BUENOS AIRES (Reuters) – Argentina’s economy minister abruptly resigned on Saturday night, a move that threatens to further destabilize an economy already rattled by soaring inflation, rising energy costs and growing fears about possible new debt defaults.
The minister, Martín Guzmán, was the architect of the recent agreement between the South American country and the International Monetary Fund to restructure $44 billion in debt.
Tensions within the government have flared over how to handle the economic crisis. The relatively moderate Guzmán clashed with the more militant wing of the ruling Peronist coalition, led by Vice President Cristina Fernández de Kirchner. She publicly criticized the IMF deal and called for more public spending and more government action to combat inflation.
Guzmán’s departure was the highest-profile resignation since President Alberto Fernández took office in late 2019. A large part of Guzmán’s team at the Ministry of Economy also resigned.
“Minister Guzmán’s resignation really exposes the internal breakdown of the government,” said Eugenio Marí, chief economist at Fundación Libertad y Progreso, a public policy research center, adding that Guzmán had been an “anchor” for the economic policy despite their struggles
“From the economic side,” said Marí, “it amplifies the dynamic of uncertainty that Argentina was already in.”
Pressure is mounting on the country’s currency, the Argentine peso, which is protected by strict capital controls. Mr. Guzmán also oversaw fiscal policies for grains and energy. Argentina is one of the main cereal producers in the world.
Inflation is above 60 percent and is expected to rise further, while high energy import costs have limited the country’s ability to add to depleted foreign exchange reserves. Argentina’s sovereign bonds have plummeted to 20 cents on the dollar.
Guzmán was scheduled to travel to France this week to discuss the restructuring of some $2 billion in debt to the Paris Club of sovereign lenders. The restructuring of that debt had been considered essential to reopen Argentina’s access to foreign direct investment needed for infrastructure and energy.
Daniel Marx, Argentina’s former finance secretary and debt negotiator, said it had become untenable for Guzmán to continue in office amid strong opposition within the government. The big question now is who will replace him.
“It seems important to me to see how the void is filled,” said Marx. “Not only the person but the direction of the economic policy to get out of all the skepticism and the problems that have been dragging on for quite some time.”
As of Sunday morning, there was no word on a successor and President Fernandez had yet to make a public statement on leaving, suggesting the government had been caught off guard.
Some investors worried how the exit would affect the country’s ability to meet its obligations to the IMF, which include inflation targets, reserve levels and fiscal balance, all already under pressure.
“This is not good and confirms that there is a political problem,” said Maria Castiglioni, an economist at C&T Asesores Economicos, adding that it raised questions about whether the government could take the necessary measures to deal with the crisis.
Horacio Larghi, an economist and director of the consulting firm Invenómica, said that the most important thing was whether the new economy minister had a license to act.
“As for who replaces him, the name doesn’t matter that much,” Larghi said. “What matters is whether or not the person will have the power to do something.”