Fernandez of Argentina bets on 'superministry' to stop economic hemorrhage

By Nicholas Misculin

BUENOS AIRES (Reuters) – Argentine President Alberto Fernandez launched his latest effort to tackle a failing economy on Thursday, naming one of the ruling coalition’s most powerful figures to head a new “super ministry” on the same day he the central bank raised interest rates to 60%.

Fernández chose politician Sergio Massa for the new position of overseeing economic, manufacturing and agricultural policy. Massa currently heads the lower house of Congress for the ruling Peronist coalition.

The ministerial shake-up, which brings current economy minister Silvina Batakis to head state bank Banco Nación, comes less than a month after her predecessor abruptly resigned.

The changes point to tensions between different wings of the ruling centre-left coalition over how to deal with the spiral of worsening prices for consumers, huge government debt obligations and a peso currency that hit record lows last week.

Once Massa steps down from his leadership position in Congress, he will take over the newly created position, which is expected to happen after a special legislative session scheduled for next Tuesday.

The government announced Massa’s new post just hours after the central bank raised its benchmark Leliq interest rate by eight percentage points to 60%, its seventh hike this year.

The move continues the monetary authority’s hitherto futile push to rein in rising inflation, which analysts speculate could top 80% by the end of this year.

Before Fernández’s cabinet changes, the beleaguered peso currency was gaining around 5% on the parallel black market, trading at 311 pesos to the US dollar, according to private traders. Last week, the peso weakened to 350 per dollar.

Analysts offered mixed views on the president’s attempt to turn the page on weeks of economic instability, citing persistent imbalances fueled by consumer prices plus an exchange rate gap between the parallel official rate and the tightly controlled one, which exceeded 150%. this month.

“The policy response can well be characterized as a band-aid effort, lacking the consistency and breadth required to stabilize the economy,” JP Morgan said in a research memorandum following Massa’s appointment.

He added that a new economic administration must be able to better coordinate political support for sound fiscal policies.

On what could be taken as an optimistic note, the bank’s Latin American market researchers noted that the incoming minister with a vastly expanded portfolio “can offer that capacity for coordination, amplified with political cunning.”

(Reporting by Nicolas Misculin; Writing by David Alire Garcia; Editing by Christian Plumb and Leslie Adler)

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