| BUENOS AIRES
BUENOS AIRES Nov 19 President Cristina
Fernandez's new cabinet picks confirmed a deepening of
Argentina's left-leaning economic model rather than a policy
switch needed to confront escalating inflation and dwindling
foreign currency reserves.
Following her first public appearance since an Oct. 8
operation to remove blood that pooled on her brain, Fernandez's
spokesman announced late on Monday the promotion of leftist
economist Axel Kicillof to economy minister and the replacement
of the central bank director and agriculture minister. Kicillof
has served as deputy economy minister.
Argentine debt prices were little moved by the news on
Tuesday, though the Global 2017 bond was down 1
Analysts said Kicillof already had more influence on
Fernandez than the man he replaced, Hernan Lorenzino, who was
given the job of ambassador to the European Union.
"I wouldn't say that any of this represents a policy change,
per se. But a deepening of the model? Perhaps," said Michael
Henderson, a Latin American economist at Capital Economics in
Latin America's No. 3 economy faces inflation that private
economists estimate at 25 percent and a currency, the peso, that
is 65 percent weaker on the informal market than at the
government's official rate.
The government is also in the midst of a decade-long legal
battle with holdout creditors and is blowing through foreign
currency reserves to import energy and fund popular subsidies.
Kicillof, 42, steered the Argentine government's
expropriation of a controlling stake in energy company YPF
from its former parent company, Spain's Repsol
. Argentina, once a net energy exporter, needs foreign
capital to develop its vast Vaca Muerta shale reserves.
Amid concerns over the economy's health, Fernandez's
supporters suffered heavy losses in congressional elections on
Oct. 27 that ended her chances of securing a change to the
constitution that would have enabled her to run for a third term
"Since there's no chance of Fernandez holding on to power,
she might just throw caution to the wind and really double down
on some of these ideological reforms pre-2015," Henderson said.
Fernandez's spokesman also announced the appointment of
Carlos Fabrega as central bank chief on Monday, replacing
Mercedes Marcó del Pont, and said Carlos Casamiquela would take
over as agriculture minister, replacing Norberto Yauhar in the
world's No. 3 soybean and corn supplier.
Most observers expect Fernandez's government to maintain or
intensify measures to keep the economy growing even as foreign
investment abandons Argentina. She increased public spending to
keep voters happy ahead of the mid-term vote, causing prices to
rise and reserves to melt away.
"The bottom line is that if the government fails to tackle
the underlying inflation problem - which the new economy
minister doesn't even recognize - there will be a strong risk of
some sort of currency crisis in the rest of Ms. Fernandez's
term," said Fiona Mackie, an Argentina analyst for the Economist
Mackie said bondholders who refused to participate in two
debt restructurings dating to the country's 2002 default had
more confidence in Lorenzino as a dealmaker than in the
abilities of Kicillof, who previously focused on domestic
"This could dash hopes that were only recently raised that
some sort of negotiated settlement to the holdout problem could
finally, and against the odds really, be found," Mackie said.
A U.S. appeals court in New York on Monday declined to
reconsider an order requiring Argentina to pay $1.33 billion,
ruling in favor of bondholders who refused to participate in two
debt restructurings spinning out of the country's 2002 default.
The court's decision set the stage for Argentina to go to
the U.S. Supreme Court in a case that has created concerns about
a potential new debt crisis following Argentina's $100 billion
default more than a decade ago.