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Last Updated: Tuesday, 29 November 2005, 08:11 GMT
Argentina replaces economy boss
Argentina's former Economy Minister Roberto Lavagna
Mr Lavagna had won the support of many international investors
Argentina has replaced Economy Minister Roberto Lavagna, the man widely credited with steering the country out of 2002's hard-hitting recession.

The change has raised question marks over Argentina's continuing economic rehabilitation, and the main Buenos Aires share index dropped 4.5%.

Felisa Miceli, president of the state-owned National Bank of Argentina, has been chosen to succeed Mr Lavagna.

Analysts said political pressures had led to Mr Lavagna's resignation.

Time to change

Argentina's President Nestor Kirchner decided to reshuffle his cabinet following last month's elections which saw him pick up support.

As well as Mr Lavagna, Foreign Minister Rafael Bielsa, Defence Minister Jose Pampuro and Social Development Minister Alicia Kirchner, the president's sister, were also replaced.

According to reports, Mr Lavagna's view of how the economy should be developed differed from that of President Kirchner.

Argentina's President Nestor Kirchner
President Kirchner has the support to ring key changes

The Financial Times said that the president and minister had clashed over the way money was being spent on infrastructure projects.

The Reuters news agency said President Kirchner was also not keen to slow economic growth in order to rein in inflation, and wanted to boost wages to cut the gap between the poor and rich.

'Very bad news'

The worry among analysts is that Argentina may now be less willing to enforce tough spending measures.

"Mr Lavagna was one of the few members of the Cabinet that seemed to have some understanding of the concerns and interests of investors," said Alberto Bernal, an analyst at Bear Stearns.

"Mr Lavagna's resignation is very bad news for the government," he said.

Appointed economy minister in 2002, Mr Lavagna took over at a time when Argentina was still struggling to recover from its debt default and currency devaluation at the end of 2001.

A key part of his work was helping reschedule Argentina's $120bn (70bn) in foreign debts.

"Mr Lavagna was well considered, that's why his exit has affected the markets," said Noelia Lucini, an analyst at Capital Markets Argentina.

Better times?

Argentina's economy has been growing in recent years, though it is still saddled with massive debts.

Growth this year is expected at close to 8%, after expansion of 9% in 2004.

Argentina's new Economy Minister Felisa Miceli
Felisa Miceli is the first woman to head the ministry

"The change of ministers at this time is very risky because the current minister has shown after several years that he is moderate and can help meet our objectives, as seen by the current economic conditions," said Miguel Schiaritti, president of the Argentine Chamber of Commerce.

As well as the decline on the benchmark MerVal stock index, Argentina's peso lost 1.3% against the US dollar.

"There is a sensation that the market doesn't like the change," said Hector Blanco, a broker with ABC Mercado de Cambio.

"It looks like a political choice rather than picking some one with the education and experience for such an important job," he said.

Analysts said the Ms Miceli, the ministry's first female boss, faced a number of key challenges, including bringing down inflation and reaching new agreements with creditors such as the International Monetary Fund.

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