Argentina's Fernandez bets on 'superministry' to stop economic bleeding

·2 min read
FILE PHOTO: Argentina's President Alberto Fernandez gestures as Sergio Massa speaks after midterm elections, in Buenos Aires

By Nicolás Misculin

BUENOS AIRES (Reuters) - Argentine President Alberto Fernandez launched his latest effort to tackle an economy in crisis on Thursday, tapping one of the ruling coalition's most powerful figures to lead a new "superministry" on the same day the central bank hiked interest rates to 60%.

Fernandez picked politician Sergio Massa for the new role overseeing economic, manufacturing and agricultural policy. Massa currently heads the lower house of Congress for the ruling Peronist coalition.

The ministerial shake up, which moves current Economy Minister Silvina Batakis to lead state-run lender Banco Nacion, comes less than a month after her predecessor abruptly resigned.

The changes point to tensions between different wings of the center-left ruling coalition over how to tackle the worsening price spiral for consumers, huge government debt obligations, and a peso currency that last week hit historic lows.

Once Massa resigns his congressional leadership post, he will assume the newly created role, which is expected to happen after a special legislative session set for next Tuesday.

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

The move continues the monetary authority's so far futile push to tame surging inflation, which analysts speculate could exceed 80% by the end of this year.

Prior to Fernandez's cabinet changes, the beleaguered peso currency strengthened around 5% in the parallel black market, to trade at 311 pesos per U.S. dollar, according to private traders. Last week, the peso weakened to as much as 350 per greenback.

Analysts offered mixed takes on the president's attempt to turn the page on weeks of economic turmoil, citing persistent imbalances fueled by raging consumer prices plus an exchange rate gap between the parallel and tightly controlled official rate, which has climbed above 150% this month.

"The policy response can well be characterized as a Band-Aid effort, lacking the required consistency and breadth to stabilize the economy," J.P. Morgan said in a research memo after Massa's appointment.

It added that fresh economic stewardship must be able to better coordinate political support for sound fiscal policies.

In what could be taken as a note of optimism, the bank's Latin America market researchers noted that the incoming minister with a greatly expanded portfolio "may offer that coordination ability, amplified with political savviness."

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