Argentine Mystery Over Economy Chief Chills Markets; Three Contenders Lead Race

Argentine Mystery Over Economy Chief Chills Markets; Three Contenders Lead Race

As Argentina's new government prepares to take power, the key role of economy chief is shrouded in mystery, with a trio of economists leading the field as the country grapples with how to fight inflation, recession and rising debt.

President-elect Alberto Fernandez will announce his cabinet on Friday evening, with all eyes on who will be the new minister of Treasury when the center-left leader is sworn into office on Dec. 10.

Fernandez is likely to back a sharp shift in economic approach to outgoing conservative President Mauricio Macri, whose International Monetary Fund-backed austerity helped cut fiscal deficits but hammered his popularity with voters.

Sources and creditors told Reuters that Martin Guzman - an acolyte of Nobel Prize-winning economist Joseph Stiglitz - and heterodox economist Matias Kulfas were two of the top names. On Thursday, major local newspaper La Nacion said lesser-known Martin Abeles was also in the running.

The makeup of the economic roles - and whether there will be one powerful ministry or several ministries working in tandem - has sparked fierce speculation, with the last-minute reveal spooking investors and keeping bonds in distressed territory.

"The fact that Fernandez has left it this late suggests to us that it's not necessarily a priority of his to help investors and guide Argentina with a market-friendly approach," said Nikhil Sanghani, London-based economist at Capital Economics.

'MUTUAL ADMIRATION SOCIETY'

Guzman, a young academic and protégé of Stiglitz, is considered an expert in the field of debt restructuring, though he has little hands-on experience.
"I like Guzman. He's smart and you can talk to him. And he will play by rules," said one major international bondholder who views Guzman, a scholar at Columbia University in New York, as a favorable choice for leading debt restructuring.

Others, however, felt he was too aligned with Vice President-elect Cristina Fernandez de Kirchner, a divisive, populist ex-president.

"It's a mutual admiration society between her and Stiglitz. She loves him for his anti-IMF, anti-austerity views," said Carlos Abadi, managing director at financial advisory firm DecisionBoundaries.

Kulfas, who previously held government and central bank positions, is seen more in the "classic Peronist school of thought," and could raise taxes on exports and prioritize local creditors over international bondholders, economists said.

"Their way to solve Argentina's problems will be to stimulate domestic demand, and if that requires monetary expansion of some sort, that's fine with them," said one local economist, who requested anonymity.

Abeles, meanwhile, served in the Ministry of Economy under Fernandez de Kirchner and her late husband and presidential predecessor Nestor Kirchner.

Abeles is currently local head of the U.N.'s Economic Commission for Latin America and the Caribbean (ECLAC), and is married to Cecilia Todesca, a close economic adviser to Fernandez.

Jose Dapena, an economist and director of the finance department at the University of CEMA in Buenos Aires, noted that all three lack ministerial experience.

"It seems this administration wants people who are not yet high-profile, who will follow and obey policies," he said.

Kulfas and Guzman did not respond to requests for comment. Abeles could not immediately be reached by Reuters.

CURVE BALL?

While the three are considered the mostly likely contenders for the top economic jobs, Argentina watchers are not ruling out a surprise pick.

Guillermo Nielsen, another key economic adviser to Fernandez, could take an economic role in the government. He is already known among bondholders for leading tense negotiations with Argentina's creditors in 2005.

Other well-known Fernandez confidants, including Todesca and Martin Redrado, who both held senior roles at the central bank, are also expected to be tapped as economic advisers.

(Reporting by Cassandra Garrison; additional reporting by Rodrigo Campos in New York and Marc Jones in London; Editing by Dan Grebler)

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