Will Luis Caputo, the “Messi” of finance, be able to combat Argentine inflation?

Luis Caputoin charge of solving the worst economic crisis in Argentina In decades, he was once nicknamed “Messi” for his financial ability in giants like JP Morgan and Deutsche Bank. Now he faces the challenge of recovering the country’s economy, a goal that is comparable to a World Cup.

Caputo, 58, former finance minister and former president of the central bank, a rugby lover, will take the reins of the Argentine economy, with the aim of reducing the triple-digit inflation rate, rebuilding foreign exchange reserves and removing the country from the recession.

The official, considered market-friendly, must also balance the demands of his new boss, incoming libertarian President Javier Milei, whose radical campaign promises included eliminating the central bank and dollarizing the economy.

The South American country is mired in its worst economic moment in two decades, with inflation approaching 150%, with more than 40% of the population in poverty and a million-dollar debt with bondholders and the International Monetary Fund (IMF).

“The situation is delicate”said José Echague, head of strategy at Consultatio Financial Services, which manages about US$400 million in mutual funds, adding that the challenges now are much more complex than in 2015, when Caputo first took office.

“Even if you have Messi and Maradona together on the same team, you are not guaranteed success”he explained in reference to the two great stars of Argentine soccer, Diego Maradona and the current captain of the world champion team, Lionel Messi.

Luis Caputo, a very low-profile father of six, has had an auspicious start. His appointment has stimulated local markets as investors expect him to act as a check on Milei’s more extreme ideas and pursue more orthodox economic policies.

““The election of the Minister of Economy is very important because what it signals is a less radical approach in terms of dollarization,” said Robert Simpson, co-head of emerging markets debt at Pictet Asset Management in London.

In May, a report from his consulting firm Anker Latin America that circulated online said that dollarization was “difficult to implement” but not impossible, although he argued that the “spine” One of Argentina’s problems was the fiscal deficit.

Simpson added that Caputo’s appointment should also facilitate talks with the IMF, with a rethinking of the US$44 billion agreement that has been derailed especially because the outgoing government opened the tap on public spending to avoid a fall in the peso and boost the economy. .

Argentina and the IMF: clean slate?

Luis Caputo, chief financial officer from 2015 to 2017, has a history of fundraising, but fundraising has a mixed record. Caputo is considered more of a financial guru than a macroeconomic expert.

He was Minister of Finance and later president of the Central Bank in the government of former conservative president Mauricio Macri, who negotiated the original US$56 billion agreement with the IMF in 2018, a program that failed and was replaced by the current one.

Caputo also helped raise about $3 billion in 2017 with a 100-year bond, a sign of optimism at the time but which over the years has hurt many creditors as inflation and interest rates soared and bonds They sank into territories close to default.

“As Secretary of Finance he was the one who managed to obtain financing for the fiscal deficit (…) In that sense he played a good role,” said Camilo Tiscornia, director of C&T Economic Advisors and former manager of macroeconomic analysis at the central bank.

This time that may be more difficult since Argentina is excluded from the financial markets, its foreign reserves are estimated to be in the red, with US$ -10 billion, and there are a series of exchange controls that have disfigured the foreign exchange market.

Alejandro Werner, who led talks with Argentina as the IMF’s Western Hemisphere director during the last time Caputo was in government, said both sides would seek to start with a clean slate to help revive the credit program, the largest in the organization worldwide.

“I think the Fund is going to start the relationship with him from scratch. The past will not influencesaid Werner, current director of the Georgetown Americas Institute.

“They will build their own phobias and affinities,” he added.

A former Macri government official who worked closely with Caputo when he was Finance Minister said it was “simple” and a good listener, often surrounded by his top team of confidants including Santiago Bausili, who will be the new central bank president, according to three sources with direct knowledge of the matter.

Caputo’s challenge will be to build his economic team and have a strong economic policy advisor to balance his more financial approach, he added.

The person, who asked not to be identified, added that Caputo likes sports and that while at the Finance Ministry he often waited for meetings to end on time so he would have time to see his family.

“Sometimes there would be meetings late on Fridays and he would say he wanted to finish so he could go see his kids,” he commented. “He is a serious guy, but not bitter”he added.