Publish in Perspectives - Wednesday, September 29, 2021
Vice President Cristina Fernandez Kirchner with President Alberto Fernandez. (Photo: Argentine President's Office)
Time to take profits and stay on the sidelines for a better moment to jump back into the fray.
BY WALTER T. MOLANO
As we expected, President Alberto Fernandez succumbed to the political pressure imposed by Vice President Cristina Fernandez Kirchner. Many members of the cabinet who were loyal to him resigned or were reassigned to new positions.
Close ally and confidant Press Secretary Juan Pablo Biondi was ousted for leaking information to the press in “off the record” interviews. Chief of Staff Santiago Caifero was demoted to Foreign Minister. He was replaced by the Governor of Tucuman Juan Manzur. He is a fervent Peronist, known for his belligerent style, and is the governor of one of the poorest provinces. Surprisingly, the economic team led by Economy Minister Martin Guzman survived the Friday night massacre.
Although the Vice President attributed Sunday’s loss on the government’s austere fiscal policy, her fury was really directed at the cabinet members who had not fully spent their budget allocations. This is why she insisted on changing the Chief of Staff, because she wanted someone who would hold the ministers’ feet to the fire and force them to execute their budgets. Friday’s changes also saw the return of Anibal Fernandez, Cristina’s former Chief of Staff and party militant, as Security Minister. Cristina loyalist Eduardo Wado de Pedro returned as Minister of the Interior, after resigning earlier in the week.
Last of all, several other of Cristina’s former cabinet members including Daniel Filmus and Julian Dominquez were incorporated into President Alberto Fernandez’s cabinet. As we expected, Sunday’s defeat led to more, not less, radicalization of the government. The government promised a consumption shock, with a 46% increase in the minimum wage, more pension benefits and tax exemptions for the working poor. The 2022 budget that had recently been prepared will be totally redone. In an attempt to circle the wagons, President Alberto Fernandez flew to the Province of La Rioja in northern Argentina to meet with Peronist governors. The ensuing photo op was meant to show solidarity in a moment of great political uncertainty. It is more likely the changes will not alter the outcome on November 14th, but what is sure is that the results will be fully accredited to the Vice President.
Why the manic behavior? Cristina Fernandez de Kirchner is still fighting several serious corruption charges, which could imply incarceration. At the same time, several important cases against former President Mauricio Macri and senior members of his government are moving through the courts. Therefore, she needs to keep a tight grip on the levers of power. In the short term, this will lead to further weakness in Argentine asset prices. However, it could also lead to an implosion of the Fernandez Administration and a body blow to the Kirchners.
Yet, we are still some time away. There is no incentive to pick up assets on the cheap. The carry on the sovereign bonds remain very low and the international environment is about to get ugly. Therefore, it is time to take profits and stay on the sidelines for a better moment to jump back into the fray.
Walter Molano is head of research at BCP Securities and the author of In the Land of Silver: 200 Years of Argentine Political-Economic Development.