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Analysis-Same dire problems, new chief: Can Argentina solve economy riddle?

Published Jul 29, 2022 07:52PM ET Updated Jul 29, 2022 09:06PM ET
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© Reuters. A one thousand Argentine pesos bill is shown inside a store, in Buenos Aires, Argentina July 29, 2022. REUTERS/Cristina Silles NO RESALES. NO ARCHIVES

By Lucila Sigal

BUENOS AIRES (Reuters) - Argentina's incoming economy chief, the crisis-racked country's third in a less than a month, may be its last best chance to right a sinking ship, or at least avoid further deterioration ahead of a high-stakes election next year.

A Thursday cabinet reshuffle engineered by President Alberto Fernandez followed days of frenzied rumors over whether Silvina Batakis, named minister just a month ago after the shock resignation of longtime economy steward Martin Guzman, could survive.

The job of tackling growing unrest in South America's second-biggest economy after Brazil now falls to Sergio Massa, a congressional leader for the ruling Peronist coalition, who will oversee economic, as well as industrial and agricultural policy beginning next week.

"It seems like their last chance," said political analyst Andres Malamud, referring to government officials' so far unsuccessful efforts to reign in sky-high inflation, over-spending and a plunging peso currency.

Malamud described recruiting Massa for the expanded role as "more like a desperate bet than a reasoned one," adding that cutting a widening fiscal deficit and rebuilding confidence must be top priorities.

Massa told reporters on Friday that he will announce some new measures next week, though it remains unclear what they will be.

Fernandez's bitterly divided center-left coalition hopes Massa's arrival will calm financial markets. The initial response was positive on Friday, with the stock market clawing back some losses.

The government - and some observers - also hope he can help calm growing social unrest.

"It seems to me that Massa and his skills can contain the street protests a little better," political analyst Jorge Giaccobe said.

The country, especially the capital Buenos Aires, has seen near-constant protest marches calling for measures such as a universal basic income or just more aggressive action to contain surging consumer prices.

Giaccobe thinks more modest expectations should guide Massa.

"It's one thing to fix a problem, but another thing to not make things worse," he said, as the government eyes a tough 2023 re-election battle.

Batakis last week traveled to Washington to assure nervous finance officials including leaders of the International Monetary Fund (IMF) that the government remains committed to its $44 billion debt deal with the lender.

The president sought to bolster his new "superminister" in posts on social media on Friday, touting Massa's "vision, capacity and experience."

But political needs may ultimately complicate Massa's ability to strike the right balance since any spending cuts, or other potentially painful fiscal medicine, could further damage a government that already finds itself backed into a corner.

"In Argentina, there are two types of balance: political and economic, what suits the ruling class versus economic logic," said economist Natalia Motyl.

"Everything depends on which side prevails."

Analysis-Same dire problems, new chief: Can Argentina solve economy riddle?

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Comments (1)
Jack Nicholson
Jack Nicholson Jul 30, 2022 1:16AM ET
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The more global news I read the more I feel globalization has reutered all of us. Reuter is my curse word since they allow it
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