Monday, August 15

Extreme tension in Argentina between the president and the vice president for economic management

The resignation of the economy ministerMartín Guzmán, demonstrated the magnitude of the internal crisis that the Government of Argentina is experiencing.

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After months of distance between the different branches of the Frente de Todos, the center-left coalition that governs the country, the president, Alberto Fernández, is trying to resume political dialogue with the vice president, Cristina Fernández de Kirchner. Estela de Carlotto, president of the Grandmothers of Plaza de Mayo, called Fernández on Sunday to convince him to break the ice. “Do it for the Homeland, I told the president. The people voted for you and Cristina”, said the historic reference for human rights in Argentina. Two hours later, Fernández called her vice and the conversation ended with him announcement of the appointment of Silvina Batakisan economist close to Fernández de Kirchner.

Guzmán made a decision on Saturday that would alter the political board. While Cristina Fernández was speaking at an event in tribute to former President Juan Domingo Perón, in the province of Buenos Aires, in a speech plagued with criticism of the president, the former Minister of Economy surprised by announcing his resignation on his social networks. Guzmán assured, through a four-page letter, that his management sought to “normalize the functioning of the Argentine economy” and defended the agreement with the International Monetary Fund. “A necessary condition to be able to establish that path was to solve the problem of unsustainable external debts, which overwhelmed both the State and Argentina as a whole. That was a starting point.”

But Guzmán also dedicated a few lines to saying that the next minister should come out of “a political agreement within the ruling coalition.”

The tension between the Argentine president and his vice president are visible amid projections of year-on-year inflation above 72% for the markets, while the government acknowledges that it will not be less than 52%. “Whoever replaces me, who will have this high responsibility ahead of him, must have centralized management of the macroeconomic policy instruments necessary to consolidate the progress described and face the challenges ahead,” wrote the outgoing minister.

The reasons for the resignation

For months, the vice president has openly demanded that the president remove “officials who do not work” from their positions, as she considered former Minister Guzmán and the former Minister of Production, who resigned less than two weeks ago. The former president has also demanded Fernández on more than one occasion to “use the pen”, that is, to make decisions capable of responding to the harsh economic situation that hits Argentines.

“Guzmán left because the christianity it made it impossible for him to carry out his plan, which he considered to be an adjustment. But also because the President did not guarantee him the political support he needed and only clung to him like a lifeline”, says Diego Genoud, author of the book Cristina’s Peronism. “The new minister Batakis now faces a very difficult situation at all levels: she has an internal consensus but she arrives in the midst of the worst storm.”

Silvina Batakis, 53, is the minister that no one expected. Among a dozen names that circulated after Guzmán’s resignation, Batakis’s was not the most popular. Batakis has held the position of Secretary of Provinces in the Ministry of the Interior since December 2019, led by Eduardo ‘Wado’ de Pedro, one of the ministers closest to the vice president.

But despite the crossing of darts in the vice president’s speech, “nobody is very clear about what Cristina thinks and what she is looking for,” says Sol Montero, doctor of Philosophy and researcher in discourse analysis, when determining what the program is. economical capable of containing a inflation that each month grows by more than 5%. “A question that arises is whether we are facing a dispute between two ‘country models’, as is often said, or if we are facing a mere display of power in its purest form, without polishing. In this case, the result is impotence and mutual blockade, which does nothing but weaken both parties,” Montero told

Analysts agree that the Frente de Todos is in the worst moment. “This is a Peronism of scarcity that carries the contradiction inside, from the first moment, and finds no way out in a very difficult economic context at a global level,” says Genoud.

The day after in the Argentine economy

In Argentina, one of the few countries in the world with so different and varied types of exchange, the first hours of Monday the value of the dollar opened lower as a result of the holiday in the United States. But after noon, the trend reversed. The parallel exchange rate, to which a large part of Argentines access when they want to buy foreign currency, started 41 pesos higher than on Friday. This is how a dollar became worth more than 280 pesos while the official price remained at 131 per dollar, which confirms the widening of the exchange gap with a local currency that loses more value with each passing day.

The unlimited inflation of the last 12 months, we are talking about an increase of 60.7%, which represents the highest level since January 1992, at the end of the hyperinflation of 1989, has a direct impact on the purchasing power of wage earners in pesos. . The challenges that the new administration will have will be to shorten the exchange difference between the so-called Dolar blue and the officer. It will also seek to contain the loss of dollars in exports, especially in energy resources.

However, the latest political movements only deepen the uncertainty. For Santiago Bulat, an economist at the consulting firm Invecq, the outlook is “very negative.” “Everything that is happening is a bad sign, not because of the appointment of Batakis in itself, but because the economic decisions are still scattered and it is not known where the government’s logic is going to go.”

The cost of the tariffs has been one of the main points of tension between the president and his vice president. For Fernández, it is necessary to advance in a staggered increase in prices that impacts those sectors with greater purchasing power, while he maintains the subsidy for consumers only in the lowest classes. For the government sector led by Cristina Fernández, increasing rates is a mistake. For this reason, the discussion has been completely blocked for months.

Stopping inflation, which is climbing to exorbitant levels, will be the main objective of the new cabinet. “Since the peso is worth less, people are going to start getting rid of the pesos faster and faster, that is going to hit very badly in the July inflation data,” says Bulat.

In this context, the political situation for Fernández is increasingly complex. “The president is left once again in a situation of extreme weakness in which he confirms that he has no ideas, nor strength, nor audacity to operate decisively in search of a way out. He continues to delay substantive changes, he does not risk taking a course and meanwhile his political project is dying and Peronism as a whole loses representativeness on the way to the elections, ”says Genoud.

A coalition with too many heads

The Front of All, the government coalition created for the 2019 elections, has more than one head. And that is your main problem. The main figure is Cristina Fernández, who represents the sector furthest to the left of Peronism, is opposed to the more moderate wing, represented by Alberto Fernández. There is also a third partner, a minority but with his own weight, in this triad who is represented by Sergio Massa, current president of the Chamber of Deputies, with a high political profile, political ambition and room for manoeuvre.

During these days, the murmur indicated that it would be Massa who would assume the economic portfolio and head of the Cabinet. But Fernandez didn’t even try to answer. “Massa is the partner that arrives with less power in the coalition but with better management of power relations within the front,” says Genoud, also the author of Massa, the unauthorized biography. “Fernández, who knows him well, needs him as an ally but is also afraid of him. That is why he leaned on a candidate who does not receive objections from Cristina ”.