Argentina falling deeper into crisis? Part II
|Summary
Earlier this month, we commented on how we felt Argentina had slipped further into crisis following the appointment of Silvina Batakis as economy minister. Indeed, Batakis' time was punctuated by elevated local financial market volatility and concerns that the latest IMF program would be disregarded. In the span of a few weeks, Batakis suggested the IMF program was a priority and tried to calm markets by engaging with multi-lateral lenders and investors; however, those efforts proved futile as she has been removed from her post and replaced by Sergio Massa, president of the lower house of Congress. In our view, under Massa, Argentina is more likely to achieve IMF targets and be dedicated to a successful IMF program. The flip side of this commitment is that the IMF requires specific policy implementation to correct economic imbalances, which should still lead to a peso devaluation by the end of this year. However, under Massa we believe the probability of sovereign default is now lower and that risks are now tilted toward a shallower peso devaluation than we forecast.
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