Argentina Taps Leftist as Economy Minister in Growing Crisis
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Argentina President Alberto Fernandez tapped leftist economist Silvina Batakis as the country’s new economy minister after her predecessor’s resignation deepened a political crisis that has been hurting its finances and markets.
Fernandez spokeswoman Gabriela Cerruti confirmed the appointment to Bloomberg News on Sunday night.
Batakis, a low-profile policy maker close to the more heterodox wing of the ruling coalition, inherits a long list of economic challenges, including annual inflation over 60%, and the government’s $44 billion program with the International Monetary Fund, which just passed its first revision.
The announcement capped more than a day of uncertainty and political negotiations sparked by the sudden resignation of Martin Guzman on Saturday following two and half years in the job. Batakis, 53, didn’t respond to a request for comment late Sunday.
Read More: Three Signs Show That Argentina Is Heading to a Devaluation
The second woman to serve as the nation’s economic chief, Batakis was the economy minister of Buenos Aires province, the largest in the country, from 2011 to 2015 under then-governor Daniel Scioli, who recently became production minister. She was currently serving in a second-tier role in the nation’s Interior Ministry.
The appointment was made after Fernandez met for hours with Lower House Leader Sergio Massa on Sunday to discuss a replacement. Vice President Cristina Fernandez de Kirchner, who is publicly critical of the president and his economic team, spoke to him Sunday evening by telephone, local media reported.
“Batakis’ appointment seems to signal that the balance of power has tilted to the Kirchnerist side,” Diego Pereira, an economist at JPMorgan Chase & Co., wrote in a note to clients. “We would expect a more expansive fiscal stance, and potentially a renegotiation of the IMF program.”
It remained unclear if Fernandez would make other cabinet changes. Central Bank Chief Miguel Pesce told Bloomberg News he will stay in his role.
Markets will be watching for clues on Batakis’ economic agenda, the IMF program and how she plans to navigate a divided ruling coalition that ended Guzman’s tenure.
The nation’s bond prices remain in distressed territory, just above 20 cents on the dollar, and the country’s parallel exchange rate -- which indicates local confidence amid capital controls -- slumped to a record low of 252 pesos per dollar last week.
The overseas bonds edged slightly higher overnight, with euro-denominated notes due 2035 inching up 0.1 cent to 20 cents on the euro, as of 8:55 am local time. US markets are closed for the fourth of July holiday.
Analysts pointed to Batakis’s lack of experience formulating major economic policies or negotiating with the IMF. She could also represent a turn toward far-left economic policies.
“It’s a victory for Cristina,” Camila Perochena, a political analyst and professor at Torcuato di Tella University in Buenos Aires, said. “For financial markets, it’s an awful impact.”
“Batakis will implement a heterodox agenda,” Marcos Buscaglia, founder of Buenos Aires-based consultancy Alberdi Partners, wrote in a note. “She will tighten FX controls while at the same time she is likely to rein on public spending. She has repeatedly voiced her favorable view on export taxes so we do not rule out her pushing for legislation to raise export taxes.”
Crisis-prone Argentina is currently battling inflation seen at nearly 73% by the end of this year, with almost 40% of the population living in poverty and the economy forecast to enter a recession.
The central bank has razor thin cash reserves that it’s struggling to build up amid low credibility and high prices on energy imports and the country’s bonds trade in distressed territory.
(Updates with bond prices in 10th paragraph.)
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