Argentina’s new Minister of Economy, Silvina Batakis, will have the task of calming markets, balancing the political game between President Alberto Fernández and his deputy, Cristina Kirchner, and promoting changes for calm Argentines who expect quality to improve. life – especially when it comes to inflation, which is already increasing by 60% annually, and poverty in the country affecting 37% of the population.
Batakis was announced for the post yesterday, following the announcement of Martín Guzmán’s resignation. In his resignation letter, Guzmán implied that internal differences had driven him to resign:
“It will be crucial to work on a political agreement within the governing coalition so that whoever replaces me (…) will have central management of the macroeconomic policy instruments,” he wrote.
The 53-year-old economist is unusually an ally of Cristina Kirchner, against regulation and for public spending. He currently worked as the Provincial Secretary of the Ministry of Interior in the government, and in this position he maintained direct relations with the governors. He served as the Minister of Economy of Buenos Aires Province from 2011 to 2015.
After intense negotiations, the appointment of Batakis was the only point of agreement between Alberto Fernández and Kirchner, who held power in the ruling coalition.
But the market wants to know how committed the new minister is to the goals of the agreement with the IMF (International Monetary Fund), and what economic measures will be taken to contain the financial crisis created by the growing fiscal deficit and unsupported issuances. , with uncontrolled domestic borrowing and a galloping inflation forecast of 80 to 100% in 2022.
Argentine newspapers such as “La Nación” and “Clarín” reflect the market’s concern about the Batakis name, especially because of its closeness to ideals that encourage public spending at the expense of greater financial control.
Despite this, analysts are still holding out for the new minister and are waiting for a position on pressing issues such as international financial deals, the fall in government bonds and inflation.
Crisis
Political turmoil coincides with a climate of economic insecurity in Argentina. Guzman’s sudden departure put the country in a difficult position, as he was due to travel to France this week to renegotiate a $2 billion debt settlement with the Paris Club creditors’ group.
The original loan of $57 billion to Argentina was the largest loan ever made by the IMF. The final part of the deal was rejected by President Fernandez after he took over from his liberal predecessor, Mauricio Macri.
With rising inflation and dwindling foreign exchange reserves due to higher energy import costs, investors are questioning the country’s ability to meet its debt commitments. Government bond yields are among the highest in the world, demonstrating a lack of investor confidence.
The truck drivers’ strikes, which were launched twice this year alone due to a lack of diesel, also damaged the economy. Diesel demand has increased in Argentina in recent months, following increased activity in sectors such as transportation and mining in the context of the economic recovery, but price controls by the state prevent imports from private oil companies.
Financial market response
The political crisis that has gripped the economy and the response of local financiers to the new name will face a crucial test this Monday. President Alberto Fernandez met with the new minister this morning.
However, with the Independence Day holiday in the United States, this will only be a partial test, as the US dollar bond market and country risk index only returned on Tuesday. Even so, domestic reference should experience strong turmoil in the coming days.
“The only way for the government to set positive expectations is to show the public how it will fix its public accounts. It needs to present a sustainable economic plan. And it takes political power to implement a plan. Claudio Zuchovicki, a reference capital markets analyst in the country, told RFI about the economy. “Negative expectations will not be reversed with just a name change in the Ministry of Economy.”
*With information from Deutsche Welle, RFI and AFP
source: Noticias
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