Martin Guzmán, Argentine Minister of Economy, resigns abruptly

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BUENOS AIRES (Reuters) – Argentina’s economy minister abruptly resigned on Saturday evening, a move that threatens to further destabilize an economy already rocked by soaring inflation, rising energy costs and growing fears of possible new debt defaults.

The minister, Martin Guzmán, was the architect of the South American country’s recent agreement with the International Monetary Fund to restructure a debt of 44 billion dollars.

Tensions within the government have spilled over into how to handle the economic crisis. The relatively moderate Guzmán clashed with the more militant wing of the ruling Peronist coalition, led by Vice President Cristina Fernández de Kirchner. She had publicly criticized the IMF deal and called for more public spending and more government action to fight inflation.

Mr. Guzmán’s departure was the most publicized resignation since President Alberto Fernández took office in late 2019. Much of Mr. Guzmán’s team at the economy ministry also quit.

“Minister Guzmán’s resignation really reveals the internal rupture within the government,” said Eugenio Marí, chief economist at Fundación Libertad y Progreso, a public policy research center, adding that Mr. Guzmán had been a ” anchor” for economic policy despite his struggles.

“From an economic point of view,” Marí said, “this amplifies the dynamics of uncertainty in which Argentina already found itself.”

Pressure is mounting on the country’s currency, the Argentine peso, which is protected by strict capital controls. Mr. Guzmán also oversaw tax policies for grain and energy. Argentina is one of the main grain producers in the world.

Inflation is above 60% and expected to rise further, while high energy import costs have limited the country’s ability to add to its depleted foreign exchange reserves. Argentina’s sovereign bonds plunged towards 20 cents on the dollar.

Guzmán was due to travel to France this week for talks on restructuring some $2 billion in debt with the Paris Club of sovereign lenders. The restructuring of this debt had been considered essential to reopen Argentina’s access to the foreign direct investments needed for infrastructure and energy.

Daniel Marx, Argentina’s former finance secretary and debt negotiator, said it had become untenable for Mr Guzmán to continue in office amid strong opposition in government. The big question now is who will replace him.

“I think it’s important to see how the void is filled,” Marx said. “Not just the person but the direction of economic policy to get out of all the skepticism and issues that have been dragging on for some time.”

As of Sunday morning, there was no news on a successor and President Fernández had yet to speak publicly about the departure, suggesting the government had been caught off guard.

Some investors worried about how the departure would affect the country’s ability to meet its obligations to the IMF, which include inflation targets, reserve levels and the fiscal balance – all already under pressure.

“It is not good and confirms that there is a political problem,” said Maria Castiglioni, economist at C&T Asesores Económicos, adding that it raised questions about whether the government would be able to take the necessary measures. to deal with the crisis.

Horacio Larghi, an economist and director of consultancy Invenomica, said what mattered most was whether the new economy minister had the license to act.

“As for who will replace him, the name does not matter so much,” Mr. Larghi said. “What matters is whether or not the person will have the power to do anything.”


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