Tuesday, November 29th 2005 - 20:00 UTC

With Lavagna out, who reins Kirchner?

Argentina's new Economy minister Felisa Miceli is a close associate of her former boss Roberto Lavagna who was ousted by President Nestor Kirchner in Monday's cabinet reshuffle that also included Foreign Affairs, Defence and Social Development.

Ms Miceli, 52, an economist from the University of Buenos Aires who will officially take office next Thursday is currently president of the government owned Banco de la Nacion.

Between 1983 and 1987 she was a board member of the Banco de la Provincia de Buenos Aires and a consultant to several Argentine and provincial governments in investment projects.

Besides her academic activities as university professor Ms. Miceli has always been identified as a member of Mr. Lavagna's team including in the private sector where she worked for Ecolatina, a consultant company founded by the former minister in 1980.

When in 2002 then Ambassador Lavagna was recalled to Argentina to become Economy minister following the default and collapse of the country's economy, Ms. Miceli was named member of the board of the Central Bank.

A year later, June 2003, a few days after Governor Kirchner's was elected president of Argentina she is nominated to head the Banco de la Nacion which in Argentina also plays an important role as development bank.

Ms. Miceli is the first woman ever to occupy Argentina's Ministry of Economy.

Argentine analysts point out that Lady M has ahead three main tasks: bringing down inflation; negotiations with the International Monetary Fund and ensuring sufficient investment to keep the Argentine economy steaming at a strong pace.

The surprise removal of Mr. Lavagna who was valued as one of the winning assets in the recent October mid term elections which confirmed a solid support for President Kirchner and his administration came as an unexpected decision for the Argentine business community and international investors.

"President Kirchner considered a different beginning was needed and the logic consequence was that I handed my post to the president", said Mr. Lavagna in a mid afternoon press conference recalling the brief meeting earlier in the day with President Kirchner.

The Argentine economy is "in a solid, strong situation", and "we've also advanced in repairing the damage we inherited", said Mr. Lavagna insisting that the strength of the economy will enable Argentina "to continue correcting as a country, as a community the social damage that was done".

"I took office under (President) Duhalde in an extremely critical situation. We confirmed policies with Kirchner. Policies that had shown their effectiveness and enabled us to advance in the same line and obtain results", remarked Mr. Lavagna.

However the unexpected removal has other readings according to Argentine analysts.

To begin with Mr. Lavagna was rapidly becoming a formidable political force as the Argentine economy kept advancing, and the Kirchner team (Mr. & ambitious Mrs. K) have their eyes set in the 2007 presidential election.

Contrary to the rest of the cabinet and advisors, Mr. Lavagna was the only hurdle to the very determined sweeping Kirchner style, and during the recent mid term election when all the guns were targeted on the president's former mentor Duhalde, the minister adopted a neutral position.

"The campaign adopted a high style and involved a former president. In no way could I participate actively" he said in direct reference to the Kirchner-Duhalde duel.

Furthermore he recently accused public works contractors of acting as a "cartel" in the bidding process, which meant treading on a sensitive area whose responsibility belongs to a close aid, buddy, of President Kirchner, Planning Minister Julio De Vido.

The inner recalcitrant Kirchner circle who have been longing for greater access to the surplus budget purse saw this as an excellent opportunity to recall the president about Mr. Lavagna's half/half loyalty which does not agree with the binary hate or love position preached by the president.

Mr. Lavagna was also displeased with the confrontational attitude adopted by President Kirchner blaming local business and suppliers for the surge in inflation which this year will be two digits in the range of 12%.

Further evidence that the Kirchner/Lavagna "divorce" was not as smooth as presented to the press was given by former Finance Secretary and a close aid of the minister, Guillermo Nielsen who confirmed that "the whole economic team has presented its resignation".

Claudio Loser a former IMF Western Hemisphere Director described Mr. Lavagna's departure "as an important loss for the Argentine government in terms of credibility with the business sector and the international sector. It could negatively affect Argentina, at least in the short term. Lavagna has done a tremendous job of returning Argentina to a relatively stable situation".

"Today's lesson is that Argentina is deepening its leftist tendency. Without Lavagna, Kirchner has no one to rein him in", highlighted Jose Luis Espert, head of a local consultant in Buenos Aires.

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