Uruguay says Argentina will review 30% ‘tourism tax’ – media

© Reuters.  Uruguay says Argentina will review 30% 'tourism tax' - media © Reuters. Uruguay says Argentina will review 30% ‘tourism tax’ – media

By Maximilian Heath

BUENOS AIRES (Reuters) – Argentina’s Tourism Minister has committed to reviewing a 30% “tourism tax” applied when travelers from the country pay for goods and services abroad in U.S. dollars, Uruguayan President Tabare Vazquez told local news portal Infobae.

The new law, which has hit traditional Argentine Southern (NYSE:) hemisphere summer holiday destinations like its smaller neighbor Uruguay, applies to all such expenses incurred when using credit cards outside of the country.

Vazquez said in an interview published by Infobae late on Saturday that representatives of the Uruguayan Chamber of Tourism traveled to Argentina to talk with representatives of the Fernandez government.

“They got what they hoped to get: a commitment to some potential flexibility in the timing of the measure …and a commitment from the minister of tourism (Matías Lammens) to review the situation in 180 days. We will see what happens,” Vázquez told Infobae.

A spokesman for the Argentine Ministry of Tourism declined to comment.

Argentina is in the grip of a prolonged recession and annual inflation is running at more than 50%.

The credit card charge aims to help prop up the local peso and was introduced by the new government of Alberto Fernández as part of an “economic emergency” law passed by Congress in December.

The government is due to repay around $ 100 billion in maturing debt this year and is in negotiations with creditors about a restructuring.

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Argentina Can’t Pay Debt Until Economy Grows, Fernandez Says

© Reuters.  Argentina Can’t Pay Debt Until Economy Grows, Fernandez Says © Reuters. Argentina Can’t Pay Debt Until Economy Grows, Fernandez Says

(Bloomberg) — Argentina is willing but unable to pay its debts under current conditions and needs the economy to grow again before meeting its obligations, President Alberto Fernandez said in his first speech after being sworn in.

The government will seek “constructive and cooperative” dialogue with the International Monetary Fund and bondholders to address the debt load, Fernandez said, without giving additional details. The outgoing administration of Mauricio Macri left Argentina in “virtual default,” he said.

Fernandez, 60, read off a list of challenging economic indicators that he’s inheriting including the biggest debt load as a percentage of gross domestic product since 2004, when the country was in default and he was cabinet chief. Investors are awaiting details from incoming Economy Minister Martin Guzman on his plans to confront the debt crisis which may include proposals to extend maturities.

“The country is indebted, cloaked by an instability that discards the possibility of development and leaves it hostage to foreign financial markets,” he said. “Argentina should grow with a project of its own and implemented by Argentines, not dictated by foreigners with old recipes that always fail.”

Fernandez’s speech was “constructive,” said said Shamaila Khan, the New York-based director of emerging-market debt at AllianceBernstein. “They obviously didn’t have much policy details. But I don’t think we were expecting that from an inauguration speech.”

Debt Challenge

Macri, who reinserted Argentina into global bond markets after taking office in 2015 but later failed to control inflation and kick start growth, signed a record $ 56 billion IMF credit line last year. The implied probability of non-payment over five years with credit-default trading stands at about 95%.

Macri, who was forced to reimpose capital controls in September after markets sank due to a primary election that showed Fernandez set to win the presidency, had also announced plans to “reprofile” a total of $ 101 billion in debt between payments due to private creditors and the IMF.

Moody’s Investors Service Inc. said restructuring Argentina’s medium- and long-term debt will be a challenge for Fernandez’s administration, and that the future of the nation’s credit ratings will depend on “losses imposed on bondholders as well as the long-term sustainability of the government’s yet-to-be-defined economic program.”

Fernandez said that the 2020 budget can only be drawn up once the debt negotiation has been completed, as well as some economic and social measures haven been implemented to compensate the impact of the crisis in the economy.

“Solving the problem of the unsustainable debt that Argentina has today is not a matter of winning a dispute. The country has the will to pay, but it lacks ability to do it,” Fernandez said.

Argentina’s bonds fell slightly on Tuesday with notes due in 2028 down 0.5 cent to 40 cents on the dollar.

(Updates with quotes from Fernandez, analysts)

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‘Deja vu’: Argentina braced for new round of debt talks with markets stalled

© Reuters. People walk past a screen showing currency exchange rates at a currency exchange shop in Buenos Aires © Reuters. People walk past a screen showing currency exchange rates at a currency exchange shop in Buenos Aires

By Cassandra Garrison

BUENOS AIRES (Reuters) – Argentine markets held steady on Friday morning at the end of the first business week since voters chose a new left-wing government, as investors watched for signs about future economic policy and plans for crunch debt talks with creditors.

With few signals from President-elect Alberto Fernandez, the country’s peso currency and bonds have been trapped in limbo, while international holders of Argentine debt have been in Buenos Aires for talks amid fears of default.

In a playful moment on Friday, Guillermo Nielsen, a key economic advisor to Fernandez who previously led fraught negotiations with Argentina’s creditors in 2005, tweeted a photo from his office alongside a major German investor.

“Deja vu? Estefan Engelsberger in my office now,” Nielsen tweeted, referring to an investor who had led a group of European creditors in previous talks, and became well enough known to have his own cartoon character in Argentine newspaper Clarin.

Nielsen led the debt talks under the administration of former President Nestor Kirchner and is now an economic adviser to Fernandez. He is expected to play some role negotiating the restructuring of some $ 100 billion in sovereign debt.

In an interview published on Friday with Argentine news website Infobae, Englesberger said he was here to offer his help to the Fernandez government in upcoming negotiations with the International Monetary Fund, which agreed to a $ 57 billion financing program with Argentina in 2018.

In the markets, Argentina’s peso edged down to 59.95 per dollar, capping off a mostly steady week under stricter currency controls and heavy central bank invention to steady the rickety currency.

The black market peso was 1.47% stronger in morning trading, to 68 per dollar, traders said.

Fernandez, who has named a transition team but not yet his key picks for top economic posts, was scheduled to travel to Mexico on Friday and return next week, in his first foreign trip as president-elect.

He defeated business-friendly President Mauricio Macri in an election on Sunday to set Argentina back on a left-wing path.

Argentina’s central bank was also set to auction another $ 50 million at a rate of 59.99 pesos per dollar, traders said on Friday. The central bank has been draining its foreign currency reserves with regular interventions in the foreign exchange market to defend the peso since Fernandez heavily won an Aug. 11 primary election.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Burned and Trapped, Bondholders Dust Off Guide to Flee Argentina

Burned and Trapped, Bondholders Dust Off Guide to Flee Argentina Burned and Trapped, Bondholders Dust Off Guide to Flee Argentina

(Bloomberg) — For the bravest, most risk-tolerant investors out there — shops like Franklin Templeton and Pimco — the Argentine trade the past few years was to dive into the local market and scoop up peso-denominated bonds. Paying out interest rates of up to 75%, it was a cash-generating machine.

But now, amid a collapse that has put the country on the verge of default once again, it is these bonds that have taken the worst of it. Not only have they plunged in value just like the country’s dollar notes, but they have also been hammered by a 25% drop in the peso and gotten ensnared by capital controls the government imposed this week. That move, which came in a desperate bid to stabilize the peso, effectively blocked investors from taking money out of the country through traditional foreign-exchange markets.

Which leaves many bond firms nursing losses and searching for alternative ways out. One method has immediately jumped to the fore, the same one used for years to skirt controls during the previous rule of the leftist version of Peronism that now appears poised to retake the presidency next month. It’s called the blue-chip swap and it’s predicated on the purchase — with pesos — of certain types of shares or bonds in the local market and the subsequent sale of those securities abroad for dollars. It’s not cheap, though: The effective peso exchange rate is currently about 8% weaker than the going price in the foreign-exchange market.

“Old veterans who used to trade local-currency bonds from beforehand know the score,” said Edwin Gutierrez, London-based head of emerging-market sovereign debt at Aberdeen Asset Management, who said he used the parallel rate during the capital controls implemented by Cristina Fernandez de Kirchner’s government. “It’s a return to the bad old days.”

Beforehand means before President Mauricio Macri, a free-market reformer determined to return the slumping, state-controlled Argentine economy to normalcy, swept into office in 2015. One pledge was to overturn capital controls, and he achieved it in his first week in office. He assembled a star cabinet with Wall Street veterans to settle lawsuits with creditors and return Argentina to foreign bond markets.

Over the next two years, finance officials sold enough local bonds to build a peso bond curve amid the promise of slowing prices. After jacking up rates to among the highest in the world — the benchmark is now at 86% — they lured foreign investors like Franklin Templeton’s Michael Hasenstab to place long-term bets on the peso bonds. The money manager kept his bullish stance even as the peso tumbled 50% last year amid growing concern about the outlook for growth and inflation.

Argentina’s carry trade, the practice of buying local notes with borrowed dollars, offered a modest return in 2017 before the rout in 2018. Its performance in the first half of this year was among the world’s best, though it’s now negative for the year.

Some foreign investors, most notably Pacific Investment Management Co., latched onto local floating-rate bonds that track the country’s monetary policy rate, making them the world’s top-paying bond.

Peso Bet

Fund managers including T Rowe Price to VanEck were also among top foreign holders of local currency bonds. The peso notes have underperformed overseas dollar bonds since the currency controls were announced Sunday.

“Many investors thought Argentina was on its way to becoming Chile or Colombia — stable, investment grade,” said Leo Chialva, a partner at Buenos Aires-based consulting firm Delphos Investment. “Those large funds are horrified by the latest measures.”

It’s hard to know exactly how things worked out for Franklin Templeton or Pimco, and neither firm would discuss how it fared in detail. While Argentina makes up just a small portion of Franklin Templeton’s assets, the Templeton Emerging Markets Bond Fund had its biggest drop since the 2008 financial crisis the day after Argentina’s primary round results. One silver lining: the fixed-rate peso bonds that have Franklin Templeton as the top holder won’t be part of a debt reprofiling plan the government is now proposing.

While Argentina was always a very small part of Pimco’s total assets, the fund manager diversified its holdings in the country “with more downside protection in an extreme market event” and “avoided larger exposures with greater losses that have impacted other major investors,” spokesman Michael Reid said last month.

Under the rules Argentina announced Sunday, exporters must repatriate foreign currency from overseas sales within five days. Corporations will need authorization from the central bank to buy dollars in the foreign-exchange market, except in cases of international trade. Individuals, meanwhile, will be limited to buying no more than $ 10,000 a month.

“The aim is to protect exchange stability and savers,” Guido Sandleris, the head of the central bank, said the day after bringing back the controls.

The gap between the official exchange rate and the blue-chip swap rate, which was sometimes as large as 40% during the Kirchner years, won’t exceed 10% this time around, Chialva said. That’s because the controls aren’t quite as stringent as they were in the past, especially for individuals. Plus, after dropping 20% since the primaries, the peso is at a fair value given the likelihood of a leftist government winning the presidential ballot next month, he said.

As the blue-chip swap comes back, local brokerage firm Portfolio Personal Inversiones sent out a note for the benefit of newcomers to explain how the system works.

It’s “an expensive but fluid way to convert this trash cash into greenbacks,” the note said.

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Argentina new economy chief will not allow ‘irrational’ run on peso

By Hugh Bronstein and Hernan Nessi

BUENOS AIRES (Reuters) – Argentina will not allow a chaotic fall in the peso and will use its dollar reserves to bolster the currency against political uncertainty that has swept the country since the Aug. 11 primary election, Treasury Minister Hernan Lacunza said on Wednesday.

The peso opened 0.47% weaker at 55 to the U.S. dollar and the country’s risk spread was 8 basis points tighter at 1,855 over safe-haven U.S. treasury bonds , reflecting a calming of recent market jitters.

“We will not allow an irrational run on the currency. That’s why we have international reserves,” Lacunza told local radio station Mitre in an early morning interview, less than 24 hours after being sworn in as treasury chief.

Later on Wednesday, Lacunza was scheduled to meet with economic advisors to center-left presidential candidate Alberto Fernandez, who crushed business-friendly incumbent Mauricio Macri in the presidential primary vote. The primary result sent the peso spiraling down 18% last week.

“Since the market pays as much attention to the future as it does to the present, in addition to what the government in charge can do, it also matters what the other candidates and their economic teams say, to generate certainty towards the future,” Lacunza said, when asked about the meeting with the Fernandez team scheduled for later in the day.

Fernandez is now the clear front-runner ahead of the Oct. 27 presidential election. Macri has enacted a series of emergency economic measures, including cuts in food and personal income taxes, aimed at helping families stung by Argentina’s recession and 55% inflation rate.

Nicolas Dujovne, the former treasury minister, quit on Saturday, saying he believed the country needed “significant renewal” of its economic team.

The currency stabilized on Tuesday, after the central bank poured $ 112 million of its reserves into dollar auctions.

Including last week’s interventions, the bank had auctioned off $ 615 million in dollar reserves as of Tuesday afternoon, traders said.

Lacunza said Argentina would hit its target of erasing the country’s primary fiscal deficit this year, under a $ 57 billion standby financing pact signed in 2018 with the International Monetary Fund. Macri negotiated the pact to halt a run on the peso last year.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Argentina Treasury minister resigns, says ‘significant renewal’ needed amid economic crisis

By Eliana Raszewski

BUENOS AIRES (Reuters) – Argentina’s Treasury Minister Nicolas Dujovne has resigned, saying in a letter seen by Reuters on Saturday he believed the government needed “significant renewal” in its economic team amid a crisis which saw the peso plunge this week.

Dujovne said in a letter to Argentine President Mauricio Macri that he had given his all to the job, helped tame a significant deficit and trim public spending but conceded: “Mistakes have been made, without a doubt.”

“I believe my resignation is in keeping with my place in a government… that listens to the people and acts accordingly,” he added. 

Macri has appointed Hernan Lacunza , the current economy minister for Buenos Aires province, as Dujovne’s replacement, a government source told Reuters. 

(Reporting Eliana Raszewski; writing by Aislinn Laing; Editing by Marguerita Choy)

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Brazil and Argentina renew rivalry on Pan Am handball court

By Steve Keating

LIMA (Reuters) – Whether soccer or basketball, a World Cup or an Olympics, the Brazil-Argentina rivalry is one of the greatest in sport and it played out again on Tuesday on the Pan Am Games women’s handball court.

The two countries can work themselves into a lather with nothing more than pride on the line but the stakes were much higher at a seething Videna Sports Center, with a gold medal and direct qualification for the 2020 Tokyo Olympics going to the winner.

This round went to Brazil, who broke open what had been a tight contest with a second half surge, cruising to a 30-21 win to punch their Tokyo ticket.

It was the 11th gold of the Games for Brazil, keeping them in front of their bitter rivals who sit eighth in the standings.

The United States continued their gold medal rampage, improving their haul to 28 after just four days with Mexico a distant second on 13 followed by Brazil.

The U.S. grabbed gold on land, sea and air on Tuesday, led by Karissa Cook and Jace Pardon who capped an unbeaten run to the women’s beach volleyball gold with a 14-21 22-20 15-10 win over defending champions Argentina.

Gymnast Riley McCusker was flying high at the Polideportivo Villa El Salvador, taking top spot on the uneven bars finals while weightlifter Sarah Robles picked up gold with victory in the women’s over-87kg division.

Timothy Sherry in the 50 meter rifle and Brian Burrows in the trap were on target in the men’s shooting competition while waterskier Regina Jaquess added her third gold to the U.S. cause by winning the overall women’s title.

After a slow start, Canada finally found its gold medal mojo, doubling their total from four to eight to leap up the leaderboard.

Gymnast Ellie Black, Canada’s most decorated athlete at the 2015 Pan Am Games, is well on her way to repeating that performance. She picked up a second gold and third medal in three days by winning the vault event.

The 23-year-old also took bronze in the uneven bars to take her tally to four medals for these Games and nine over the last two Pan Ams.

Black led Canada to a team silver on Saturday then on Monday successfully defended her all-around crown.

“We wanted to deliver some strong performances and we were able to do that,” said Black. “It is awesome to bring some more medals home for Canada.”

It was a big day in the canoes for Canada with Alanna Bray-Lougheed and Andreanne Langlois triumphing in the women’s K2 500m and Dominik Crete getting home first in the men’s K1 200m sprint.

Dorien Llewellyn triumphed in the men’s overall water skiing competition.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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In Argentina crisis, firms do everything to cut costs – except fire workers

© Reuters. Employees work at industrial manufacturing company Gottert in Garin © Reuters. Employees work at industrial manufacturing company Gottert in Garin

By Eliana Raszewski

BUENOS AIRES (Reuters) – Like many Argentine businessmen, Marco Meloni is doing everything he can to avoid laying off staff at his textile factory despite a slump in sales, more than 70 percent interest rates and soaring utility bills.

The reason? He doesn’t have the money to fire anyone.

A little-reported and unusual feature of the economic crisis gripping Latin America’s third-largest economy is the absence of many workers losing their jobs.

Small businesses, the biggest employer in Argentina, have been hardest hit by inflation that is nearly 48 percent, a tumbling peso, and major cuts to subsidies for public utilities that have sharply increased companies’ operating costs. But the unemployment rate has barely budged from 9 percent.

Reuters interviews with business owners in textile, plastic, clothing and paint industries, government officials and union leaders show that many firms are adopting different strategies to try to survive until the economy begins to recover, which the International Monetary Fund expects to begin in the second quarter.

Firms are reducing working hours, halting production on some days, cutting shifts and making workers take their vacations now in anticipation of more customer demand once the economy lifts.

The workforce contracted by just 120,000 registered workers between October 2017 and October 2018, the latest government data reviewed by Reuters shows. That represents about 1 percent of the 12 million-strong labor force.

In contrast, the United States lost about 6 percent, or some 8.7 million people, of its workforce during the two years of the 2007/08 Great Recession as companies laid off workers to stay afloat.

Argentina has some of the world’s most generous labor laws and they are making it more difficult for small business owners like Meloni to adapt to an economy now in recession. Typically in a tough economic climate a company might be expected to reduce its workforce to cut costs. But in Argentina taking that step could dramatically increase costs and potentially push a company into bankruptcy.

Introduced by successive populist Peronist governments since the 1940s, the labor laws make the country one of the most expensive in Latin America to employ, or fire, a worker.

Argentine companies are required to pay workers laid off a month for every year of service plus at least one additional month simply for informing them they are being fired. And crucially, there is no cap on how much a company needs to pay.

In contrast, neighboring Chile has a cap on severance pay. Layoff costs in Argentina are among the highest in the world, according to the World Bank’s Doing Business project, which measures business regulations in 190 economies.

GIVING NOTICE

The Argentine labor laws have helped to contain what could have been a big increase in the unemployment rate. In addition, President Mauricio Macri, a free marketer who wants to reform the country’s rigid labor system to encourage foreign investment, is taking steps to dissuade companies from firing workers.

He announced on Nov. 13 that companies must give 10 days’ notice of any plans to lay off workers so that the government can help find ways to keep them employed. Macri wants to expand an existing program that helps to subsidize salaries of workers at companies that can show they are in financial straits.

The government has not yet issued any regulations to enforce its announcement, so it is not clear whether companies are informing them of pending dismissals.

Like many small businessmen, Meloni has found himself caught in a vice. Sales from his plant in the town of Quilmes, 30 km (19 miles) outside the capital Buenos Aires, shrank by just over one third last year as Argentina’s economy sank deep into recession.

"It was not a storm," said Meloni, a reference to how the country’s president has described the economic crisis. "It was a tsunami. The tsunami kills."

Meloni said the plant, which makes fabrics, used to operate 24 hours a day from Monday to Saturday but now just operates 16 hours a day, five days a week. Like many other businesses, Meloni advanced the holidays to his roughly 100 employees with the hope that once summer ends in March, demand will pick up.

Daniel Funes de Rioja, the head of one of Argentina’s biggest labor law firms, said a major issue for companies was the seniority of many workers. Many, especially in low-skilled industries, stay in the same job for years, so paying them severance becomes very expensive.

“There’s a cultural custom for Argentines to remain in their jobs but also, as it has been always very expensive to fire people, that has extended the length of service of the workers in the companies,” explained economist Camilo Tiscornia, from Buenos Aires-based C&T consultancy.

Production Minister Dante Sica said companies were also reluctant to fire workers because of forecasts showing an economic recovery around the corner.

"They prefer to suspend and not fire because of the cost of layoffs, plus the cost of hiring is costly," Sica said in an interview.

The unemployment rate in Argentina fell to 9 percent in the third quarter from 9.6 percent in the second quarter. Year on year, it increased only 0.7 basis points from the third quarter of 2017, when the economy was growing at an annual rate of 3.8 percent.

While workers are staying in their jobs they are earning less because of the shorter hours and fewer shifts. Some have resorted to taking second jobs, working for Uber, the ride hailing app, for example, according to anecdotal reports.

"We are not happy with these measures at all (fewer shifts, shorter hours), but the last thing we want is layoffs," said Jose Minaberrigaray, head of Setia, a textile workers union that represents 25,000 workers. "But we have to choose what is bad and what is worse," he told Reuters.

FORCED VACATIONS

Macri has pushed for labor reforms to make it easier for companies to hire and fire, but his government has delayed implementing them after protests in December 2017. Sica, the production minister, has said they will try again in 2019 but it will be difficult to get political support for the reforms in an election year.

Tiscornia, the economist, said the difficulty in firing workers ultimately hurt the competitiveness of Argentine companies.

“Making it easier to fire people or to reduce salaries improves the economy efficiency and the companies’ capacity to adjust to different situations," he said.

“In the U.S. it’s tremendously easy to fire but at the same time they are at the lowest historic jobless rate because that market has very strong flexibility. That favors the creation of new companies. Here if you start a business and it doesn’t work, you are stuck with the employees, so you don’t even try.”

At the metallurgical company where Pablo Mansur, 31, works, production has fallen 30 percent over the last 12 months. To keep busy, workers are painting, cleaning and doing repairs, Mansur said. Workers were also told to take their vacations in December, a period when production would be low any way because of public holidays.

He said workers agreed to this because "we are aware of the reality. It is not a whim," he said.

Jorge Göttert, president of Göttert, a 75-year-old company that makes production line systems for the wood and auto sectors, says he has tried not to lay off workers because of his memories of what happened during the country’s worst financial crisis in 2001.

Then, the company laid off half of its staff to try to survive. When the economy rebounded, however, it "became very difficult for us" as it took time to rebuild its workforce, training new workers to operate the specialized machinery.

"We think this crisis will be shorter this time."

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