September 23, 2023

BUENOS AIRES, Argentina (AP) — The market welcomed Argentina’s new Economy Minister Sergio Massa on Thursday with a cautiously optimistic attitude amid questions about how he will meet a key goal of reducing the budget deficit, while leftist groups criticized the initial of plans they said would inevitably lead to strong austerity measures.

The peso strengthened slightly in the financial market, seen as an important gauge of confidence as the government maintains tight control over the official exchange rate. The black market value of the dollar (known locally as the “blue” dollar) fell from 297 pesos to 291 pesos.

Argentina’s government bonds made early gains in early trading after Massa’s swearing-in on Wednesday evening, but these largely disappeared by the afternoon. Argentinian shares also made slight gains both locally and in New York on a day in which stocks generally posted gains.

In his first press conference as finance minister on Wednesday afternoon, Massa sent several pro-market messages, including a target to increase the country’s hard currency reserves, reduce the deficit and promise to no longer use the Central Bank to finance government functions. .

Massa, who resigned from the lower house of Congress, the House of Representatives, to take charge of a strengthened Economy Ministry that includes the previously independent Production and Agriculture ministries, is President Alberto Fernández’s bet to deal with a growing economic crisis that has also exposed deep divisions within the ruling coalition.

In an example of the balancing act Massa will now have to perform, his initial words were not well received by left-wing groups and even more left-wing elements of the ruling coalition demanding more welfare for the poorest members of society who have been particularly hard hit. from one of the highest rates of inflation in the world, currently running at more than 60 percent annually.

Economic analysts said Massa, who has close ties to the country’s business elite and has spent years building contacts in the United States, appears committed to cutting spending and meeting the target of a budget deficit of 2.5 percent of gross domestic product. Domestic Product. part of the country’s commitment to the International Monetary Fund to restructure around $45 billion of Argentina’s debt.

Left-wing members of the governing coalition, including Vice President Cristina Fernández, a former president, have strongly criticized the IMF deal.

“There is a sense that the vice president was particularly scared about how much inventories fell in July, how much inflation rose,” Camilo Tiscornia, head of local consultancy C&T Asesores Economicos. “The government is more scared and willing to take more anti-people measures.”

Tiscornia said the “firmest” part of Massa’s early announcements included a larger-than-expected cut in utility subsidies.

Other parts of his original plan, however, were not precise, particularly those dealing with reducing inflation.

“The announcements seem to be insufficient,” Tiscornia said.

Others agreed that a larger-scale plan was needed if Massa has any hope of success in his new role.

“To deal with an inflationary process as large as the current one, which threatens to reach 100% annually, requires a comprehensive plan drawn up by a group of coordinated fiscal, monetary, exchange rate and income measures,” said Victor Becker. the Center for the Study of the New Economy of the University of Belgrano; “That does not appear at present.”

Analysts and opposition leaders also disputed that Massa failed to specify how he would increase the Central Bank’s reserves nor what his exchange rate policy would be, although he stressed that a strong devaluation was not part of his plan.

United for Change, the main opposition force, said Massa’s announcements were too general and “in no way constitute an economic plan and do not constitute a program to stabilize the economy, which is necessary and must be immediate.”

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *