Argentina’s President-elect Javier Milei is reportedly close to filling the most crucial post in his cabinet, that of economy minister, and Luis Caputo is his top choice.
Caputo, a former finance minister and central bank governor under President Mauricio Macri, has already met with bankers to lay out the incoming president’s economic plans and is now accompanying Milei on a trip to the US for meeting with the International Monetary Fund and the Treasury Department, according to press reports.
In a meeting with local with local and international bank officials on Friday, Caputo said the new government planned a fiscal and monetary “shock” from day one and would lift capital controls “rapidly,” according to a Reuters report. Fiscal and monetary stabilization would take priority over the dollarization that Milei pledged during his campaign, the report said.
Caputo opposes Milei’s proposals to dollarize the Argentine economy and close the central bank but the incoming president nevertheless wants him to head up the economy ministry, according to a report on the infobae website.
While Milei is an outsider, unknown to many outside Argentina until just a few months ago, Caputo is well known by international banks and investors. He was head of trading for Latin America at JP Morgan in the 1990s and held the same role at Deutsche Bank from 1998 to 2003. He went on to lead the German bank’s Argentine operation until 2008.
As finance minister under Macri, who ruled from 2015 to 2019, Caputo helped negotiate a deal with hedge funds to settle nearly $10 billion in defaulted bonds, allowing Argentina to return to the international bond markets for the first time since a 2001 default on nearly $100 billion. Caputo went on to organize the sale of a century bond in 2017, raising $7 billion.
‘FIT’ FOR POST
Caputo’s naming would be a sign of Macri’s influence on the president-elect. Macri said after the primaries in August that Milei was running a good campaign and subsequently endorsed him and after his party’s presidential candidate, Patricia Bullrich, finished third in the first presidential vote.
Milei, for his part, has lauded Caputo. “Luis Caputo is fit to be in the position and has the necessary expertise to solve the problems we have,” Milei said Wednesday in an interview with the A Dos Voces program on the TodosNoticias cable network.
Caputo was part of a small group of that left with Milei for Washington DC on Sunday night, infobae said. Milei will not meet with President Joe Biden but has been invited to visit the west wing of the White House to meet the national security adviser for Latin American issues, Juan González, the report said.
Milei will face immense challenges as he tries to pull Argentina’s economy out of recession and rein in triple-digit inflation. He has proposed liberalizing the exchange rate, slashing government spending among other measures.
“The risk of a sovereign credit event in 2024-25 remains very high,” Moody’s Investors Service said last week. Fitch Ratings said a default of some kind is probable given the obstacles the new administration will face to build up reserves and regain access to global markets before 2025, when eurobond payments become “onerous.”
CENTRAL BANK
For the central bank, the latest name to hit the local headlines is Demian Reidel, a former deputy central bank governor under Macri who has a Master’s in physics and financial mathematics as well as a PhD in economics from Harvard University.
Reidel is close to Federico Sturzenegger, who was governor of the central bank from 2015 to 2018 when Reidel was his deputy.
According to the infobae website, however, Caputo is opposed to Reidl taking the reins of the central bank.
Whoever gets the job, it may be short-lived. On Friday, Milei confirmed his plan to close the central bank on the grounds that it has been used notoriously by governments over the years to print money to finance spending, which has left the country mired in inflation.
On Wednesday, Milei said he will announce his cabinet after he takes office December 10.