Argentine Economy Minister Martin Lousteau resigned on Thursday after less than five months managing Latin America's No. 3 economy and was replaced by the tax agency chief, a government source said.

Lousteau, 37, had looked increasingly isolated in recent weeks and was sidelined in tense negotiations between the government and the country's disgruntled farmers, raising speculation that he would not last in the job.

"He's presented his resignation," said the source, who asked not to be identified. He added that Lousteau's replacement would be economist Carlos Fernandez, head of the AFIP tax agency and a close ally of President Cristina Fernandez and her husband, ex-President Nestor Kirchner.

Argentina's economy has grown at rates above 8 percent in each of the last five years since a devastating crisis in 2001-2002. But high inflation has become a major challenge for the government.

One of the few new ministers appointed by Cristina Fernandez, the youthful Lousteau stood out in a cabinet dominated by faces from the previous government of her husband.

Lousteau was the architect of a tax hike on soy exports that triggered a three-week strike by the country's farming sector last month.

SIDELINED

But he has been increasingly sidelined and hardly appeared during the talks with farmers, which have instead been led by Cabinet Chief Alberto Fernandez and controversial Domestic Commerce Secretary Guillermo Moreno, the government's price watchdog as it battles inflation.

Local media have said Lousteau clashed with the powerful Moreno over the design of a new consumer price index, a project aimed at restoring credibility to the INDEC national statistics office.

Many analysts and opposition politicians accuse the government of manipulating INDEC inflation data to under-report real inflation. Inflation was 8.5 percent in 2007, but many private analysts put the true figure at at least twice that.

As well as trying to tackle the inflation issue, Lousteau sought to advance talks on how to restructure Argentina's $6.3 billion debt with the Paris Club group of wealthy nations.

Both tasks will remain for his successor, a Peronist who served as economy chief in the large and heavily populated province of Buenos Aires.

Centre-left opposition leader Elisa Carrio said the replacement showed Kirchner maintained a strong influence over his wife's government.

"It was obvious that there was only one power in Argentina and that person was Nestor Kirchner... This means Kirchner will directly intervene in the Economy Ministry; (it is) a tremendous endorsement of Moreno (and) a weakening of Cristina Fernandez," she said.

In the past, Argentina had strong economy ministers - dubbed second presidents - who clashed with presidents over policy. However, the post has become less independent since Roberto Lavagna resigned during Kirchner's presidency.

Lavagna was replaced by Felisa Miceli, then head of the Banco Nacion, who was forced to step down in July 2007 after a bag of cash was found in her office bathroom.

Her successor, Miguel Peirano, lasted even less time in the job, apparently because he clashed with other government figures.