Argentina forced by ailing economy to change populist policies

jueves 17 de abril de 2014 10:20 GYT

By Hugh Bronstein

BUENOS AIRES, April 17 (Reuters) - Argentine President Cristina Fernandez is reversing some of the populist policies that defined her first six years in power and will have little choice but to stick to the new, more pragmatic path over the remaining 20 months of her final term.

Confronted by falling dollar reserves, a weak economy and high inflation, Fernandez has in the past three months cut heating gas subsidies and let the peso devalue by 18 percent.

She has revamped shoddy official inflation reporting and agreed to pay Spain's Repsol $5 billion for the 2012 nationalization of oil company YPF.

Investors long put off by Fernandez's antagonism toward big business are interested in Argentina again and hoping that more prudent government spending could bolster reserves and slow one of the world's highest inflation rates.

The policy changes have helped fuel a 19 percent rise in Argentine stocks so far this year and a 9.5 percent rally in local bonds that analysts expect will continue through mid-year.

If Fernandez's government follows up with more changes it could put the economy on firmer ground for whoever succeeds her as president late next year. All of the most likely candidates have more orthodox economic policies than those pursued by Fernandez.

The more she cuts subsidies and allows the currency to devalue, the less painful the reform process will be after she leaves office.

"What's not clear is whether she wants to do a full fiscal adjustment or just what's necessary to get through her term without a crisis," said Mariel Fornoni, a pollster with the Management & Fit consultancy.   Continuación...