A new phase of uncertainty is beginning in Argentina. Economy Minister Martin Guzman, the main architect of the agreement with the International Monetary Fund (IMF) last March on the refinancing of Argentina’s debt, announced his resignation on Saturday July 2, after two and a half years in office.

“I am writing to present to you my resignation from the position of Minister of Economy of the Nation, with which you have honored me since December 10, 2019,” Martin Guzman said in a letter to center-left President Alberto Fernandez, inviting the Head of State to designate a successor. The Argentine president, who again this week had given his noticeable support to the minister, had not yet spoken at the end of the day on Saturday.

Martin Guzman, a 39-year-old economist, former student and close associate of the Nobel Prize in economics Joseph Stiglitz, had been on the front line of negotiations for two years, first with the creditors of the Paris club, then with the IMF to restructure the Argentinian debt, amounting to nearly $45 billion, the legacy of a loan taken out in 2018 by the previous government of Liberal Mauricio Macri – the largest loan in the history of the Fund.

Guzman criticized on his left

The agreement between Latin America’s third-largest economy and the IMF provides for a series of macroeconomic measures to control the country’s chronic inflation (50.9% in 2021, 60.7% over the last twelve months) and reduce its deficit budget (3% of GDP in 2021) until equilibrium in 2025. All under regular monitoring by the Fund. In return, the repayment of the debt will not begin until 2026, after a grace period of four years, to be spread out until 2034.

The IMF had so far endorsed Argentina’s macroeconomic guidance since the deal, with a successful first pass review last week, and $4 billion disbursed as a result. But Minister Guzman was regularly questioned by the Peronist left wing of the government coalition, embodied by the vice-president (and former head of state from 2007 to 2015) Cristina Kirchner.

This fringe reproached the minister for an excess of zeal in controlling the budget deficit, and the monetary issue, when the time and the conditions of Argentina, with 37% poverty, would require, according to this vision, more largesse. social. These criticisms have increased since the midterm elections at the end of 2021, which saw the ruling coalition lose a majority in the Senate.

Market mistrust

Martin Guzman, for his part, defended a pragmatic line of relative expenditure control, cleaning up numerous subsidies (in energy in particular) and a patient reconstitution of reserves, thanks to renewed growth (10% in 2021 after 3 years of recession, 6 % over the last 12 months). The Minister had on several occasions regretted the bad signals transmitted to the markets by these dissonances within the “Frente de Todos” government coalition.

And Martin Guzman returns to this lack of consensual support for in his letter of resignation, believing that for his successor, “it will be essential to work for a political agreement within the government coalition”. He reaffirms his “deep conviction and confidence in [his] vision of the path that Argentina should follow”, and warns that in the future it will be “essential to continue to strengthen macroeconomic coherence, including fiscal, monetary , financing, exchange rate and energy”.

The IMF, which has often hailed Guzman as an interlocutor, has yet to respond to his resignation. This could have an impact on the confidence, already not in good shape, of the markets vis-à-vis Argentina. For political analyst Carlos Fara, Guzmán’s departure means “checkmate for the autonomy of President” Fernandez. “The resignation is going to have a very negative effect on the markets,” he told Agence France Presse. Even if the president and vice-president reach a consensus on the conduct of the economy, everything will now be conditioned by pressure from Cristina Kirchner.

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