The government is getting busy with a series of institutional shake ups on different quarters and, following the scandal-ridden suspension of Appeals Court Judge Eduardo Freiler last week, finishing the job at the Central Bank board seems like the next item on their checklist.
After his controversial removal of previous Central Bank members from its board, however, President Mauricio Macri’s administration seems keen to appease other parties and avoid further conflict, and has leaked the names of two economists usually associated with the opposition as candidates for the seats left available: Guillermo Nielsen and Marina Dal Poggetto.
Until now, the country’s monetary authority has been led since day one of the Macri presidency by a long-time adviser of his party and one of the economists he personally trusts the most: Federico Sturzenegger.
But the government remained unhappy with part of the supporting cast that Sturzenegger inherited from the Kirchnerite administration, leading to the ousting of Juan Cuattromo, Germán Feldman and Pedro Biscay last year, and a series of vacancies to fill in as a result.
Changing Central Bank directors is not as easy as your ordinary cabinet reshuffling, as Senate approval is generally needed, so the government relied on a series of technicalities and controversial charges of misconduct to get rid of the aforementioned trio. That move was met by some resistance, but it ultimately proved futile. “This is an attack against freedom of thought and expression,” Biscay said after his removal, suggesting it was motivated by his opposition to a monetary policy which he said was detrimental to “financial stability, job creation and social equality.”
Now, with the first of this year’s election season over, the government has put the names of their would-be replacements on the table, and is reportedly negotiating with Peronist senators for a green light. The first of the new trio, Enrique Szewach (who was actually named right before the primary elections), was hardly surprising, as he had already served under the Cambiemos administration as VP for the state-owned Banco Nación.
But the other two, whose names were filtered to the press over the weekend, did come more out of left field, as they were both associated with opposition politicians.
Nielsen had not only advised Renewal Front leader Sergio Massa on economic issues, but also ran as his Buenos Aires City mayoral candidate in 2015, while Dal Poggetto was the second in command at the Bein Consulting agency, whose head Miguel Bein advised the FpV’s Daniel Scioli during his failed presidential bid that same year.
Both have also been critical of Cambiemos’ policies, even if not always for the same reasons. Nielsen accused the government of “fiscal inaction” for not cutting the deficit, while Dal Poggetto lashed against Sturzenegger’s high interest rate policies at the Central Bank, saying they stimulate financial speculation over real production.
So why is the government willing to take these critics on board after going to so much trouble to oust previous ones? Seemingly, the line in the sand is drawn when critics turn Kirchnerite.
Even though Dal Poggetto’s consulting agency advised Daniel Scioli, the 2015 Kirchnerite presidential candidate, it did so while taking distance from the macroeconomics of the late-Kirchnerite years, which were described as unsustainable in the long term. Her think tank also proposed policies that clashed with the views of Cristina Fernández de Kirchner’s economic team, such as reducing export duties and ending the sale of cheap Central Bank dollars to a few selected clients.
Nielsen, meanwhile, was part of the team that Néstor Kirchner put together to renegotiate Argentina’s foreign debt after the country’s 2001 default, but has also clearly drifted from the Kirchnerite camp since then, being a very vocal critic on the so-called “clamp” on foreign currency transactions since its beginning, among other policies.
Contrast that to Biscay, who rose through state ranks as an ally of Cristina Kichner’s leading economic adviser, Axel Kicillof, and you can begin to see the difference. Biscay, a criminal lawyer, actively backed the clamp by pushing for legal sanctions against the currency exchange houses that kept buying and selling dollars in the black market throughout Kirchner’s last term. Critics of that policy, instead, argued that black markets were the inevitable result of unsustainable prohibitions and a frozen peso-to-the-dollar exchange rate.
Macri’s decision-making team views economists such as Dal Poggetto and Nielsen as critics who might have a different take on things but which could ultimately add to their discussions, while the clash with Biscay’s ideas is perceived as much harder to reconcile.
In addition, clashing with those most closely linked to CFK’s government while integrating the non-Kirchnerite opposition fits perfectly with Cambiemos’ political strategy of late: polarizing public discussion between the current administration and the past one, in an attempt to push voters that are neither Kirchnerites nor Macri supporters away from third parties such as Massa’s.
ORTHODOXY AND KEYNESIANISM
The similarities between Nielsen and Dal Poggetto end there, however. To illustrate the point, look at the radically different responses that the emergence of their names provoked among other Argentine economists.
The most fervent free-market advocates furiously took to Twitter in an attempt to resist Dal Poggetto’s nomination, with economists such as José Luis Espert and Diego Giacomini both saying almost word for word that she “knows nothing about monetary policy.”
Nielsen’s name, on the other hand, was acclaimed by the so-called economic orthodoxy, with Javier Milei saying he would be “an honest director dedicated to lowering inflation.” It’s worth noting that Milei, Giacomini and Nielsen even worked together on one of the many proposals that floated around the Argentine economic academia on how to end the clamp on the dollar, even though it wasn’t ultimately adopted.
Contrast that with the reception that the more Keynesian Dal Poggetto got from the self described “left-liberal” economic historian Pablo Gerchunoff, a public official during the Raúl Alfonsín and Fernando de la Rúa presidencies, who cheered the news joking about how he already felt prices going down in his nearest supermarket after her nomination.
Indeed, while the aforementioned orthodox economists have mostly praised Sturzenegger’s policy of high Central Bank interest rates to contain inflation (or, on some occasions, asked for an even more hawkish approach, with even higher rates), both Dal Poggetto and Gerchunoff made similar criticism of Sturzenegger, saying his inflation targets of 12 to 17 percent this year and 8 to 12 percent in 2018 were way too ambitious, and would either bring unnecessary economic pain to the population or prove impossible to meet in the end.
“This (high interest rate policy) is a financial party, it hasn’t ended up well in history. The government has some margin to continue with it because debt levels are low, but it can’t go on like this forever,” Dal Poggetto argued earlier this year.
So how will this group mix together if the nominations are confirmed? Sturzenegger can rest assured that, when it comes down to voting, his overall hawkish approach still probably has the support of the majority of the board, so don’t expect any radical change in policies.
One thing Dal Poggetto might somewhat alter is the verbal dynamics taking place every time a Cambiemos official tweets out a picture of the Central Bank board, prompting feminist critiques at their all-male cast, since she would become the first woman with a seat on it.