Argentina's cabinet chief says harvest should bring economic relief

By Nicolás Misculin

BUENOS AIRES (Reuters) - Argentina's financial crisis, which has been marked by exchange rate volatility and soaring inflation, should start abating in November and December, with large foreign currency inflows from the wheat harvest, cabinet chief Agustin Rossi told Reuters on Friday.

Argentina's prolonged financial crisis has been aggravated by a ferocious drought that reduced crucial agricultural exports by an estimated $20 billion this year.

"This situation ends in November, December of this year," Rossi, who is also a vice-presidential candidate in October elections, told Reuters from his office at the Casa Rosada presidential palace in Buenos Aires.

"Next year you will not have a drought, you will have savings of $4 billion because you will have the first stage of the Nestor Kirchner gas pipeline (which will transport natural gas from the Vaca Muerta shale formation) in operation," Rossi said.

"This will lead to a favorable trade balance and recover reserves, and imply a more controlled exchange rate. This immediately lowers inflation and recovers the purchasing power of wages."

Rossi said that Argentina should not devalue the currency to calm inflation, which went over 115% in the last 12 months, while its poverty level is nearing 40%. That has triggered deep concern in the ruling Peronist bloc, which hopes to triumph in October with current Economy Minister Sergio Massa as the presidential candidate and Rossi as his running-mate.

The government has been keeping access to foreign currency restricted to prevent further draining of central bank reserves, and Rossi said that a further devaluation of the peso would only cause more difficulties.

"(Inflation) does not go down with abrupt devaluation... We do not believe that this is necessary in Argentina," Rossi said.

The center-left government is hoping to close an agreement with the International Monetary Fund (IMF) before presidential primaries in August for fresh cash injections through the end of the year, under the framework of an existing $44 billion loan.

"We are optimistic, we believe that we will find a way," Rossi said of the IMF talks.

The coalition government of President Alberto Fernandez has struggled with frequent clashes between its factions during its four years in office, but Rossi said that would not be repeated in a future Peronist government, with a new broad consensus among the candidates.

Most pollsters believe Massa's Peronists will face an uphill battle against opposition candidates, however.

(Reporting by Nicolás Misculin, Editing by Alexander Villegas and Rosalba O'Brien)