Argentinian peso falls with the appointment of a left-wing economy minister

BUENOS AIRES, Argentina (AP) — The Argentine peso tumbled and stock prices fell on Monday after leftist Silvina Batakis was named economy minister following the surprise resignation of her more moderate predecessor this weekend as the country grapples with economic difficulties.

Batakis was named Sunday night to succeed Martín Guzmán, who was widely seen as a moderate voice in President Alberto Fernández’s cabinet. Guzmán had been the target of heavy criticism from more left-leaning elements in the government coalition, including Vice President Cristina Fernández, who is not related to the president.

The value of the peso fell 18% at one point in the informal market on Monday, hitting 280 to the dollar, before recovering a little late in the day. Government bond prices plunged as much as 10%, signaling fears of worsening inflation, while stocks also saw declines.

The peso’s historic volatility means that Argentines save largely in US dollars, and the exchange rate is closely watched as a general barometer of the economy.

Some analysts warned that it was too early to tell whether the peso was at a fresh low as trading activity was very light on Monday, indicating that many people may be taking a wait-and-see attitude.

“These are prices that should be taken with a grain of salt today,” said Gustavo Ber, an economist who runs local consultancy Estudio Ber.

But others said it was a signal that after several economic crashes in recent decades, Argentines fear inflation, already running at an annual rate of 60%, will worsen under Batakis, who was sworn in late Monday afternoon.

“That’s what we expected, a pretty strong market reaction,” said Marcos Buscaglia, associate economist at local consultancy Alberdi Partners.

Argentines crowded into stores over the weekend to buy big-ticket items like fridges and ovens.

“More inflation is on the way,” Buscaglia predicted, saying Batakis’ appointment signals the left-leaning vice president’s political preferences prevail in government.

Fernández, who herself served as Argentina’s president from 2007 to 2015 and continues to enjoy strong support, has publicly criticized austerity efforts aimed at bringing inflation under control.

Guzmán, who was considered a close ally of the president, resigned on Saturday with a seven-page letter posted on Twitter at a time of tension within the ruling coalition over how to handle the economic problems plaguing the country.

In addition to inflation, Batakis will have to contend with an economy in which about four in 10 Argentines are poor and the Central Bank is dangerously short of hard currency reserves.

Batakis has a long history of public service and served as Minister of Economy for the Province of Buenos Aires, the country’s most populous district, from 2011-2015 under Governor Daniel Scioli, who was recently appointed Federal Minister of Health. Production.

A big question mark concerns the future of the country’s recent deal with the International Monetary Fund to restructure a $44 billion debt.

Many left-wing members of the governing coalition have publicly opposed the IMF deal, saying it involves too many concessions to the multilateral institution that will hamper growth.

As the country waits for Batakis to present his plan for the future, some analysts warn that his way forward is difficult.

“One would expect the new minister to first try to calm the financial market and then order the macro (economy),” said Matias Carugati, an economist at Consultora Seido. “But it’s really hard to know today if that will happen, given that we don’t have a lot of information on the government’s plan. They ensure the continuity of what Guzmán was doing, but it was precisely this plan that led to his resignation.

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