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OPINION AND ANALYSIS | 24-08-2019 09:47

Déjà vu with Dujovne: so many ministers, so little joy

Argentina has packed in so many officials with wonder recipes into three decades that the broth appears to have been spoilt for good.

Finance Minister Nicolás Dujovne has resigned. Now there’s a new minister: Hernán Lacunza.

Bring on the clichés: Argentina loves football and beef. But it is also fascinated by its economy ministers, after all, there’s been so many of them. One newly-appointed economy minister, Miguel Ángel Roig, even died of a heart attack in his chauffeurdriven car on the way to the office in 1989, after only six days on the job.

Lacunza is the country’s 25th economy minister since the return of democracy in 1983, by one count. Each time a new minister is sworn in the nation skips a heartbeat wondering if, finally, this will be the inspired individual who delivers Argentina from financial oblivion.

It rarely works out. Ministers are technocrats, not messiahs. If only the hand of God (no, not that one) could be summoned to work a miracle and sort out the country’s monetary messes.

There’s no such divine intervention when it comes to the coffers, of course. Argentina has packed in so many officials with wonder recipes into three decades that the broth appears to have been spoilt for good. All that Lacunza has left to feed the nation is thin gruel.

President Mauricio Macri’s coalition lost the presidential primaries on August 11. Stocks plunged and the peso has weakened dramatically. Inflation is expected to pick up speed once again. Dujovne drafted a resignation letter admitting “mistakes” and walked out after Macri – who recently lost the PASOs 47 to 32 percent to the Peronist candidate Alberto Fernández – scrambled to control the damage by decreeing a sweeping freeze of fuel prices until the end of the year and IVA (read VAT) deductions on basic food products.

Where did these new interventionist measures leave the market-friendly Dujovne, the architect of Argentina’s deal with the International Monetary Fund? Packing his bags and exiting the ministry. Enter the circumspect Lacunza, until now economy minister in Buenos Aires Province under Governor María Eugenia Vidal (a Macri loyalist who also lost August 11).

The new minister took his oath on Tuesday morning. Drafting in a new economy minister here involves a recurring pompous ceremony at the presidential palace that everybody loves to watch nearly as much as the drama that is unleashed when the time comes for a resignation. There are exceptions. Domingo Cavallo, who pegged the peso to the dollar in the 1990s, enjoyed some popularity before the meltdown in 2001. Axel Kicillof, the progressive Peronist gubernatorial candidate who defeated Vidal in Buenos Aires province, served as former president Cristina Fernández de Kirchner’s last economy minister from 2013 to 2015.

Lacunza’s mission, according to the president, is to make sure that Argentines are not punished any further by the crisis unleashed after the primary defeat. This is a political crisis that is standing on the shoulders of a giant economic crisis, which explains why Macri lost so badly to a united Peronist front.

The president has no choice but to ride the mammoth storm until the first round presidential elections are held on October 27. But already Alberto Fernández is fielding questions about what is to come, because the general impression is that he will win in October with Cristina Fernández de Kirchner as his running mate (and quietly looking on from the wings). Alberto Fernández, for instance, said in an interview with a major newspaper last weekend that if he is president, negotiations will be held with each and every bondholder when asked about the future of the country’s debt.

The markets shuddered. Was the potential future president saying that he will force bondholders to accept a haircut? Maybe. But then one of Alberto Fernández’s chief economists declared that there is no plan to restructure debt. (By the way Fernández said on Tuesday he has “many” economists in mind for the job of economy minister, which is just as well because on average, they don’t hold on to the job for very long).

Fernández then dispatched two of his economists for talks with Lacunza on Wednesday. After the meeting the Peronist economists told reporters that the renegotiating has to be done not with the bondholders but with the IMF. On Thursday, speaking at a forum, Fernández said defaulting was not an option.

Meanwhile, the snap fuel freeze by decree (after some initial balking) angered the opposition governors, who complained in a statement that they will lose revenue. Some governors vowed to take their case to court. It’s a sign Macri is losing power.

Awkward questions are now being asked about the standing agreement with the IMF too. The fund is supposed to lay down a payment (some five billion dollars) next month. But how do the frozen fuel prices fit into the IMF recipe of fiscal discipline? The Fund has issued a statement calling Argentina’s situation “difficult” and says a mission is expected here soon. If the IMF pulls the plug on Argentina, it would be disastrous for Macri. Lacunza has said he expects the deal with the IMF to stand.

Dujovne, a discreet bank analyst who made a name for himself by dishing out wry financial commentary on cable television, when Macri decided to hire him in 2017 (possibly with the remote control of his television still in hand), was instrumental in charming the IMF into injecting over US$50 billion into debt-ridden Argentina.

But now Argentina has no charm left for the markets. It is voters who Macri needs to charm if he is to avoid a whimpering end to his four-year mandate.

It won’t be easy. The president’s campaign team, headed by Cabinet Chief Marcos Peña, decided to go down a non-Peronist path. At times during the campaign Macri’s coalition even sounded anti-Peronist. It turns out that it was a wrong decision (even when Macri tapped a Peronist with little territorial clout, Senator Miguel Angel Pichetto, as his running-mate at the last minute).

Alberto Fernández’s big win possibly happened because a portion of the electorate, say 20 percent, can still relate to Peronism, even when it will vote for some other viable option if it is on offer.

Look at the history. The Radicals, marshalled by former president Raúl Alfonsín, painstakingly orchestrated a deal with a disgruntled left-wing Peronist faction in a bid to regain power after a decade. The result was the Radical-Frepaso Alliance that defeated the Peronist party – then dominated by the centre-right neoconservative wing – in 1999. What followed was economic chaos, but that’s another story.

Despite its primary fumble, Macri’s camp is uttering rallying cries (and even planning street demonstrations in support of the head of state). Peña, credited with leading Macri’s successful campaigns since 2007, has not been sacked but the campaign team has been reshuffled and the Cabinet chief has lost power. However Macri on Thursday said that “those who criticize Peña are criticising me”.

The ruling centre-right coalition’s new message to disgruntled voters is “we hear you” and “we are listening.” But is anybody listening to Macri? The primary was won by Alberto Fernández – and everybody loves a winner.

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Martín Gambarotta

Martín Gambarotta

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