Argentine Stocks React to President Kirchner’s Latest Handiwork

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By Bianca FernetThe Bubble

Cristina Fernández de Kirchner, President of Argentina, returned to her post this week, shuffling her cabinet and shaking up markets.

Axel Kicillof was named Economy Minister, and will replace Hernan Lorenzino.  Mr. Kiciloff is a 42 year old economist who studied at the University of Buenos Aires and is very much a modern Marxist.  Except with much more fashionable facial hair than the late Mr. Marx.

He is an unapologetically leftist economist and advocates significant state intervention to achieve national goals of growth and industrialization.  He is also a member of La Cámpora, the Kirchnerite youth movement.

Kicillof has effectively held a position of influence over the Ministry of Economy since 2011, and was influential in orchestrating the state seizure and nationalization of YPF from Spanish-owned Repsol in 2012.  Nevertheless, the formalization of his position coupled with the resignation of former Trade Secretary Guillermo Moreno has made both domestic and international markets nervous about Argentina.

Yesterday the Central Bank of Argentina had to sell US $110 million.

At home, the Merval fell 6.5%, concentrated primarily in energy companies and banks.  This drop was lead by the following individual drops:

  • -9.85%:  YPF
  • -8.55%:  Banco Frances
  • -7.84%:  Petrobras Energia
  • -7.64%:  Siderar
  • -7.48%:  Aluar
  • -7.25%:  Pampa

In the United States, stocks of Argentine companies tumbled along with their counterparts on the Merval.  The following companies dropped:

  • -9.3%:   Petrobras
  • -7.0%:   Edenor
  • -5.9%:   Banco Frances
  • -5.5%:   YPF
  • -5.5%:   Grupo Galicia

As is the internationally accepted practice when markets fall, many balding men marked the occasion by posing for cameras holding their heads in their hands in front of computer screens.

Markets are nervous because Mr. Kicillof has advocated ideas such as dual exchange rates, which have not worked out so well in places like Venezuela and Iran.

This ties back to the issue of Argentina’s reserves and the ongoing battle with holdout creditors in New York.  Mr. Kicillof’s appointment and the cabinet reshuffle consolidates control within the Federal government aligned with an ideology that supports and indeed sees heavy state control as indispensable to Argentina’s survival and success in the world.

At the end of the day and regardless of what transpires, at least we’ll have some beautiful sideburns to admire on the way. By Bianca Fernet, The Bubble.

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