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Agreement between IMF and Argentina would be at risk with new Minister of Economy

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His appointment, following the sudden resignation of Martín Guzmán on Saturday, is seen by economists as a victory for the more left wing of the country’s ruling coalition, aligned with Vice President Cristina Fernández de Kirchner.

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Here is what analysts are saying about Batakis:

Diego Pereira and Lucila Barbeito of JPMorgan

The appointment of Batakis seems to indicate that the balance of power has tilted towards the Kirchnerist side and we would expect a more expansionary fiscal stance and, potentially, a renegotiation of the IMF program amid growing imbalances and a wider exchange rate gap.

The way forward looks shaky as we head into the election year, making any orthodox adjustment politically costly and therefore unfeasible.”

Nicholas Watson of Teneo

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As an immediate priority, Batakis will have to refinance short-term peso-denominated debt equivalent to around 2.7% of GDP by September.”

Marcos Buscaglia of Alberdi Partners

Guzmán’s departure was due in part to “his inability to get the energy secretaries and deputy secretaries to implement portions of the rate increases announced about a month ago.”

We see Batakis as a lightweight compared to the economic challenges facing Argentina. We think he will tighten currency controls and at the same time he is likely to control government spending

Bataki’sHe has repeatedly expressed his favorable opinion on export taxes, so we do not rule out that he will push for legislation to increase export taxes.”

Javier Timerman of Adcap Securities

There is a government going through a difficult situation, and the fact that it cannot even organize a press conference to communicate the change of ministers in Economy, has an impact on the behavior of the people and on the markets”

So, the president and the vice president have to sit down with the economy minister and talk about what level of inflation they are willing to tolerate, how much they want to lower spending or cool down the economy.”

William Jackson of Capital Economics

This is likely to lead to a looser fiscal stance accompanied by higher inflation and tighter capital controls. The country’s agreement with the IMF already seems to be wearing thin”

The IMF program “It appears to be derailing sooner even than we had anticipated. A (another) sovereign default is starting to look more and more likely.”

Source: Gestion

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