November 24, 2022
  • November 24, 2022

Buenos Aires Weather | Argentina bonds and currency plunge on first day in power for Batakis

By on July 5, 2022 0

Argentina’s global bonds have fallen the most since they were issued nearly two years ago after the country appointed leftist politician Silvina Batakis as its new economy minister.

Dollar sovereign bonds fell as much as four cents on the dollar, with some notes dipping below 20 cents on the dollar at noon in Buenos Aires. The country’s parallel exchange rate, known as the prime swap, weakened as much as 15% before paring losses to 268 pesos to the dollar. Argentinian stocks traded in the United States also fell.

Batakis, who was named Sunday night after Martín Guzmán’s shock exit on Saturday, told a radio station on Tuesday morning that Argentina had to stick to its $44 billion deal with the International Monetary Fund, but changes made to the main objectives of the program will certainly change over time.

“Tensions will exist, but we have to work together” with the IMF, Batakis said, according to comments sent by a government press office. “With each revision of the objectives, there will certainly be modifications because the world is constantly changing.”

Ahead of the reopening of international markets on Tuesday, Argentines rushed to protect their money and their businesses on Monday.

Savers withdrew money from bank accounts with online platforms posting five-minute wait times just to log in. Local businesses reported people rushing to stock up on imported goods, such as coffee, fearing the price would jump soon after the currency depreciated. Suppliers have sent notices to companies that previously announced price increases have been reversed for the largest ones.

“The new economy minister is seen as close to Vice President Cristina Fernández de Kirchner, who has bet on extremely strict capital controls, intervention in the private sector, fiscal expansion and even changed the parameters inflation, to the detriment of those who held inflation-related, during her term as president from 2007 to 2015. Ultimately, Batakis will have the opportunity to show whether she intends to write a new page or go back a few chapters,” said Adriana Dupita, Latin America economist at Bloomberg.

sudden exit

Batakis took the reins of economic policy after Guzmán, who has been one of President Alberto Fernández’s closest advisers since his administration began two and a half years ago, surprised the government by announcing his exit with a seven-page letter message from Saturday.

His resignation further revealed a piercing rift between Fernández and Fernández de Kirchner, with frantic negotiations lasting more than a day to find a new head of the economy.

Batakis, a low-key, left-wing economist considered closer to Fernández de Kirchner’s group, served as minister of economy in the province of Buenos Aires from 2011 to 2015. At the time, Fernández de Kirchner was president and Daniel Scioli , currently Minister of Production, was Batakis’ boss as governor of the country’s most populous district.

She did not respond to multiple requests for comment from Bloomberg News. In his first comments to the press on Monday evening, Batakis tried to reassure nervous investors about the government’s political path.

“I believe in a balanced budget,” Batakis said at the presidential palace without answering questions. “We will continue with the economic program.”

The new minister most recently served at the national level as provincial secretary, a second-tier post in the interior ministry headed by a top ally of Fernández de Kirchner. Former officials say the role helped Batakis build relationships with powerful Argentine provincial governors, which could help her build consensus as she navigates a divided coalition.

“She’s coming in with quite a bit of support because the governors know her,” said Mercedes D’Alessandro, a former economy ministry official who led policy on gender and equality issues until March. . Batakis “is also acutely aware of the problems that ordinary Argentines face.”

No honeymoon

However, Batakis will not have a honeymoon.

Beyond inflation seen at nearly 73% in December and poverty levels reaching nearly 40% of Argentines, economists predict a recession for this year and the Central Bank has extremely thin cash reserves to defend the peso against the coming monetary rout. The government has no access to international capital markets after defaulting on Wall Street investors in 2020. The country’s local peso debt market is also shrinking, rolling over less debt.

Analysts have warned that the rise of Fernández de Kirchner’s far-left faction of the ruling coalition is further undermining Argentina’s IMF program. The vice president is a longtime critic of the IMF and last year floated the idea of ​​not returning the money until a deal is struck.

Even before Batakis took over, investors doubted the government could meet the program’s goals. Now, investors will be watching whether she can follow through with her guidelines, particularly the cuts to government subsidies under the program.

“What the market is looking for is – does it have degrees of freedom to make some of the tough decisions that Guzmán didn’t like?” said Arturo Porzecanski, a researcher at American University. “That’s a question investors are looking for an answer to, and so far they’re saying no.”

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by Patrick Gillespie and Scott Squires, Bloomberg