Markets applaud Sergio Massa’s arrival as Argentina’s third economy minister in less than a month, but analysts warn more details are needed on his plans to pull the South American country out of its economic predicament hard.
The local currency, the peso, strengthened strongly in the financial market on Friday, while government bonds registered gains a day after the government of President Alberto Fernández unveiled Massa’s appointment as “super Economic Minister which groups together the current Ministries of Economy, Productive Development and Agriculture. .
The increases recorded on Friday continued a trend that began earlier this week amid speculation that Massa, the head of Congress’s lower house, the Chamber of Deputies, would join the administration.
“The market reaction reflects relief that someone with political skills and a strong constituency in the party has taken on this key role,” said Benjamin Gedan, acting director of the Latin America program at the Washington-based Wilson Center. “He’s someone who can’t be easily fired, and the idea is that there will be some consistency in the policy.”
Massa’s appointment came just over three weeks after leftist Silvina Batakis was named to replace the more moderate Martín Guzmán, who abruptly resigned amid complaints that he lacked the full support of the ruling coalition that has been split between factions loyal to the president on the one hand and Vice President Cristina Fernández de Kirchner, a former president who continues to enjoy a strong base of support.
Batakis’ appointment was followed by a sharp depreciation of the peso amid tight capital controls, reflecting uncertainty over whether she had the authority to impose the kinds of reforms needed to fix a struggling economy. one of the highest inflation rates in the world. which turns over 60% per year.
“Argentina urgently needs to restore confidence in the economy and the finance ministers’ game is having the opposite effect,” Gedan said.
Fernández tacitly acknowledged on Friday that a strong personality was needed to lead the government’s economic program.
“What we have experienced as a country and as a society in recent months, and in particular in recent weeks, forces us to coordinate better,” Fernández wrote on Twitter.
Massa, a former mayor who has long harbored presidential ambitions and good relations with the country’s business elite, has his own political base of support and is therefore seen as someone who should likely be able to impose its own program.
“He’s not pro-market, he’s pro-capitalism,” said Fausto Spotorno, chief economist at Orlando J. Ferreres & Associates, a consulting firm in Buenos Aires. “He is not on the left.
Massa told reporters on Friday that he would name his team on Monday and unveil new economic measures on Wednesday. He has yet to officially step down from his seat in Congress before he can officially assume the role of minister.
Despite the lack of concrete metrics, market analysts are confident in which direction Massa will go, given his team has been talking with key players all week.
“The measures they discussed are quite reasonable,” Spotorno said.
For now though, “the optimism seems slightly overdone,” Gedan warned. “It is true that Martín Guzmán was living abroad and did not necessarily have the ability to navigate the snake pit of this coalition, but the fundamental issues are both difficult to solve and politically treacherous.”
One of the main questions for the country concerns the future of the country’s recent agreement with the International Monetary Fund to restructure some $44 billion in debt.
Cristina Fernández and her leftist allies in the coalition have publicly opposed the deal, saying it demands a level of austerity that will hurt workers and the poor while stunting growth.
Batakis was replaced the same day she returned from a whirlwind tour of Washington, where she met with investors as well as officials from the IMF, World Bank and US Treasury.
Even though the market seems to welcome Massa with open arms, it’s not clear that Argentines as a whole feel the same way.
“What the market needs and what public opinion needs are two very different things,” said Jorge Giacobbe, a political analyst who runs local pollster Giacobbe & Associates. “They are both angry, yes, but Massa arrives in this new role with only 9% positive and 70% negative image.”
When asked to describe Massa in one word, most chose the word “pancake,” Giacobbe said, a word that’s commonly used to describe someone who frequently changes their minds.
The low approval rating means Massa “is a man with nothing to lose,” Giacobbe added.
Massa served as chief of staff for nearly a year during the first term of Cristina Fernández’s 2007-2015 presidency. He then became very critical of his former boss as he pursued his own presidential ambitions to later join the coalition that ended up electing Alberto Fernández, another former ally of Cristina Fernández who later became a critical.
Some say handing so much power to someone who has shown a willingness to quickly switch alliances reflects the administration’s desperation.
“It’s the last bullet for the government,” Spotorno said. “If Massa leaves, who remains? There is nobody.”
The Independent Gt