On Wednesday, newly elected Argentine President Javier Milei announced that he has chosen Luis Caputo, a former Wall Street stock trader, to serve as the new economy minister of Argentina.
The announcement was delivered by President-elect Milei on Wednesday, on the Radio La Red radio show following his two-day trip to Washington DC, in which he met with International Monetary Fund (IMF) and US Treasury officials.
Caputo had worked at JPMorgan and Deutsche Bank, before he ran the Finance Ministry of Argentina, and its central bank between 2017 and 2018. He has maintained close relationships with both Wall Street and the banking sectors in Buenos Aires.
Caputo held meetings last week, despite his appointment not yet being officially confirmed, with both local and international banking officials in which he explained the broad outlines of Milei’s planned “shock therapy” for the nation’s economy. It will reportedly include replacing the Argentine peso with the US dollar, eliminating the fiscal deficit through spending reductions, and closing the nation’s central bank.
Earlier this year, the new finance minister’s economics consulting firm, Anker Latinoamerica, published a report which found that it would be “difficult,” though “not impossible” to dollarize the Argentine economy, and that doing so would require a “complex legal and financial architecture.”
The plan has come under criticism from many economists in the nation, who have warned that dollarizing the economy is risky, given the limited foreign reserves the nation has. They fear it could set off another period of hyperinflation, and argue the government should focus on making other reforms to support the economy. Others argue Argentines have extensive offshore holdings of foreign currencies, and dollars are already used for many in person transactions in the country due to the inflation afflicting the peso.
In an interview, Milei acknowledged the risk and said, “It’s crucial to solve problems with a lot of expertise, because if we make a mistake we could end up with hyperinflation,” as he specifically cited the over 23.8 trillion pesos ($66.2 billion) in short-term liabilities which are presently on the books of the central bank, and held by local creditors.
On top of that, there is a $43 billion loan from the IMF, which the new economy minister, Caputo, will need to renegotiate, after the nation has missed nearly all of the economic targets it was supposed to meet.
