President Alberto Fernández has appointed the influential leader of Argentina’s lower house to spearhead a new economic “super ministry” in an attempt to rescue his government and regain market confidence as fears of a full-blown economic crisis worsen.
Sergio Massa, the Peronist leader of the lower house of congress, will be in charge of a ministry that oversees economic, manufacturing and agricultural policy, the government announced on Thursday.
He is the third person to take charge of the Argentine economy in less than a month. He replaces Silvina Batakis who was sworn in on July 4, taking over from Martín Guzmán, who quit unexpectedly amid a split in the ruling coalition government over what direction economic policy should take.
As part of his role Massa will also lead Argentina’s $44bn restructuring deal with the IMF, as well as negotiations with other international lenders, the government said.
Batakis, who has just returned from Washington where she met with IMF officials earlier this week, is due to stay on in the government as head of the state-owned Banco Nación, according to officials.
Speculation in recent days of a cabinet shake-up had brought some relief to markets amid signs that Massa, who is considered a more moderate member of the governing coalition, could be granted sweeping powers to introduce much-needed reforms to help bring down inflation and avert a crisis.
Argentine bond prices rallied on Thursday, with dollar bonds due in 2030 climbing to over 23 cents on the dollar, their highest level since Guzmán resigned at the beginning of July.
The president’s decision to create the ministry comes as confidence in his government’s ability to deal with the fast-deteriorating economy has collapsed.
Despite Batakis’s pledges to stick to IMF commitments and restore “order and balance”, investors and the public worried she lacked the political support to turn the economy round.
Savers in Argentina have been racing to swap their pesos for currencies such as the US dollar, as fears of a possible devaluation pushed the black market exchange rate to record lows in July. Sovereign bonds are trading in distressed territory, and inflation is forecast to exceed 90 per cent this year.
Massa has reportedly insisted on having a level of control over the finance ministry and energy ministry as conditions for accepting the job that would allow cuts to energy bill subsidies and other tougher policy changes to be pushed through, according to local media. These are the same conditions, analysts say, which former economy minister Guzmán failed to secure and which led to his resignation earlier this month.
As a lawyer who served as a cabinet chief under Cristina Fernández de Kirchner, the current vice-president and former president, analysts say Massa could be better placed than his two predecessors when negotiating with different members of the coalition as well as the opposition.
Kirchner leads the more radical bloc of the leftwing coalition and believes the Peronists should spend more to shield voters from rising inflation ahead of the 2023 presidential race. An open split between her and the president over how to reconcile the economy has intensified in recent months and spurred a number of senior resignations.
Argentine economist Eduardo Levy Yeyati said the appointment of Massa was “the president’s last playing card” as a figure who may give some reassurance to investors. However, if it does not end up working, the Fernández government will be left with no other options, he added.