Weary Argentina investors hit by more political turmoil

Argentina's long-suffering investors tore into the country's chaotic politics on Monday after the architect of its IMF programme, economy minister Martin Guzman, quit and was replaced by someone seen as close to the powerful vice president Cristina Fernandez de Kirchner. Argentina is in the grip of yet another economic crisis as soaring inflation and a shortfall of foreign currency reserves cause jitters in its financial markets.

Argentina's long-suffering investors tore into the country's chaotic politics on Monday after the architect of its IMF programme, economy minister Martin Guzman, quit and was replaced by someone seen as close to the powerful vice president Cristina Fernandez de Kirchner.

Argentina is in the grip of yet another economic crisis as soaring inflation and a shortfall of foreign currency reserves cause jitters in its financial markets. President Alberto Fernandez named economist and government official Silvina Batakis on Sunday to replace Guzman, whose handling of the economy had come under increasing scrutiny.

JPMorgan's Argentina economist Diego Pereira said Guzman's resignation, on Saturday, "opened a new regime of financial and macroeconomic uncertainty" with the balance of power now tilted firmly in favor of the "Kirchnerists" loyal to the vice president. Bondholders meanwhile said that the new attempts to ramp up government spending now would put the country on course for more problems ahead of a presidential election due to be held late next year.

"The market was already very fragile and now it will be scared," said Riccardo Grassi, Head of Risk Management at investment fund Mangart, which was also involved in the country's 2020 debt restructuring that Guzman had led. "If they don't revise the model they are going to implode."

Argentina's problems mean its peso currency now trades at nearly a 50% discount in the black market and its bonds are worth roughly half of what they were after the country's $100 billion-plus 2020 debt restructuring. They have been trading at deeply-discounted levels of between 20-25 cents on the dollar in recent weeks, but most bondholders are now clinging on hoping that a change of government next year can turn the country's approach around.

"If you are a holder, I think that is why you are a holder," Carlos de Sousa at European fund Vontobel, which also holds some of Argentina's bonds, said referring to the expected change of government next year. "Let's see what the new economy minister is going to do - she is not very well known," he added. "And let's see how the negotiations with the Paris Club go now because that was a job Guzman didn't finish."

There was expected to be little Argentine bond trading on Monday as U.S. markets, where most of it happens, were closed for the July 4th holiday, although currency markets will be open.