BUENOS AIRES – The new Argentine Minister of Economy, Silvina Batakiswas sworn into office late this Monday afternoon, 4th. The appointment raised doubts in the market amid a new chapter of the crisis that shakes the ruling coalition on how to face the inflation and other problems that the country suffers.
O dollar initially shot up to 280 Argentine pesos on the parallel market, and then closed at 260, compared to an average of 239 pesos last Friday. Meanwhile, the official dollar rose to 131.5 pesos, compared to 130.25 pesos on Friday. The value of the US currency – which citizens save due to the fragility of the peso – traditionally serves as a thermometer of the country’s economic and political reality.
The Merval index, on the Buenos Aires Stock Exchange, fell 1.02% and bonds in dollars and pesos plummeted. The Central Bank of Argentina had to sell around US$100 million of its reserves to intervene in the official foreign exchange market.
The president Alberto Fernandez hastily named Batakis as new economy minister on Sunday night after Martín Guzmán resigned the day before. The former minister’s economic policy was questioned by the current vice president and former president Cristina Fernandez de Kirchner (2007-2015), for failing to contain inflation. Guzmán’s departure from the government followed that of other ministers who have lost approval from the political leadership in recent months.
Some analysts have warned that it is too early to say whether the peso is at a new low because trading was very light on Monday, as markets closed in the US for the holiday. They claim that many people may be adopting a wait-and-see attitude.
Others said it was a sign that, after several economic meltdowns in recent decades, Argentines are worried that inflation, which is already at an annual rate of 60%, will worsen under Batakis. Argentines packed stores over the weekend to buy big-ticket items like refrigerators and ovens.
“More inflation is on the way”, predicts the economist partner at the local consultancy Alberdi Partners Marcos Buscaglia. For him, the appointment of Batakis indicates that the political preferences of the left-wing vice president are predominant in the government.
A big question mark surrounds the future of the country’s recent agreement with the International Monetary Fund (IMF) to restructure $44 billion in debt. Many left-wing members of the ruling coalition have publicly opposed the deal with the IMF, saying it involves too many concessions to the multilateral institution that will hurt growth.
As Argentina waits for Batakis to present its plan for the future, some analysts warn that the path ahead will be difficult.