Fernández shakes up cabinet in a bid for coalition unity
The biggest change in the executive branch was the appointment of the governor of Tucumán, Juan Manzur, to replace Santiago Cafiero as the cabinet chief. Although Mr Manzur was nominated for the position by Ms Fernández, he is far from being a devout adherent of "Kirchnerism" and has previously been embroiled in public rows with the vice-president. Mr Manzur's appointment appears to have been driven by electoral considerations ahead of the November mid-term elections. We believe that the FdT is looking to re-engage with socially conservative, fiscally liberal voters; these voters have traditionally represented a significant bloc of the eclectic Peronist base, but have recently been side-lined by the party apparatus. Mr Manzur's history as a pro-life advocate and his ties to local Peronist movements could prove assets in this regard.
Other cabinet changes also reflect an uneasy truce between the two main factions of the FdT. Changes to the leadership at five ministries (including agriculture, education and security) all went in favour of the Kirchnerists. However, the president did retain Mr Cafiero, a close ally, in the cabinet by appointing him foreign affairs minister. Most importantly, the main ministries responsible for crafting economic policy were left untouched, with Martín Guzmán and Matías Kulfas retaining their portfolios of economy and productive development respectively.
That the moderates remain in charge of economic policy bodes well for economic stability. Nevertheless, the influence of leftist populists over policy has grown since the FdT's resounding defeat at the September 12th primary elections. Although there has been no official announcement, the government is reportedly contemplating an array of spending measures—from expanded retirement benefits to direct cash transfers—to boost its popularity. We had already accounted for strongly back-loaded public spending in our forecasts, but the balance of risks is tilted towards even more expansionary fiscal policy.
Impact on the forecast
The cabinet reshuffle has, by itself, not drastically altered the balance of power within the government. We assume that the pivot to more populist policy will be short-lived, but risks to the fiscal outlook and to our forecast for a new IMF deal are growing.