Argentine President Alberto Fernández today appointed Silvina Batakis new Minister of Finance, after her predecessor threw the towel in the ring two days earlier. The Argentine faces a huge challenge as she has to deal with the economic storm that the country is currently in.
Last Saturday, 39-year-old Argentine Finance Minister Martín Guzmán announced via Twitter that he was resigning with immediate effect. The Minister was unable to formulate an answer to the devaluation of the national currency, the soaring inflation rate (60.7 percent year-on-year), the protests from farmers and social movements and the fact that a large part of the Argentine people live in poverty.
In addition, the moderate Guzmán struggled with a lack of political support in the government. It was mainly about the controversial agreement with the IMF, in which he played a key role, which led to the dissolution of the governing coalition in the Argentine House of Representatives.
Lead loop around the neck
The South American country signed a $ 57 billion deal with the IMF in 2018 to prevent an impending economic crisis. However, the country failed to avert a crisis and sank into a recession with high inflation. Because of this, it was unable to pay its remaining debt to the IMF in 2022, a new agreement with the Fund was needed.
However, this new agreement contains an economic program that requires a lot of Argentine politics and people. For example, the country needs to reduce its energy subsidies to citizens and increase taxes on public supplies. Currently, many Argentines pay below the market price for gas and energy, which hangs as a link around the neck of the government.
Living in poverty
However, a large part of Argentina’s population is dependent on such subsidies and the relatively low prices of gas and energy. Poverty in Latin America is expected to rise further this year to at least 33 percent of the population, according to a UN report. That is an increase of 0.9 percentage points compared to 2021. In Argentina, this percentage is 31.2 percent.
The news of the agreement with the IMF therefore triggered protests in March last year in the capital Buenos Aires, where the population fears paying for the country’s debt.
The economic instability, meanwhile, is leading to a sharp increase in the popularity of crypto. According to the news service Bloomberg Argentina has a larger percentage of employees paid in crypto than anywhere else in the world. Especially technology companies seem to be finding their way to digital currencies.
More public spending, despite agreement with IMF
It is now up to left-wing Silvina Batakis to tackle the country’s economic problems. Her CV includes various positions in the provincial government of the capital Buenos Aires, and she has been employed as Secretary of the Ministry of the Interior since December 2019.
From a political point of view, Batakis is placed around Vice President Cristina Fernández de Kirchner, who had already quarreled with the resigned Minister Guzmán over the controversial agreement with the IMF. The political cabal around Kirchner wants to increase public spending significantly, in order to reduce the high level of poverty in the country.
However, increased public spending is contrary to the agreement with the IMF. According to the agreement, the government must cut the budget deficit, increase reserves and reduce central bank funding.
“There is no dignified poverty,” Batakis wrote in a pinned post on his Twitter account. “It’s just poverty, and we have to fight it. It is fought with a state that plans and intervenes, and with a society that imposes it as a social goal. ”
Goldman Sachs analyst Alberto Ramos said Guzmán’s departure is a political blow to Fernández, who is already facing declining support in opinion polls ahead of next year’s election.
“The appointment of Batakis seems to indicate that the balance of power is tilting to the side of the Kirchner party,” wrote Diego Pereira, an economist at JPMorgan, in a note to customers.