Argentina markets dip as new ministers sworn in after reshuffle

Argentina markets dip as new ministers sworn in after reshuffle

17:05 - Argentina’s markets dipped on Monday as investors remained uncertain about economic policy outlook after a bruising primary election defeat for the government sparked a Cabinet reshuffle at the end of last week.

Center-left President Alberto Fernandez swore in his new ministers on Monday afternoon, with expectations the revamped government will pump up spending to win back support from voters hit hard by the impact of the COVID-19 pandemic.

“What is coming... is intended to respond to a part of the electorate that the pandemic has affected. Those the economic growth that is now occurring has not yet reached,” Fernandez said at the ceremony, playing down recent tension in his party.

Investors are concerned the reshuffle could tilt the balance of power within the ruling coalition toward the militant wing of the party allied with powerful Vice President Cristina Fernandez de Kirchner, who has criticized a lack of spending.

Over-the-counter sovereign bonds lost an average of some 1.7% and a JP Morgan country risk index jumped sharply.

The S&P Merval stock index, which has been one of the world’s top performers this year, fell around 6%, though that was also affected by concerns of fallout from a possible default by property developer China Evergrande.

“The make-up of the new cabinet would indicate an intention to close ranks around the ‘Kirchnerist’ base, which could increase market concern about radicalization,” said local consultancy Portfolio Personal Inversiones.

“Alarms are going off as the Treasury gains room to increase spending with increased monetary financing,” it added.

The reshuffle on Friday night, which came after pressure from Vice President Fernandez de Kirchner, saw a number of her allies take on ministerial roles, including a new Cabinet chief Juan Manzur, who she had publicly backed earlier in the week.

A few key ministers allied with a more moderate bloc around the President, however, remained in their posts, including the important Economy Minister Martin Guzman.

The ruling party is looking to claw back support ahead of the November congressional midterm vote, after being some 9 percentage points behind the center-right opposition in the primary vote, a strong indictor of the likely result.

That could see it lose its majority in the senate and its hold over the largest bloc in the lower house.

“The government needs to reverse the result in a couple of provinces that elect senators, so as not to lose its quorum,” said political analyst Andrés Malamud. “That requires distributing a lot of money.”

The new ministers include: Manzur as Cabinet chief, Julián Domínguez in Agriculture, Aníbal Fernández in Security, Jaime Perzyck in Education and Daniel Filmus in Science. Santiago Cafiero, formerly Cabinet chief, will become Foreign Minister. (Reporting by Walter Bianchi and Nicolas Misculin; Editing by Adam Jourdan and David Gregorio)

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