Macri eschews quick economic fix for Argentina

OREANDA-NEWS. December 15, 2015. New Argentinian president Mauricio Macri is toning down expectations of immediate economic policy shifts following more than a decade of strong state intervention in the economy.

"We will not overwhelm anyone with a package of measures or anything of the sort," finance minister Alfonso Prat-Gay said yesterday, when Macri was sworn into office.

"There is not as much urgency as it may seem," Prat-Gay added, noting that while the former government left a "complicated inheritance" there is no impending crisis.

Macri did not outline any specific economic policy changes in his first speech as president. Rather, he made a broad call for unity following a tense transition that culminated with the conspicuous absence of former president Cristina Fernandez de Kirchner at her successor's inauguration.

Market-oriented Macri is taking over an economy that has been idling for years, with nearly 30pc annual inflation and dwindling hard currency reserves. Yet his advisers say they cannot implement changes until they understand the real state of the commodity-based economy.

Fernandez's economic legacy is marked by a lack of credible official data following a government takeover of the INDEC statistics agency in 2007.

Macri has vowed to address impediments to investment, including capital controls and restrictions on repatriating profits.

While Macri had vowed to lift restrictions on buying foreign currency—popularly known as the "clamp" on the dollar—from day one, his advisers have made clear it will not happen until they determine that conditions are right. The new administration is negotiating new lines of credit with international banks in an effort to boost reserves and avoid a steep devaluation once the market is opened.

In the energy sector, oil and natural gas companies are on standby, waiting for signs from the administration about whether it will maintain export subsidies and an artificially high wellhead price for crude. Argentina?s extensive shale resources are an obvious draw, but development costs remain high at a time when oil prices are sliding.

Energy minister Juan Jose Aranguren, a former Shell executive, has spoken of the need to more efficiently target power sector subsidies in a move that could help struggling distributors. Changes are likely to be gradual as Macri balances economic pressures with a polarized electorate.

The president's allies have said that before Argentina can attract more foreign investment, it must wind down litigation in New York with a group of holdout creditors that pushed the country into technical default last year.

Daniel Pollack, the court-appointed mediator to the dispute between Argentina and the holdout bondholders that have refused to restructure defaulted debt, met with new finance secretary Luis Caputo on 7 December.

During the introductory meeting Caputo expressed the administration's hopes to begin "negotiations promptly," Pollack said. No dates have been set for the talks.