August 8, 2022

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Who is Argentina’s new “super minister” Sergio Massa and how does he plan to tackle the economic crisis? | the world

read more: Argentina debuted as “super minister” of the economy after Silvina Patakis resigned 24 days after being appointed to the post.

At a ceremony at the Casa Rosada bicentennial museum, Massa took office after the tumultuous departure of Silvina Patakis, who had been head of the portfolio for 24 days, further exposing the rift within the government coalition, which also includes the vice president. Cristina Fernandez de Kirchner.

Patakis was hurriedly replaced by Martin Guzman, the portfolio holder since Fernández came to power in 2019 and the author of the $400 billion refinancing that Argentina maintains with the International Monetary Fund (IMF).

The term “Super Minister” refers to the fact that Masa will be in charge of not only the Ministry of Economy but also the Ministry of Productivity Development and Agriculture, Livestock and Fisheries. He is also responsible for relations with international lending institutions such as the IMF.

However, the memory of the “super ministers” is bitter in Argentina, as it recalls the position held by Domingo Cavallo during the government of Carlos Menem between 1991 and 1996.

Although Cavallo was able to reverse the inflation the country was suffering from and restore balance between the peso and the dollar, he did so on the basis of a series of privatizations and creditors that led the country to an illusion of stability that exploded in successive governments.

So during the press conference after his inauguration, Massa tried to get rid of the title of “Super Minister”.

“I read a savior, a silver bullet or a super minister. I am not a magician or a savior, I came to work”Mass said.

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Domingo Cavallo was Menem’s Super Minister of Economy between 1991 and 1996. His administration led the country to an imaginary stability that has exploded in successive governments. / Fabian Credillas/AFP

Path and shocks with KIRCHNERISM

Massa, 50, is a lawyer who draws mixed reactions within the ruling coalition Frente de Todos.

In his early years he fought for the Judiciary Party. He was the Executive Director of the National Social Security Administration and the Mayor of Tigray. Additionally, between 2008 and 2009 he served as Chief of Staff during the government of Cristina Fernández de Kirchner.

In 2013 he left the Judiciary Party to found the Renewal Front, facing Kirchnerism in the 2013 elections. Massa was also elected National Vice President under that banner.

He was a presidential candidate in 2015, but came third. In the 2019 elections, the Renewal Front became the third most important force in the Frente de Todos.

In the process, Masa was elected Vice President and presided over the House of Representatives until August 2, a day before he was sworn in as Minister of Economy.

He is defined as a politician close to the business community, which has made him hostile to the left wing of the coalition.

“If we look around his history, we can see that he has had his twists and turns with both characters. He hired Alberto Fernández in 2008, then faced Cristina’s party in 2013, he organized a renewal front. In 2019, when the candidacy of Alberto Fernández was confirmed, he returned to the front of all, But he did not lose his identity as a Renewal Front. That is why the singing of Pudukavitha Front yesterday was a bit displeasing. There is also a video of Masa asking him to stop singing.”He says Trade Argentine political analyst Santiago Rodriguez Rey.

Between 2008 and 2009, Massa served as Chief of Staff during the government of Cristina Fernández de Kirchner, replacing Alberto Fernández.
Between 2008 and 2009, Massa served as Chief of Staff during the government of Cristina Fernández de Kirchner, replacing Alberto Fernández. / Juan Mapromata/AFP

A country in crisis

Massa will lead The Argentine Economy As it moves through turbulent waters.

“Subsidies, deficit and inflation are the three main problems of the country”Rodriguez Rey explains.

The country is recording a year-on-year inflation rate of 64% and it is expected to reach 70% by the end of the year.

“The inflammation Estimates suggest it could be 8% month-on-month in July, with analysts already talking about 3-digit inflation. Argentina. It’s one of those things that you have to attack quickly.”The expert says.

Same step MassaInflation is a major cause of poverty Argentina. According to the National Statistics and Census, 37.3% of Argentina’s population lived in poverty in the second half of 2021.

The Social Credit Observatory of the Catholic University of Argentina estimates that this number will increase by 39% by 2022.

On the other hand, MASA needs to reduce the fiscal deficit to 2.5% of GDP to fulfill the commitment agreed with the IMF. In 2021 it reached 3% and according to the schedule it will be 1.9% in 2023 followed by 0.9% in 2024.

Massa It sees many issues in the air, some of which need to address deficits rather than inflation.”The expert points out.

Despite all this, Argentina Post positive economic growth forecast for 2022 and 2023. The IMF estimates 4% this year and 3% next year. The World Bank puts it at 3.6% and 2.5% respectively. The Organization for Economic Co-operation and Development puts it at 3.6% and 1.9%, while the Central Bank puts the figures at 3.2% and 2%.

“Last year we had very significant economic growth. Argentina It is one of the strongest rebounders in the US compared to 2020. This creates a carryover effect for the next year. Until last month, that traction was seen as consolidated, but a certain brake has started to be seen, and we will see if the growth has reached its ceiling.Rodriguez Rey explains.

Argentina It has benefited from the effects of the war in Ukraine as many of its exports have increased in value, but it has not been able to use this to strengthen its finances. There was growth in those areas, higher foreign exchange earnings, but that was not reflected in the central bank’s strength. All these affect inflation. This makes growth forecasts difficult to actually replicate.”Experts warn.

Key propositions

Aware of the challenges, Massa announced the most urgent measures he would take from the economy during his first press conference.

Among them, he highlighted the reduction of energy subsidies provided by the government to the people.

Massa announced measures to increase the reserves of dollars in the central bank, emphasized the need to establish “fiscal order” to control public spending, promised to meet the target with the IMF and not use advances from the Treasury. year.

He also announced a hike in electricity and water tariffs to reduce government subsidies for energy bills.

“Almost four million Argentine families did not request to maintain the subsidy, and that was the first cut. We are going to encourage consumption savings among the 9 million people who applied for the subsidy.Minister announced.

This change in energy charges is the first measure that citizens feel. “The price of energy in Argentina is very low, ridiculous compared to other Latin American countries, so the impact will be stronger for those who have abandoned the subsidy claim. But what differs from Guzmán and Parasky is that those with subsidies will have a limit of 400 Kw, although they do not clarify whether it is monthly or bi-monthly.” Rodriguez Rey explains.

To understand the estimate of the range, the expert points out that the average consumption in the city of Buenos Aires is between 250 and 300 kilowatts per month. “But this is on average, almost half of the consumers have exceeded 400. From then on, the full rate will be paid, and the impact will be very strong. From September, in addition, it will be used for water and gas. With similar numbers, although it is not very specific,” he said.

Another point of interest to citizens is the value of the dollar. Argentina has more than ten exchange rates for the dollar; However, the one most used by citizens is the blue dollar.

This Thursday, markets reacted positively to Massa’s appointment, registering a decline of 7 pesos to the blue dollar.

In the last weeks of July, the blue dollar reached a peak of 340 pesos.  With Massa's arrival, it was quoted at 291 pesos, but still not at the level it was when Guzmán took office.
In the last weeks of July, the blue dollar reached a peak of 340 pesos. With Massa’s arrival, it was quoted at 291 pesos, but still not at the level it was when Guzmán took office. / Luis Ropaio/AFP

At the end of this article, the blue dollar was 291 pesos for selling and 286 for buying. The official dollar remained at the same value: 138.75 pesos for selling and 130.75 pesos for buying.

“The Impact of Actions Massa You can’t see them in official dollars because the value is around 120 pesos, but it’s very difficult for people to access them. The appointment saw a significant drop in the blue dollar but not to the level it was when Guzmán left. Initially, the reception in the city (Buenos Aires financial team) was positive, but Minister Guzmán did not reach the levels to leave. We have yet to see the real impact at the end of August and see if this is the calm before the hurricane or orders are on the way.The expert says.

What would be the political cost of reducing subsidies?

Comment by Santiago Rodriguez Rey

At the time, one of the arguments for understanding the failure of Macrosmo and Together for Change was to be precisely honest about the value of the public service ratio. If so, we should expect a similar effect. But at the same time, the restructuring of the economy should produce a drop in inflation. In the play of these forces, the social mood faces the rise of public services, which mainly affects the upper and upper middle classes, who are not the electoral base of the government, and the fall in inflation. If this drop in inflation is achieved the message sent may be positive. The fight is there.