Argentina’s Presidentelect Javier Milei confirmed that his Economy Minister will be Luis Caputo, known in Buenos Aires as the “Messi of Finance” and whose Herculean task will be to repair the economy and bring the country back to normal to join international markets.
The choice shows that Milei distanced himself at least for now from libertarian academic economists and advocates of dollarization, opting for an orthodox and pragmatic economist with extensive experience in market and public management.
With a background as a strategist at JP Morgan and president of Deutsche Bank in Argentina, Caputo served as Minister of Finance and then Minister of Finance in the government of Mauricio Macri (20152019).
At that time, he led the renegotiation of debts to holdouts, international investors and “vulture funds” that had not accepted the exchange offer from Cristina Kirchner’s government.
In 2018, the economist briefly held the presidency of Argentina’s central bank but resigned amid disagreements with the IMF over a lending program run by the multilateral organization.
With the negotiations, Argentina returned to foreign markets and managed to issue a 100year bond which was due to be renegotiated in the wake of Alberto Fernández’s default in 2020.
During Milei’s recent visit to the United States, Caputo was among the members of the entourage. The itinerary included a visit to the US Treasury Department and the International Monetary Fund, which is patiently paying off its $44 billion in debt while waiting for political decisions in the country.
Milei said it was necessary to have “someone who knows finance, and there is no one in Argentina who knows finance better than Luis Caputo.”
The choice suggests that Milei’s priority as he enters the government will be to confront Argentina’s debt tango, and not just with the IMF.
Faced with a public deficit of 15% of GDP and a lack of credit in the market, the government financed itself largely through British Columbia bond issues, similar to what happened in Brazil during the period of hyperinflation in the 1980s.
As Milei said, the first point to resolve is the Leliqs, the bonds issued by the BC, which have the dual objective of covering the national deficit and preventing inflation from getting completely out of control.
According to Milei, it is “fundamental to solve this problem with a lot of expertise if we do not end up in hyperinflation.”
According to reports in the Argentine press, Caputo offered a market solution to untie this knot, with the possible replacement of these securities with government bonds but there are no details yet on how this would happen.
The name of the new president of the BC also remains unclear, a key position in the implementation of the financial planning prepared by Caputo.
By endorsing the Caputo solution, Milei pushed aside economists who favored dollarization, including Emilio Ocampo.
Ocampo, a dollarization theorist, was the main candidate for president of Argentina’s BC. It would be up to him to “close the central bank,” as Milei had promised.
Luis Caputo is the cousin of Nicolás Caputo, a building contractor who, according to the Buenos Aires press, is a “soul brother of Macri.”
Macri’s support is becoming more important to Milei’s governance every day.
Milei’s Libertad Avanza elected only 39 of the 257 representatives. Juntos por el Cambio by Macri and the defeated candidate Patricia Bullrich has 94 MPs. (Bullrich has already been named security minister, a position she held in the Macri government.)
In the Senate, Libertad Avanza will have 7 of the 72 seats. Together for change, 24.
Giuliano Guandalini