sales to China in 2011. China is aggressively trying to add Argentina as an alternative supplier with China set to become the world's largest corn importer in the next five years.

China's appetite for oil in Argentina is growing too. Last week, the China Petroleum Corp, known as Sinopec, announced a decision to buy Occidental Petroleum's operations in Argentina for $2.45 billion, accelerating a drive by Chinese energy companies to diversify their oil sources in Latina America. The deal with Asia's biggest refiner came on the heels of Beijing-based Cnooc Ltd's joint venture with Brindas to buy BP's 60 percent stake in Pan American Energy, Argentina's second biggest oil and gas producer. Argentina has potential for oil and gas reserves, particularly offshore, but investment in exploration and upstream investment has been constrained by price controls and energy tax policies --a financial regime that Chinese investors are hoping will change.

Yet the Chinese may be in for a wild ride here in Argentina, if the current labor strike in the key oil-producing provinces of the country is any indication of the operating environment. 

Argentina's largest integrated oil and gas company, YPF SA, a unit of Spain's Repsol YPF, has been forced to shut down oil production amid a strike by union workers entering its third week. More than half of Argentina's crude oil is processed in these provinces and the strike threatens to deprive the capital of fuel this week, just as Aregentine motorists are set to start the summer vacation season in January.


After almost a decade of vilification and rapprochement, the Argentine government stunned investors late last month by inviting the International Monetary Fund back into the country for the first time since 2005 to help overhaul its inflation statistics. 

 The IMF mission will likely visit Argentina several times in the coming months before making its final conclusions and recommendations next April, though most do not expect the government to make any efforts to curb inflation until after the 2011 presidential election.

The credibility of Argentina's national inflation data has been called into question since 2007, when then-President Nestor Kirchner purged the national statistics institute, known as Indec. Since then government data and private-sector estimates have diverged significantly. Although the government reported 11 percent inflation for November, most economists believe the true rate of inflation is well above 25 percent. 

While Argentina has been the only G20 nation to refuse oversight by the IMF, it could now also be the first G20 on a blacklist of countries where financial transactions represent a high risk of criminal activity. The Financial Activity Task Force, a multinational advisory group acting on behalf of the G20, has recommended nearly a thousand changes in Argentina, whose large cash economy makes it easy for criminals to mask their money sources. Failure to comply would result in more security of international transactions that would raise the cost of doing business in Argentina.

Argentina is set to do more business with Cuba, as are other nation members of Mercosur, which seeks to boost economic and political ties with the communist island. During a Mercosur summit  in Brazil last month, trade agreements were also signed with Australia, New Zeland, Syria, and the Palestinian territories.


Meanwhile, Argentina, Uruguay, and Brazil have given diplomatic recognition to the state of Palestine. Argentina's President Cristina Fernandez told Palestinian Authority President Mahmoud Abbas in a letter that her country would recognize a Palestine defined by 1967 borders, while Isreal expressed "regret and disappointment."

Wikileaks expressed several notions about how Washington sees Argentina in the series of leaked cables that reverberated around the world earlier this month. The cables described Argentina's government as "acid," "impervious to advice," "inept at foreign policy, and "extremely thin-skinned." They also made several references to the mental health of Fenandez and questioned her ability to control her emotions and manage stress.