for several For months, Argentine President Alberto Fernandez and his leftist vice-president Cristina Fernandez de Kirchner (no relation) have publicly expressed their differences. Since September, Ms. Fernandez has published blog posts denouncing the president’s so-called austerity policies.when he reached an agreement with the company International Monetary Fund In January, she flew to Honduras in a huff to restructure her massive debt. To mark Remembrance Day in March, a victim of Argentina’s military dictatorship, her son, a member of Congress, organized a separate march to rival the president’s prisoner-of-war ceremony.
Now, the saga takes its most dramatic turn. On July 2, Economy Minister Martin Guzmán published a seven-page resignation letter in which he said a spat among his superiors had hindered his work. The resignation of Ms. Fernandez, who has been pushing for the ouster of Mr. Guzman, the president’s closest ally, is a victory.
Less than a month ago, Matías Kulfas, industry minister and another ally of the president, was forced to resign after questioning the role of Ms Fernández’s allies in gas pipeline licensing (the case is under investigation Center; Ms Fernandez called Mr Koulfas’s comments “very unfair”). Both he and Mr Guzman were replaced by ministers closer to Ms Fernandez.
The market reacted poorly to Mr. Guzman’s departure. On the black market, which more accurately reflects the value of pesos, the cost of a dollar soars from 239 to 260 (the official exchange rate is artificially maintained around 125). Some government bonds traded for as little as 20 cents on face. The cost of insuring the country’s debt rose by 6%. Some merchants are pausing sales because the economic outlook seems so uncertain. At the same time, the annual inflation rate exceeds 60%. The central bank has insufficient dollar reserves.
Mr Guzman is seen as one of the more sensible figures in the cabinet. He restructured $65 billion in debt to international creditors in 2020 (equivalent to about a year’s worth of government spending). He also slashed the fiscal deficit and led negotiations to renegotiate Argentina’s $44 billion in debt to the United States after spending surged during the pandemic. International Monetary Fund (see chart). While that did buy the government time, none of that boosted investor confidence in the country, which is a serial defaulter. However, this has drawn the ire of Ms Fernandez, who recently said inflation was not caused by fiscal deficits but by debt. She also suggested that the president should “put a pen to paper” to stop the imports. She thinks this is the best solution to the dollar shortage.
The new economy minister, Silvina Batakis, is a former civil servant. From 2011 to 2015, she served as economy minister in Argentina’s most populous province, where she defended the use of price controls and a higher wealth tax.But recently she said she believed in a balanced budget, agreeing to stick with International Monetary Fund (although she says “adjustments” are needed), admits that price controls alone will not bring down inflation, and says energy subsidies must be reduced “quickly” — a particular insult to the more extreme elements of government. Implementing these measures could prevent another crisis. That is, if Ms. Fernández allows it. ■