Argentina’s President Alberto Fernández named Lower House Speaker Sergio Massa as the head of a new, expanded ministry after the country plunged deeper into political crisis in July.
Massa will oversee a new Economy Ministry which will include the duties of the agriculture and production ministries, according to a statement from the president’s press office on Thursday. He will also lead the country’s relationship with the International Monetary Fund, with which Argentina has a US$44 billion program, and all other foreign creditors.
He takes over from Silvina Batakis, who started at the economy ministry on July 4 after the abrupt resignation of Martin Guzman and was returning from a trip to Washington this week. The turnover is a sign of the deep divisions within Argentina’s ruling coalition. The growing political crisis has caused prices to jump and the currency to plunge over the past month.
Argentina’s international bonds surged on Thursday, with notes due 2030 climbing 2 cents on the dollar to around 22.6 cents on the dollar, their highest since Guzman resigned at the beginning of July.
The statement did not mention whether Batakis would stay in the administration.
Beyond the economic volatility of the last few weeks, Massa inherits enormous challenges. Economists see inflation reaching 90% this year, the central bank’s reserves are razor thin and the country is behind on the targets it must meet to comply with a US$44 billion program with the International Monetary Fund. Almost 40% of Argentines live in poverty too and a recent slew of protests have called for more social welfare.
Argentina’s bonds had sunk deeper into distressed territory in recent weeks, with some touching a low of 17 cents on the dollar on July 25, as investors have all but lost faith Argentina’s government will be able to put a lid on inflation running over 64%.
“The gains will likely be temporary,” said Jorge Piedrahita, a managing partner at Gear Capital Partners in New York. “Argentina’s constraints are ideological and political, and that will not change with Massa.”
Massa is considered as one of most pro-market politicians within a ruling left-wing coalition that’s governed with populist, interventionist policy. A former mayor of a Buenos Aires suburb who built his reputation as being tough on crime, Massa has also shifted his politics over the years, embodying the Peronist political movement’s chameleon-like changes.
He allied with Vice President Cristina Fernández de Kirchner early in her presidency, acting as her cabinet chief between 2008 and 2009. He later broke away from her bloc and ran for president on his own in 2015, finishing in third place. Then in 2019, Massa, Kirchner and Fernández joined forces again to win the presidential election.
Massa brings more political clout than Guzmán or Batakis, but it’s unclear if he could move forward with unpopular spending cuts to comply with the IMF deal that risk even higher inflation and keep the coalition together. Guzmán resigned due to lack of political support and Kirchner hadn’t opined publicly on Batakis yet.
Replacing Batakis days after she met with staff from US Treasury, IMF and World Bank is bewildering some members of the ruling coalition, according to a senior government official who requested not to be identified. Batakis held an unusually long meeting on Monday with David Lipton, senior counsel to US Treasury Secretary Janet Yellen, to outline her economic road map. The shakeup erodes the country’s credibility, the person added.
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Three weeks into the job, Batakis told reporters Tuesday she had “strong support from all sectors” of her coalition. She received the news on Wednesday that she might be replaced while she was still in the US returning back to Argentina, the official added.
by Bloomberg / Patrick Gillespie & Scott Squires