Guzmán, who led negotiations with the IMF and private sector creditors, announced his resignation via Twitter on Saturday night. He published a seven-page letter in which he cited “political agreement within the governing coalition” as a crucial factor for his successor – a reference to government infighting. An ally of President Alberto Fernandez, Guzmán is the latest and most senior of four cabinet members to resign in recent months. His departure dealt another blow to the president, who faces dismal polls, inflation forecast to top 70 percent this year and government bond prices in trouble territory. The minister had come under intense pressure from the more radical wing of the Peronist coalition, led by Cristina Fernández de Kirchner, Argentina’s powerful vice president and former leader. The Kirchneristas have repeatedly criticized a deal with the IMF to restructure the $44 billion debt that Guzmán negotiated. Instead, they want higher spending and more government intervention to fight inflation and poverty. Political commentators noted that Guzmán announced his departure as Fernández de Kirchner was speaking at a rally in memory of Juan Domingo Peron, the general who founded the political movement of the same name. “Perón used his pen to help people,” he said, hailing his signature welfare programs. He also denied that the budget deficit was causing high inflation and called on Argentina to consider a universal basic income. Guzmán had hailed the agreement with the IMF in March this year as a compromise that would overcome the $44 billion debt and allow him to continue gradually increasing spending in real terms. But Fernández de Kirchner wanted to spend more and rejected a pledge to cut subsidies on energy bills. Given the low political capital of the current administration, there is a risk that the quality of [its] The policy mix could be further weakened The open split within the ruling coalition has raised questions about the future of the IMF program, which has been criticized as too lax by some economists for not addressing fundamental structural problems in Argentina’s economy. Investors are skeptical that a divided and unpopular government facing elections in 2023 can keep the IMF deal on track, fueling fears of yet more restructuring and a damaging wage-price spiral. Argentina is left with “great uncertainty,” said Ignacio Labaqui, senior analyst at Medley Global Advisors. Whoever replaces Guzmán “will need to bridge the gap” in the ruling coalition or face the same problems, he said. Nicolás Dujovne, a former center-right opposition finance minister, said Argentina’s economy’s problems are deep-rooted. “The government has a lot more problems than that [political] divisiveness: high deficit, excessive money printing and they have lost market confidence,” he said. Despite complaints of spending cuts by the Kirchnerista bloc, Guzmán “lacked fiscal discipline, did not make the necessary adjustments and lost the confidence of investors,” Dujovne added. Citi economists last month warned that Argentina’s authorities were not dealing with its problems properly. “We believe that a 1980s inflation spiral is a real risk to Argentina’s economy and the probability associated with it is increasing,” they concluded in a note to clients. Alberto Ramos, Goldman Sachs’ chief Latin America economist, wrote in a note: “Given the low political capital of the current government, there is a risk that the quality of [its] The policy mix could be further weakened.”

The country’s government bonds have fallen to record lows, hovering above 20 cents on the dollar. Pressure on the local currency is growing despite exchange controls and a costly energy import bill is preventing Argentina from building up dollar reserves. In the first five months of the year, the cost of energy imports rose 205 percent compared to the same period in 2021, totaling $4.6 billion, due to rising international fuel prices. Guzmán was due to travel to France next week to renegotiate more than $2 billion owed to the 22-nation Paris Club, which includes the US, Germany and Japan. The Paris Club gave Argentina more time last year to repay the debt as it negotiated a separate deal with the IMF.