Argentine economy chief quits

Jorge Remes Lenicov: Less than four months as economy minister

Argentina's government has lost its economy minister, in a crisis which feels like a replay of the serial government collapses of last year.

Jorge Remes Lenicov has quit following a decision by Argentine politicians to delay a vote on his last-ditch package for preventing a collapse in the country's banking system.

He also failed in meetings to secure loans from the International Monetary Fund to tackle Argentina's grave economic crisis.

Whereas the bond plan was going to be really grim for the man on the street, it was generally seen as the orthodox way out of a really nightmarish situation

Ben Laidler, UBS Warburg bank

In Buenos Aires, therefore, it feels like 2001 all over again.

The banks are closed, the people are on the streets, and the government is - yet again - in turmoil.

All in all, thoroughly reminiscent of the end of last year, when Argentina went through four presidents in as many weeks.

Giving up

Mr Remes Lenicov's plan to convert savings to bonds met with scorn from the public, who had gathered earlier on Tuesday outside the upper house of Argentina's parliament to register their unease at the progress of economic reform.

He had proposed allowing Argentine banks to convert about 60% of deposits into government bonds - in effect forcing people to lend money to a government they do not trust to pay up.

Protesters responded by dubbing the proposed securities "Mafia bonds".

Mr Remes Lenicov must realise the devaluation, which was his bright idea, has been an appalling failure

James Neilson, political analyst

Argentines were told that banks, closed since the weekend, would remain shut until Friday, when Congress was set to have completed its debate of the proposed legal changes.

The bank closures were ordered to prevent panic withdrawals by account holders who, rightly, feared that high-level talks to restart aid payments to Argentina would fail.

That could well have triggered a domino-like collapse in the banking sector.

The account holders were also spooked by the rapidly falling value of the country's currency, the peso.

Anger

The move to close the banks partially succeeded, in that the withdrawals were indeed stopped.

But the public mood turned sour when President Eduardo Duhalde promised the International Monetary Fund that he would push ahead with economic and legal reforms and a serious belt-tightening exercise.

Thousands of Argentines took to the streets on Monday, raising fears of a return of the kind of unrest which prompted President Fernando de la Rua to resign in December.

Reaction

No-one yet knows who will replace Mr Remes Lenicov, although energy and mines secretary Alieto Guadagni has said Mr Duhalde has offered him the job.

Mr Remes Lenicov, a long-time political partner of Mr Duhalde, was welcomed as a low-profile, calm and non-confrontational economy minister following the reign of his flamboyant predecessor, Domingo Cavallo.

If [the new economy minister is] Energy Secretary Alieto Guadagni, the market will take it as something positive

Rafael Ber, analyst Argentine Research

But Mr Remes Lenicov's decision to allow the continued slide in the peso provoked disquiet.

"He must realise the devaluation, which was his bright idea, has been an appalling failure," said political analyst James Neilson.

Confidence in Mr Remes Lenicov was severely undermined when he returned empty handed from talks with the IMF.

And concerns over the deposits-for-bonds swap proved the final straw.

"It's essentially a reflection of the failure of his bonds plan," said Ben Laidler, Argentine equity strategist at UBS Warburg, who described the resignation as "bad news".

"Whereas the bond plan was going to be really grim for the man on the street, it was generally seen as the orthodox way out of a really nightmarish situation."

Rafael Ber, an analyst at Argentine Research said the investor reaction to the resignation would depend much on who was chosen to replace Mr Remes.

"How the market reacts depends on who it is. If it's Energy Secretary Alieto Guadagni, the market will take it as something positive."