Argentina: Fernandez hands full economic policy control to House Speaker Massa

• Massa to control economy ministries and relations with official creditors
• Massa's appointment solves a political problem and places right incentives on policymaking
• Massa has incentives to try a real stabilization, big changes should be coming soon
• Unclear who gets to design Massa's policy plan, the range of possibilities is wide

President Alberto Fernandez approved a cabinet reshuffle late Thurs. in which he gave full control of economic policy to House Speaker Sergio Massa, according to a?statement. Massa will technically be appointed as the economy minister, but he will absorb the Production Ministry and the Agriculture Ministry, take charge of relations with official and bilateral creditors, and was allowed to appoint a new head of the tax office. The cabinet change was expected because the government's plans?leaked to the press on Wednesday. Massa would officially take office at some point of next week after resigning to his seat in the Chamber of Deputies. Notably, the biggest cabinet change of the Fernandez administration was announced with a brief press release, with both Fernandez and Massa declining to speak to the public or with the press for now.

Massa is a leading politician of the ruling Front for Victory (FPV) without knowledge of economics, but his appointment looks to solve a political problem. The resignation of former Economy Minister Martin Guzman earlier in July and the appointment of the rank-and-file economist Silvina Batakis as his replacement left the sense that nobody was really in charge of economic policy. Massa can be considered the third head of the FPV's political triumvirate alongside Fernandez and Vice-President Cristina Kirchner, so his appointment is meant to show that now there is someone who can run economic policy without having to look constantly over his shoulder.

Speculation about what will happen with economic policy moving forward is running high. Big changes are probably coming because there is no reason for Massa to burn his political capital to captain a ship on a collision course. It will be important to see who is tasked with designing the economic plan under Massa, as the politician has a big team of advisers of different profiles.

With Massa's appointment as a powerful economy minister, Fernandez is giving up what little power he had left and his reelection dream. If Massa succeeds in stabilizing and strengthening the economy in a way that can make the FPV competitive in 2023, then he is the coalition's obvious candidate for the presidential election. If Massa fails, Fernandez's image rating will fall lower than it already is, making him an uncompetitive candidate.

Overall, Massa's appointment as a super minister is a good move in that it should end with the constant infighting that caused the government to have a highly inconsistent economic policy approach. We don't have a lot of faith in Massa's ability to stabilize the economy, but at the very least he has the incentives and the political power to try to correct some of the imbalances. We should know pretty early on if he intends to delegate policymaking on a serious team of economists to try a stabilization.