Argentine Economy Minister resigns amid problems with the peso and diesel

Buenos Aires, Argentina –

Argentina’s economy minister unexpectedly resigned on Saturday, dealing a further blow to the government of President Alberto Fernández as the country grapples with economic problems.

Martín Guzmán resigned after a week in which the Argentine currency hit a record low against the dollar amid heavy inflation and truckers protested shortages of diesel fuel.

No successor was immediately announced.

“I am writing to present my resignation as economy minister,” Guzmán said in a seven-page letter to Fernández that he posted on Twitter, highlighting internal battles within the administration.

To illustrate the tensions, Guzmán announced his resignation as Vice President Cristina Fernández gave a high-profile speech in which she criticized the government’s economic policies. The vice president, who is not related to the Argentine leader, is a former president and the ruling coalition has been fragmenting among her allies.

The resignation came at the end of a week of economic turmoil.

With the Argentine peso falling against the dollar, the government on Tuesday made it difficult to acquire dollars to pay for imports, as the local currency hit new lows in the parallel market used by citizens and businesses to bypass official channels.

Argentina has suffered for years from a dollar shortage, stemming in part from Argentines’ mistrust of their own currency amid high inflation. Inflation is running at an annual rate of more than 60% and economists expect the rate to continue to worsen.

Work stoppages by truckers have disrupted economic activity, including the delivery to ports of grain, which is one of Argentina’s main imports.

On Wednesday, the government said it was trying to increase the availability of diesel by allowing more biofuel to be blended with the fuel and also by suspending the diesel import tax.

Argentina produces diesel but not in sufficient quantities for its needs and relies on imports, with world prices rising due to disruptions from the pandemic and Russia’s invasion of Ukraine.

Analysts say that one of the reasons for the shortage is that it is not profitable for oil companies to import diesel because the government prevents them from charging what it costs to buy on the international market.

In his resignation letter, Guzmán suggested that at least part of his reason for leaving was because he lacked political backing within the government.

“Based on the experience I have had -he wrote- I consider it essential to work on a political agreement within the government coalition so that whoever replaces me has centralized control of the macroeconomic policy instruments necessary ΓǪ to face the challenges that lie ahead” .

Guzmán had been in his post since the start of the Fernández government on December 10, 2019, and was long one of the highest-profile figures within the Cabinet.

Early in the administration, he was seen as a staunch ally of the president, but also as someone who could help bridge the divides in the often fractious ruling coalition. In recent months, however, he has clashed with some officials loyal to the vice president and his influence within the government seemed to be waning.

Guzmán’s first challenge on the job, and success, was negotiating a restructuring of Argentina’s debt and avoiding a default.

He later reached a debt relief deal with the International Monetary Fund, but some of the more leftist elements in the government said it included too many concessions that would hamper Argentina’s economic growth.

Lawmakers allied with the vice president voted against the IMF deal in Congress, and Guzmán’s resignation raises questions about whether the country will be able to meet the terms of the deal.

In his resignation letter, Guzmán said that his main objective upon taking office was to “calm down the economy” and for this it was necessary to “solve the problems of the unsustainable foreign debt that burdens the State, as well as all of Argentina.”

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