The peso strengthened slightly in the financial market, seen as an important metric on confidence considering the government keeps a tight grip on the official exchange rate. The value of the dollar in the black market (known locally as the “blue” dollar) decreased from 297 pesos to 291 pesos.
Argentine government bonds saw early gains in the first few hours of trading after Massa’s swearing-in Wednesday afternoon but these were largely wiped out by the afternoon. Argentine stocks also saw slight gains both locally and in New York on a day in which equities in general saw gains.
In his first news conference as economy minister Wednesday evening, Massa sent several pro-market signals, including a goal of increasing the country’s hard-currency reserves, a decrease in the deficit and a vow to no longer use the Central Bank to finance government operations.
Massa, who resigned as head of Congress’ lower house, the Chamber of Deputies, to take on a strengthened Economy Ministry that includes the previously independent Production and Agriculture ministries, is President Alberto Fernández’s bet to face a growing economic crisis that has also exposed deep divisions within the government’s ruling coalition.
Economic analysts said that Massa, who has close relationship with the country’s business elite and has spent years building contacts in the United States, appears committed to slashing spending and fulfilling the goal of reaching a fiscal deficit of 2.5% of Gross Domestic Product, which was part of the commitment the country made with the International Monetary Fund to restructure some $45 billion in Argentine debt.
Left-leaning members of the governing coalition, including Vice President Cristina Fernández, a former president, have been highly critical of the agreement with the IMF.
“There’s a feeling that the vice president in particular got scared at how much reserves fell in July, how much inflation increased,” Camilo Tiscornia, head of local consultancy C&T Asesores Economicos. “The government is more scared and is willing to take more unpopular measures.”
Tiscornia said that the “most solid” part of Massa’s first announcements included a larger than expected cut in subsidies for public utilities.
Other parts of his initial plan, however, were not precise, particularly those that had to do with decreasing inflation.
“The announcements appear to fall short,” Tiscornia said.
Others agreed a larger scale plan was needed if Massa has any hope of success in his new role.
“To face up to an inflationary process as large as the current one, which threatens to reach 100% annually, requires an integral plan made up by a group of fiscal, monetary, exchange and revenue measures that are coordinated,” said Víctor Beker of the University of Belgrano’s Center for the Study of the New Economy. “That is not appearing for now.”