“Events, my dear boy, events.” (British Prime Minister Harold Macmillan on the greatest challenge for politicians.)
The Argentine Presidential election season unofficially opened on Sunday, when it was revealed by official sources that Cristina Kirchner would indeed be the incumbent government’s candidate for the October 28th poll. However in the midst of the first shots fired across bows, a strange turn of events may have made the possible move away from present economic policy that much easier.
In June, a bag containing a large quantity of ready cash (a sum between U$65,000 and U$250,000 depending on which story you care to read) was found by police in the en-suite bathroom of economy minister Felisa Miceli’s private office during a routine security inspection. According to the journalist who recently broke the story, the police wrote out an official report of the finding which then strangely ‘disappeared’ and Miceli denied everything. The story became even more embarrassing when Miceli later said it was indeed her own money destined to buy a property. Once it was realized that this meant she was possibly guilty of tax evasion (large transactions in cash and not via the banking system are frowned upon in today’s Argentina), the story was then changed to “money for personal use”. The mind boggles as to why Miceli needs that much “personal” cash hanging round the office; inflation may be high, but a lunchtime delivery pizza is still pretty reasonable in downtown Buenos Aires.
The story has gained a lot of traction, coming after another recent scandal involving alleged bribes that has tarnished parts of the Kirchner outer circles. Yesterday an official complaint was registered and the case is now in the hands of the federal judiciary. This is not to be taken lightly; Miceli will have to answer to an official inquiry that may or may not lead to serious charges. The Kirchner administration will want to avoid any scandal situations at all costs during election season, so if the Miceli money bag story starts to cast shadows, a rapid change at the ministry would come as no surprise to observers. Fellow blogger Otaviano Canuto recently remarked here (and I quote), Argentina is a case “in which drastic policy adjustments are likely to become inevitable”. I heartily agree with this viewpoint, and would therefore make the following observations.
1) There is little doubt that, although aiding exports, the current weak peso policy in Argentina is fuelling the country’s worrisome inflation rate. 2) Felisa Miceli has been a strong proponent of the weak peso policy. 3) As mentioned in the previous blog “Argentina: The Strong Peso Cometh?” the proposed transition from Don Kirchner to Doña Kirchner opens an excellent window of opportunity for fundamental policy changes.
Vultures are already circling the Ministry of the Economy and talk in the city is of who will replace when (not if) Miceli resigns. So be it. Interestingly, one of the short-listed names is Beatriz Nofal, an eminently qualified economist championed by Cristina’s likely Vice Presidential running mate, Mendoza’s senator Julio Cobos. Nofal was recently installed (against the wishes of Miceli, but that’s another story) as head of a quasi-governmental office responsible for attracting foreign investment to Argentina. Nofal has done the rounds, visiting various countries on the promotion tour and also heading up Argentina’s delegation at the recent Davos summit. Her star is most certainly in the ascendancy. She is on record as being pro foreign investment and anti weak Peso policy. As a sidebar, the weird legacy of post Peron Argentine politics means that classic left/right divides are often blurred and smudged; in Nofal’s case, although belonging to the ostensibly centre-left UCR (Radical) party, she is far more laissez-faire and anti-intervention than centre-right presidential candidate and ex-economy minister Roberto Lavagna, who would continue the weak peso policies of the past 4 years if elected President.
Nofal is not the only name being bandied about, but if she is given the job in the weeks and months ahead the financial community should take it as a no-brain signal that the days of ArgP$3.10 to the dollar are numbered. By applying a new broom and putting a new face at the head of economy in Argentina, ‘Los Kirchner’ can potentially make space for the sea-change in economic policy that this observer hopes for; that is, the stronger peso.