New cabinet in Argentina: last chance for the government to overcome the crisis?

After several days of rumors, the Argentine government announced on Thursday, July 28, the appointment of the president of the Chamber of Deputies, lawyer Sergio Massa, as the head of a new ministry that will cover the economic, productive, and agricultural areas, amid severe financial difficulties.

“It looks like the last chance. Massa’s appointment is more a desperate than a reasoned letter: several economists had rejected the position (of Minister of Economy), and the government had no other options,” political analyst Andres Malamud told Reuters.

Massa, who must resign his congressional seat before taking over as minister, said on Friday that he would announce the team that will accompany him on Monday, August 1, and a series of measures on Wednesday, August 3.

“In the first place, until Monday, I am not going to start either appointing or running officials,” Massa said as he left a meeting with President Alberto Fernandez at the official residence.

“Secondly, on Wednesday, we are going to announce a set of measures because the inauguration is not going to be until Tuesday, after the (legislative) assembly,” he added.

The climate was one of expectation on Friday regarding the direction the new cabinet will take at a time when Latin America’s third-largest economy faces a challenging economic outlook with an exorbitant inflation rate, fiscal deficit, and a currency at historic lows against the dollar.

“The government needs to reduce the fiscal deficit and recreate expectations. Massa buys time; it remains to be seen if he executes the necessary policies,” said Malamud.

With the change, the government aims to bring tranquility to the financial markets, which on Friday reacted positively, with the stock market trading higher on speculative position-taking in anticipation of announcements.

“It seems to me that Massa and his ‘skills’ can contain a little more the situation of overflow in the street. That is to say, calm the financial situation, calm the street a little bit and thus make it to 2023. It is far from solving the people’s problems,” political analyst Jorge Giaccobe told Reuters.

“It does not seem to me that this can be considered a maneuver to overcome the crisis, but rather so that the situation does not break down any further. One thing is to fix a problem, and another is not to make it worse,” he added.

The ruling center-left coalition, composed mostly of Peronists, is seeking to improve its deteriorated public image to have a chance in the 2023 elections. If successful, Massa will have the opportunity to be a presidential candidate.

ECONOMIC TEAM

The announcement implied the departure of Silvina Batakis from the Ministry of Economy after less than a month in office and after having this week her first meeting in Washington with authorities of the International Monetary Fund, with which the country has a debt of US$44 billion. She will become head of the state-owned Banco Nación.

All eyes are now on the subsequent measures to be taken by the government.

“A key aspect to keep in mind in the coming days will be who advises Massa because he is a politician and a lawyer, so he will have to put together a good team to navigate the country’s complicated situation,” said Carlos de Sousa, of asset manager Vontobel, which owns some of Argentina’s bonds.

“The market will probably want to see his concrete plans before bond prices return to pre-Guzman resignation levels.”

Fernandez took to her Twitter account to endorse the new “super minister,” of whom she highlighted his “vision, capacity and experience.”

Massa “can make a great change and mark history with a reform plan. However, in Argentina, there are two types of balance: political and economic. – what suits the ruling class and the economic logic. Everything will depend on what ends up prevailing,” concluded economist Natalia Motyl.

With information from El Mostrador