BUENOS AIRES, Argentina – Argentine President Cristina Fernandez said Wednesday that she’s going to deepen her government’s left-leaning economic program.
Fernandez remade her Cabinet this week after six weeks of rest following head surgery. Her appointments suggest she’ll tighten her grip on the economy, which is struggling with high inflation and dwindling foreign reserves.
“We need to continue to deepen the model so there are more Argentines included and to prevent anyone from coming to take what’s ours,” she said in her first public act at the presidential palace in 47 days.
Fernandez, who recently stopped wearing the black of mourning three years after the death of her husband and predecessor as president, Nestor Kirchner, has upset investors with her interventionist policies.
She nationalized private pension funds, renationalized the country’s flagship airline and led Argentina’s uncompensated seizure of the Spanish company Repsol’s controlling, $10 billion stake in the state YPF oil company.
These measures have been hugely popular with those Argentines who blame the privatizations of the 1990s and other free-market policies for the country’s economic crisis and debt default in 2001-2002.
But many Argentines are fed up with currency controls that restrict them from buying dollars as the government tries to keep hard currency from pouring out of the country and worsening inflation.
While the government officially says inflation is running around 10 per cent a year, independent economists and even some of Fernandez’s allies say the rate is really more than double that.
The president rejects criticism of her intervening in the economy, saying her push for strong internal consumption is social justice, not economic orthodoxy.
“I fought my whole life for this. A national sovereignty shown through the resurgence of the nation’s productive apparatus that we must deepen and continue to move forward,” she said at Wednesday’s swearing-in ceremony for her new Cabinet ministers.
“We need to overcome the barrier that says that we’re not able to develop a competitive national industry.”
The new economy minister, fiery economist Axel Kicillof, was the mastermind behind the government’s forced takeover of YPF. As a university professor, he has taught Karl Marx’s economic theories and has called for more interventionism.
Argentina’s history of expropriations and refusal to pay all its debts left over from its catastrophic default a decade ago has left it with few alternatives when it comes to raising money on international markets. Companies also have been scared away by the government’s interference in exports and imports.
Although a major policy shift is not expected, many Argentines were pleased this week when the combative commerce secretary, Guillermo Moreno, quit a day after the Cabinet reshuffle gave others more power in Fernandez’s inner circle.
Moreno sought to fine and jail economists for publishing independent inflation numbers, and threatened black-market currency traders whose business gave many Argentines their only access to dollars in recent years.
Economic analysts said his resignation could be the first step toward clearing up the government’s official economic statistics, which are rejected by the International Monetary Fund.
The analysts said Kicillof will play a much larger role now that Moreno is out of the picture, giving him more autonomy to ease the restrictions on buying dollars.
The currency controls are stifling the investment needed for new growth, and billions of dollars in bond payments must be made in the coming year.
Argentina could also face a cash crunch, with international reserves falling from more than $50 billion to just $34 billion. The dollars that flow into the central bank thanks to commodities exports are no longer enough to cover the cost of imported oil and gas.
The government is expanding Argentina’s peso supply to cover the fiscal deficit and keep subsidizing electricity, natural gas and public transportation, but this feeds inflation, which analysts predict will be more than 20 per cent in 2014.