September 16, 2014
President Cristina Fernández de Kirchner is known for trying to impose her militant narrative on Argentina as she embraces populist policies. But the national government is not the only one trying to spin stories in this country. The reported confrontation between Economy Minister Axel Kicillof, an audacious academic in his forties, and the Central Bank Governor Juan Carlos Fábrega, an experiencied grey-haired banker with no university degree, makes for a great story, especially now that the peso is weakening once again (after it had been practically frozen by the new economic team since the sudden 20-percent devaluation in January). For this story to work it has to be oversimplified. When the rumours swirl, Kicillof is purportedly in favour of lowering interest rates, against Fabrega’s will, in order to jump start an economy that is teetering on the verge of recession.
So why let the public facts get in the way of a good story? It seems to make no difference that the Central Bank has issued a statement denying a confrontation. The statement itself, which declares that Fernández de Kirchner has the last word on the economic policies discussed by officials, is taken as a sign of weakness because it shows that Fábrega is reading what the newspapers are saying and can no longer ignore the stories. Yet the subtext of the Central Bank statement is that Fábrega is on the same footing with Kicillof and can only be overruled by the president. Fábrega’s official story is thus fodder for more rumours. Ultimately the pressure is both on the Central Bank chief and the Economy minister, whether they are on the same side or not, because the peso is under pressure. A major crisis will see them both out (and if this is the case Fábrega has the more to lose because his mandate was approved by the Senate.)
The expectations are about another sudden devaluation like January’s. But the negative speculation can surely have a limited effect both on Fábrega and Kicillof because the presidential elections are scheduled for next year. The two could indeed be arguing a lot. But what about the context? The days of the Economy Ministry officials are effectively numbered because Fernández de Kirchner can’t seek re-election in 2015. It’s not clear how Fábrega and Kicillof will go down in history. The fate of the economy itself is also unclear. But it smacks of unwise to try to hurry their exit when the president’s expiry date is clear.