BUENOS AIRES (Reuters) – Economic advisers to Argentina’s presidential front-runner and opposition leader Alberto Fernandez said he would seek alternatives to the current administration’s austerity measures in a meeting with the new Treasury Minister on Wednesday.
FILE PHOTO: Presidential candidate Alberto Fernandez speaks during the primary elections, at a cultural centre in Buenos Aires, Argentina, August 11, 2019. REUTERS/Agustin Marcarian/File Photo
Center-left Peronist Fernandez, who is expected to win Argentina’s Oct. 27 presidential election after his resounding lead in the Aug. 11 primary vote, has been critical of last year’s massive $57-billion standby agreement with the International Monetary Fund and the austerity measures that were imposed in its wake. He has pledged to “rework” it if elected.
Argentina election interactive: here
Argentine asset prices went into a tailspin last week after the primary result raised fears of a return to former interventionist economic policies.
As President Mauricio Macri sought to calm markets this week, he appointed a new Treasury Minister, Hernan Lacunza.
Lacunza, who was sworn in to the position on Tuesday, said he was meeting with Fernandez’s economic advisers on Wednesday because “it matters what the other candidates and their economic teams say.”
“We agreed to guarantee the stability of the economy,” a Treasury Minister spokesman told Reuters following the meeting.
Earlier on Wednesday, Lacunza said Argentina would not allow a chaotic fall in the peso and would use its dollar reserves to bolster the currency against the political uncertainty that erupted after the primary election.
The central bank auctioned a total $94 million in reserves during the day, traders said. The bank has spent a total $709 million to bolster the peso since Macri was thrashed in the primary nominating contest by Fernandez.
The peso closed 0.53% weaker at 55.03 to the U.S. dollar while bond prices rose slightly and the local Merval stock index closed with a gain of 2.6%, suggesting recent market jitters had begun to calm.
“We will not allow an irrational run on the currency. That’s why we have international reserves,” Lacunza told local radio station Mitre in an early morning interview, less than 24 hours after being sworn in as treasury chief.
But after the markets closed on Wednesday, debt ratings agency Fitch said the peso’s recent depreciation “suggests a real risk of default” and “raises the potential for a sharper deterioration in economic growth.”
A statement sent by Fernandez’s “Frente de Todos” coalition after the Lacunza meeting said it was committed to complying with all current obligations and contracts but wanted an “alternative economic model that prioritizes price stability and the recovery of growth and employment.”
Fernandez’s advisers also discussed with Lacunza their concern over the declining international reserves, high inflation, fuel prices and a new cut on sales tax for some food products, the statement said.
In a bid to shore up his flagging support, Macri last week enacted a series of emergency measures, including cuts in food and personal income taxes aimed at helping families stung by Argentina’s recession and 55% inflation rate.
Macri took office in late 2015, promising to “normalize” the economy after years of heavy-handed currency controls and other interventions in the markets under previous president Cristina Fernandez de Kirchner, who is running as Alberto Fernandez’s vice presidential candidate.
But Macri over-estimated his ability to attract the foreign direct investment needed to make the economy grow, while under-estimating the effect that cutting public utility subsidies would have on inflation. His popularity fell as consumer prices, especially home heating gas and electricity bills, shot higher.
Lacunza said earlier on Wednesday that Argentina would hit its target of erasing the country’s primary fiscal deficit this year, under the terms of the 2018 IMF agreement. Macri negotiated the pact to halt a run on the peso last year.
Argentina election: here
Reporting by Hugh Bronstein and Hernan Nessi, additional reporting by Cassandra Garrison, Eliana Raszewski, Jorge Otaola and Walter Bianchi; Editing by Nick Zieminski and Rosalba O’Brien