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Changes in the Argentine Cabinet: What's New?

Jorge Capitanich (R) attends a swearing in ceremony as the new Cabinet chief next to Argentina's President Cristina Fernandez de Kirchner at the Casa Rosada Presidential Palace in Buenos Aires

President Cristina Fernández de Kirchner announced a reshuffling in the most important Cabinet positions when returning to the presidential office after five weeks of mandatory medical rest.  Her reappearance was in a homey video shot by her daughter, surrounded by pets and stuffed toys.

In recent Latin American history, the position of finance minister has tended to be the second most important one after the presidency. It has been occupied by towering figures that later became presidents or presidential candidates, including Fernando Henrique Cardoso in Brazil, Domingo Cavallo in Argentina, Pedro Pablo Kuczynski in Peru, and Alejandro Foxley and Andrés Velasco in Chile. The Kirchners have followed a different path and degraded that position with weak second-line figures.  Over the last few years, the position was occupied by Hernán Lorenzino, a lawyer who became an internet figure in a viral YouTube video when he was unable to explain Argentine inflation during a Greek TV interview. At the end of that interview, he was caught on record saying “Me quiero ir” (I want to leave). His wish was granted on November 18, when he was replaced by Vice-Minister Axel Kiciloff.

Mr. Kiciloff, aged 42, has a higher profile than his predecessor and a good rapport with the president and her son, the leader of La Cámpora. La Cámpora is a group that supports the president and has been described in the World Socialist Website as a “sinister so-called youth movement, allegedly set up to promote human rights and Latin Americanism used by the regime to control and defuse dissent.” Kiciloff is a professor of Marxist economics from the University of Buenos Aires, whose only real-world experience has been holding several simultaneous positions in this administration, including key posts in the nationalized airline and the nationalized oil company YPF (an expropriation that he masterminded). That national airline, Aerolíneas Argentinas, lost over $2 billion in the first quarter and has not presented audited balances yet, and the energy deficit, under YPF leadership, was around $6 billion in the first semester.  The initial signals from Minister Kiciloff suggest that nothing will change.

Potentially more relevant, perhaps, is the removal of the secretary of commerce (or better, “secretary of anti-commerce”), Guillermo Moreno. Moreno used to intimidate businessmen with methods that included showing a gun during meetings and threatening the release of personal information, while asking those businessmen to control prices, restrict imports and buy government bonds.  His anti-inflation strategy included tampering with economic statistics, and Moreno—being the enforcer—prosecuted independent actors who published more accurate price statistics.

This Gestapo-style policymaking might be softening now, yet the central tenets of “the model,” are still part of the discourse of the president.  In the words of the last finance minister of some weight, Robert Lavagna, “[President Cristina Fernandez] locks herself in her small wonderland out of touch with the real world, and thus can’t find the way out according to their mental scheme,” and “the only thing that has avoided Argentina from falling into another major crisis is a tremendously favorable international scenario with very high prices for grains and oilseed prices and the effect this has on farmers to keep increasing their crops.” The initial signals in terms of economic policy continue to be more of the same: price controls, taxes on luxury consumption (which has been stimulated by the overvalued official exchange rate), and further tinkering with the exchange rate system.  The official exchange rate has increased by more than 40 percent this year and stands at 60 percent of the (more relevant) black market rate.

The most important change in the Cabinet has been the appointment of Jorge Capitanich as chief of Cabinet.  That office was introduced by the constitution of 1994 with the purpose of alleviating extreme hyper-presidentialism. As it is often the case with institutional reforms on paper, it has not worked to that end, and the position has tended to be filled by second-liners subservient to the president.  This time, we might be in for a change. Capitanich is the Peronist governor of the province of Chaco, and he has probably been called in to attempt to manage the transition from hard-core Kirchnerism to a new coalition of Peronist territorial bases, which is more friendly to the Kirchner crowd than the alternatives—meaning that in an eventual future government will partly include some Kirchnerists, or at least provide them with some immunity against prosecution, unlike what might happen under opposition Peronists or true opposition.

Capitanich is a typically successful Peronist governor, who was re-elected for a third term last October with 60 percent of the vote. He was granted a leave by the Provincial Legislature in a quick 26-1 vote to become chief of Cabinet.  His reign has been built with the standard trick of getting generous transfers from an allied national administration.  Chaco continues to be an underdeveloped province, where 60 percent of the population does not have drinkable water, and 76 percent do not have an adequate dwelling (electoral success in the Argentine provinces is more related to short-term clientelism than to long-term solutions for social ills). Moreover, a few years ago, Capitanich went through a noisy divorce in which he got a restraining order forbidding his former wife to approach their children. His wife, not considered sane enough to be with her children, is today a representative in the National Congress, where she was elected in 2009.

All his peculiarities notwithstanding, Capitanich is perhaps today the best hope for the introduction of some elements of rationality in economic policymaking.  As a wishful presidential candidate for 2015, his prospects depend in part on the performance of the economy in the next two years until the presidential elections in 2015.  He has some training in economics, and, given the plethora of distortions adversely affecting the performance of Argentina´s economy it doesn’t take a Nobel Prize to figure out some necessary adjustments to improve economic prospects.  Whether he will be able to pursue those adjustments in spite of the political logic of the president is perhaps the key question.