Guzman departure will raise crisis risks in Argentina

Significance

Guzman’s abrupt resignation, after months of pressure from Vice-President Cristina Fernandez de Kirchner (CFK), nonetheless took the government by surprise. His resignation letter -- calling for a “political agreement within the governing coalition” allowing his successor “centralised control over the instruments of macroeconomic policy” -- highlighted the deep splits that have undermined governability.

Impacts

• The future of the IMF programme is fragile, and concerns over sovereign default will rise.
• Market fears will drive further exchange rate weakening, complicate further domestic debt rollovers and fuel inflation.
• The likelihood of a major crisis before the government can complete its term next year is rising.