Argentina: Is Massa the right answer to the wrong question?
Argentina faces yet another financial crisis and has brought in a new ‘super-minister’ to try to calm the market and placate the IMF. While he will find a sympathetic ear at the fund, not many other international investors are listening anymore.
The appointment of Sergio Massa as Argentina’s third finance minister in the space of a month has seen the country’s economy step back from a full-blown financial crisis. However, financiers see little prospect of any fundamental improvement in Argentina’s dire economic situation.
“The appointment was a political response to the confusion in the markets that was pushing Argentina closer to a crisis. However, even an empowered finance minister who enjoys political backing from the administration is going to face the same intractable problem – it’s impossible to move the economy forward to multiple goals at the same time,” says Martin Tobal, director of the macro-financial risk analysis directorate at Banco de Mexico, speaking to Euromoney in a personal capacity. As an Argentine he is a close follower of his home country’s economic fortunes and adds that systemic risks to Argentina’s banking system appear low.
“The only way you can work to lower inflation, increase reserves and bolster the economy is to create trust in your economic policy. And, in the current context of the Argentine economy, which has run constant fiscal deficits, that means lower fiscal spending – and that is something very few Argentine finance ministers have been able to deliver,” he says.