Argentine President Mauricio Macri sacked his finance minister Alfonso Prat-Gay on Monday, shaking up his economic team amid a stubborn recession that has made his center-right reforms deeply unpopular. Prat-Gay's ministry will be split in two, said chief of staff Marcos Pena.
Nicolas Dujovne, a respected economist, will take over as finance minister. Luis Caputo, who previously served Prat-Gay as budget secretary, will take over the newly created budget ministry.
The president himself requested Prat-Gay's resignation, Pena said. "It's a matter of policy differences," he told a press conference. It is Macri's first cabinet reshuffle since he swept to power just over a year ago, putting an emphatic end to 12 years of left-wing rule. Prat-Gay had been instrumental in a flurry of market-oriented reforms, including the end of foreign exchange controls - which caused the peso to lose one-third of its value and sent annual inflation soaring above 40 percent.
Other reforms under his watch included the removal of subsidies for public transportation, electricity and gas, which triggered angry protests. Macri says the reforms are necessary to revive Latin America's third-largest economy. But as he starts his second year in office, the promised growth has yet to arrive. The economy is forecast to shrink by around two percent this year. Seven in 10 Argentines are worried about the economy, and an equal number think Macri "governs for the rich," according to a recent poll.
More than 6,000 businesses have shut this year, according to the Argentine chamber of commerce. And some 200,000 people have lost their jobs, according to consulting firm CEPA. Prat-Gay had clashed with central bank chief Adolfo Sturzenegger, whom he had lobbied to lower the country's key interest rate in a bid to kick-start growth. Sturzenegger, worried that would send inflation even higher, has refused.
The reshuffle was announced as Macri was on vacation in the southern resort town of Villa La Angostura, in the Andes mountains. But despite the Christmas holiday, the news came as a political earthquake back in Buenos Aires, where speculation swirled on how it would shape economic policy. Dujovne had publicly disagreed with Macri's "shock" policy on slashing utility subsidies, arguing for a more gradual approach. Dujovne, who currently heads an economic consulting firm, was a key player in a think tank called Fundacion Pensar (the Think Foundation) that helped get Macri elected last year.
A former chief economist at Argentine bank Galicia, he has also worked as a consultant for the World Bank. Caputo was the government's envoy for negotiations that ended a long-running legal battle between Argentina and US hedge funds demanding full repayment on defaulted Argentine bonds.