All eyes on Massa in Argentina
Thank you for reading LatinNews' chosen article from the Latin American Weekly Report, produced since 1967. The full report can be accessed here: Latin American Weekly Report - 27 October 2022
All eyes on Massa in Argentina
Sergio Massa’s moment has come. The leader of Frente Renovador (FR), one of the three main factions in Argentina’s ruling left-of-centre Frente de Todos (FdT) coalition, was appointed as the country’s new “super minister” of the economy on 28 July. On 3 August he was formally sworn in as part of a glittering ceremony attended by around 500 specially invited guests. He promised “fiscal order, strengthened reserves and a trade surplus” as “motors” for investment, production, exports, and the defence of the domestic market.
Massa, known as an audacious politician, has launched one of the biggest political gambles of his career. The other two main factions of the FdT, led respectively by centrist President Alberto Fernández (albertistas) and by nationalist/populist Vice President Cristina Fernández (cristinistas) have fought themselves to a standstill.
When then-economy minister Martín Guzmán, an?albertista,?resigned in frustration at being blocked in his attempt to reduce energy subsidies by the?cristinistas?at the beginning of July, Massa, serving at the time as president of the chamber of deputies, proposed himself for the job, but was vetoed by the vice president. Instead, the president and vice president agreed to make Silvina Batakis economy minister as a stopgap.
Over the following weeks Massa continued to press his case, eventually convincing the president and vice president to make way for a super-ministry, by absorbing the portfolios of production and agriculture, and by dismissing Batakis after only three weeks in office.
Not surprisingly, many of the 500 guests celebrating Massa’s appointment were members of the FR which believes it is now poised to gain power and influence. The president made a speech but otherwise played a modest role. Vice President Fernández and her son, Máximo Kirchner, were conspicuous by their absence.
Politically, under Massa’s stewardship Argentina will try and follow the economic stabilisation programme agreed with the International Monetary Fund (IMF) earlier this year but reinforced by extra measures made necessary by the month-long turbulence on the foreign currency markets.
The?cristinistas, fierce opponents of “neo-liberal IMF austerity”, have had to make a tactical withdrawal. If Massa can stabilise the economy the potential prize will be great: he will emerge as a strong contender for the presidential elections due at the end of next year.
But the nature of the gamble is that if the economy fails to stabilise, Massa will pay a very high political price. While the?albertistas?are on the defensive and now see little chance of their man being re-elected in 2023, the?cristinistas?would seize the opportunity to accuse Massa of selling out to the IMF and to international financial capital. Vice President Fernández, who is still troubled by corruption investigations, has not ruled out running for the presidency for a third time herself (having held the position for two terms in 2007-2015). She might alternatively support her son or another prominent?cristinista.
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It is still too early to judge whether Massa will be able to turn the economy around. Super ministers have existed before (most notably Domingo Cavallo [1991-1996, 2001], famous for introducing a peso-dollar currency peg in 1991-1996) but have tended to be economists rather than political players like Massa.?
Early indications are mixed. In his speech, Massa promised to rebuild drastically low foreign currency reserves by US$7bn, by negotiating early payments for exports and new bank loans. Also on offer were reduced energy subsidies, more favourable exchange rates for particular types of exporters, a debt-swap for peso-denominated bonds, and a freeze on hiring central government staff. Most importantly, Massa ratified the IMF supported aim of reducing the primary fiscal deficit to not more than 2.5% of GDP.
But analysts said numbers and an explicit plan were missing. The new minister has not made clear exactly how the fiscal target will be met. The suggestion is that to meet it the government may have to cut back more harshly than Massa has so far admitted on the expenditure side. With inflation now projected to end this year as high as 90%, the new super minister may have to face growing social protests over the cost-of-living crisis. That would quickly take the political shine off the new team.
Nor will the dysfunctional division of the government into three mutually suspicious factions come to an end. For the moment at least the?cristinistas?still control the energy secretariat, from where they may still oppose the reduction in energy subsidies.
Also closely aligned with Vice President Fernández is the leadership of Afip, the federal tax collection agency. Massa was meanwhile rebuffed in his attempt to get an ally appointed to the central bank (BCRA). That remains under the control of Miguel Pesce, an?albertista.
Massa proposed to merge the ministries of public works and transport under one of his appointees, but that was rejected by the president. Some lobby groups are nevertheless shifting in Massa’s favour. A number of Partido Justicialista (PJ) governors, previously aligned with the president, have moved closer to the FR, as have some trade union leaders in the country’s main trade union confederation, Confederación General del Trabajo (CGT).
Thank you for reading LatinNews' chosen article from the Latin American Weekly Report, produced since 1967. The full report can be accessed here: Latin American Weekly Report - 27 October 2022
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