Argentina’s Cristina Fernandez’s power weakened the president for a reorganization

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Argentina Update

Argentina’s Peronist President Alberto Fernández reshuffled his cabinet on Friday night. The move increased the power of the radical Vice President Christina Fernández de Kirchner and paved the way for increased public spending.

After the center-right opposition coalition achieved its best result ever in the primary election last Sunday and defeated the government by 9 percentage points, tensions within the ruling Peronist group broke out.Christina Publish an open letter Blame the “political disaster” in the primary elections on Fernandez’s economic policies and demand changes.

The new appointment shows that Fernandez has given way to his powerful deputy, who himself served as president in 2007-15 and is widely regarded as the real power behind the throne.

The Peronites are trying to avoid losing in the mid-term legislative elections in November, and their majority in the Senate is in jeopardy.

Fernández’s main ally, Santiago Cafiero, was replaced by the governor of Tucuman Province Juan Manzour as the head of the cabinet on Friday night. The vice president publicly proposed to assume the position in an open letter issued the night before.

“They clashed in the worst way possible, [this has] Continue to upgrade. The president threatened to govern alone, and Christina blamed him for the election failure,” said political analyst Marcos Novaro. “After that, they may try to repair the fence, but the damage has already been done. “

Other allies of Fernández, such as Foreign Minister Felipe Sola, Security Minister Sabina Frederick, and Education Minister Nicolas Trota, all left their positions, even though Cafiro replaced Sola. Christina’s letter also addressed the president’s spokesperson Juan Pablo Biondi (Juan Pablo Biondi), who resigned a few hours after its publication.

She argued in the letter that the president is following a “wrong fiscal adjustment policy” and “this will undoubtedly have an impact on the election.” Last year’s GDP fell by 10%.

Argentina was excluded from the international market after its ninth sovereign default in 2020. While trying to reach a new agreement with the International Monetary Fund, it has been printing money to make up for government deficits. The inflation rate exceeds 50% every year, which is one of the highest inflation rates in the world.

Economy Minister Martin Guzmán, who was severely criticized by Christina’s allies for trying to reduce the deficit, has not wavered in the reorganization. Cristina denied that she wanted him to leave, and the Argentine media speculated that he would stay where he was until an agreement was reached with the International Monetary Fund.

“The government is much weaker now. Christina’s flanks may come into play, sometimes they are part of the alliance, sometimes they are not. Otherwise the alliance may be broken forever,” Novaro said.

The leaked conversations this week highlighted the bad atmosphere in the Peronist ranks, among which one of Christina’s close allies, the chairman of the Finance Committee, Fernanda Vallejos (Fernanda Vallejos) was Hear the description of Fernandez As a “squatter” (in the presidential palace), “deaf”, “blind”, “clown”. She later apologized for these comments.

Both Christina and Vallejos called for an increase in deficit spending. Christina believes that Argentina has room to increase this year’s fiscal deficit by 1.5 percentage points of GDP in order to increase spending before the election.

According to data from the Ferreres Consulting Company, Argentina is expected to have a fiscal deficit of 5% of GDP by the end of 2021. The additional spending requested by Christina would make it more than 6%, just as Guzman tried to close the gap as part of the $44 billion debt restructuring agreement reached with the International Monetary Fund.

“[Cristina’s] The economic proposal does not comply with the IMF agreement and long-term sustainability. She criticized Guzman because of his very mild austerity policy, which led to their defeat in the election. But she should know that good policies and good politics do not always go hand in hand, and sometimes the right ones are not popular,” said political adviser Sergio Berenstein.

Even if Guzman continues to serve as Minister of Economy, he still faces enormous challenges.

The long-term sustainability of Argentina’s finances is even bleaker than this year’s fiscal deficit suggests, because the 2022 budget will not include the income from the one-time additional wealth tax imposed during the pandemic. The government must also deal with an additional 3% of GDP deficit on the balance sheet from the central bank’s deficit filling.

“The president has two very complicated years. The Argentine economy needs reforms to grow again, and the combination of national debt and central bank debt can easily lead to further inflation,” said Fausto Spotorno, chief economist of Orlando Ferreres.

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