CONTACT INFORMATION POLITICAL & REGULATORY RISKS [email protected] Juan Cruz Díaz [email protected] www.cefeidas.com Megan Cook +54 (11) 5238 0991 (ARG) [email protected] +1 (646) 233 3204 (USA) Marina Martínez de Hoz Torre Bellini [email protected] Esmeralda 950 Emilia Cerra Ciudad Autónoma de Buenos Aires [email protected] (C1007ABL) República Argentina Rayan Akill [email protected] Political Climate Report - ARGENTINA POLITICAL POLITICAL CLIMATE REPORT December 23, 2019 IN THIS ISSUE Alberto Fernández was sworn in as Argentina’s president on Page 2 Fernández announces cabinet, moves to December 10 and has moved quickly to begin advancing his agenda. consolidate his leadership Announced several days prior, Fernández’s cabinet reflects the Page 4 diversity of his electoral coalition and evidences the new Fernández administration quickly administration's view of a more active role for the state. Less than introduces economic measures two weeks in, the government has passed its first major test: Administration increases export taxes, tests relationship with agricultural sector advancing a sweeping measure that includes various tax changes, price freezes, and special presidential powers, among other Page 5 Government faces first political test: proposals, with the aim of raising government income to support advancing sweeping bill increased spending in priority areas. However, as pushback and Page 6 changes to the text of the law show, the government will have to Argentina makes changes in carefully negotiate, within its own coalition and with external actors, foreign affairs in order to advance its agenda and manage tensions. Page 7 “Solidarity Law” receives congressional approval Fernández sworn in as Argentina’s president, confirms Page 9 cabinet What comes next? Economy Minister met with IMF On December 10, Alberto Fernández was sworn in as Argentina’s Director prior to being sworn to president in front of the national Congress in a ceremony attended office by governors, legislators, judges and international leaders. Fernández received the presidential sash and baton from outgoing President Mauricio Macri, finalizing a cordial transition that marked an important moment for Argentine democracy as Macri was the first non-Peronist president to finish his term since the creation of Peronism. Although the transition between technical teams was not substantive, both Macri and Fernández made efforts to show the normalcy of a change in political stripe, and the two leaders jointly attended a mass “for unity and peace” the weekend prior to the handoff. Following his swearing in, Fernández gave an inaugural speech in which he called on Argentines to unite for “a new social contract”. Overall, the tone of the speech was measured and avoided direct criticism of the Macri administration, although Fernández painted a dismal picture of the economy—highlighting poverty, unemployment (especially youth unemployment), inflation, and food insecurity among other challenges—and said his administration would implement new economic and social measures to address these issues, with a focus on promoting growth. He reiterated pledges to protect the most vulnerable sectors and concretely announced that a share of the budget would be re-allocated to food assistance programs. Find more about our services Follow @CefeidasGroup Also of note was the fact that Fernández announces cabinet, moves Fernández cited several historical to consolidate his leadership figures that are not normally in the ARGENTINA pantheon of the Peronists, a nod to the – Just a few days before taking office, on the radicales (members of the Radical Civic evening of Friday, December 6, Fernández Union, UCR, party) in the opposition. PCR announced the composition of his cabinet, which will include 20 ministers, three Fernández’s inaugural speech and secretaries with ministerial range and the cabinet structure (see below) suggest cabinet chief. This is a significant his administration will put renewed increase from the 11-member cabinet emphasis on protecting vulnerable structure Macri ended his term with populations and restarting (following a major reduction to show consumption, as well as prioritize the austerity in 2017), and evidences the real economy and productive new administration's view of a larger development over the financial sector. role for the state as well as Fernández has reiterated his willingness to prioritization of certain issues, such as meet Argentina’s debt obligations but will health and gender equality, which have want to negotiate a restructuring more been elevated to ministerial level (of aligned with his prioritization of economic note: the new health minister rapidly growth and social inclusion. He has said reinstated the protocol for access to legal that exiting recession and returning abortion that was overturned by Macri the economy to growth are before leaving office, quickly differentiating prerequisites that must be met before itself on this issue of public debate, see here Argentina begins to repay its debt, for background). although Argentina has said it will continue to meet its obligations while Fernández announced the cabinet it renegotiates. This is very aligned with nominations in a ceremony in which he was his nomination of sovereign debt crisis front and center and highlighted his long- specialist Martín Guzmán as Economy time relationships with and admiration for Minister (see below for more information). all the members of his cabinet. Indeed, the cabinet shows his strong imprint— Fernández also stated that his most key roles were assigned to close administration would seek reforms to advisors—although positions were promote judicial independence and make allotted with the recognition that he changes to funding for the secretive governs in a coalition. Additionally, intelligence agency AFI to promote Fernández’s cabinet reflects the diversity of transparency and independence. The his electoral coalition, and mixes young implication was that Fernández wants ministers who are relatively fresh faces to to keep intelligence agents away from national politics with politicians with long often highly politicized judicial trajectory in Peronism and Kirchnerism and investigations, a touchy subject for many their own political weight. members of the current administration who feel that the Macri administration Fernández’s inner circle will include close overstepped the line in promoting lawsuits associates Santiago Cafiero and Cecilia against them. However, as the pushback Todesca, who have been named cabinet to some of the government’s first chief and vice cabinet chief, respectively. measures illustrates (see below)— As a former cabinet chief himself, these politically-charged reforms will Fernández is expected to invest not be easy to advance. significant power in Cafiero, who will coordinate the government’s political strategy. Meanwhile, economist Todesca, who has close links with national tax agency AFIP head Mercedes Marcó del Pont, will 2 play an important role in economic policy Minister) and Miguel Ángel Pesce (President coordination. Rounding out Fernández’s of the Central Bank). Fernández’s inner circle are long-time friend Julio economic team has views that combine ARGENTINA Vitobello as General Secretary of the elements of economic orthodoxy – Presidency, former significant other Vilma (keeping fiscal deficit low, attracting Ibarra as Legal and Technical Secretary, FDI, increasing exports, etc.) with PCR and Gustavo Béliz, who he has known for a active government policies focused on long time, as Secretary of Strategic Affairs. promoting domestic production and All three have previous experience in protecting most the vulnerable government: Vitobello as a Buenos Aires sectors. Guzmán, an academic specialized city legislator and head of the Anti- in sovereign debt policy who has argued Corruption Office during Cristina Fernández that repayment programs should better de Kirchner’s presidency, Ibarra as a consider local factors affecting debt national legislator, and Béliz, a former sustainability, will be tasked with Minister of Interior and Justice, under the overseeing Argentina’s debt negotiations presidencies of Carlos Menem and Néstor and macroeconomic policy, more generally. Kirchner, respectively. Meanwhile, Kulfas—a neo-structuralist economist, specialized in industrialization The incoming government had been tight- and capital flows—will oversee a lipped about nominations to key economic significantly strengthened Production roles in the lead-up to the assumption (see Ministry, that includes mining, energy and here for analysis on why), but they have knowledge economy portfolios, three pillars been assigned to Martín Guzman (Economy the administration considers crucial for the Minister), Matías Kulfas (Production country’s long-term growth. Graphic 1. Political alignment of cabinet ministers and other key appointees and relative influence in the administration. 3 Kulfas will have oversight over nearly approach of the new administration, all the real economy, and the which he said will include a “holistic concentration of economic decision- plan” that prioritizes macroeconomic ARGENTINA making in these two ministries with growth. He said the aim would be to – clearly defined responsibilities may gradually seek to close the fiscal deficit but facilitate economic policy coordination. that there is no space for a fiscal PCR adjustment in 2020 as this would likely Although the above-named individuals exacerbate the