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Montevideo, September 20th 2018 - 22:27 UTC

Forex run in Argentina: Macri appoints new Central bank president

Friday, June 15th 2018 - 06:56 UTC
Full article 4 comments
The appointment of Finance minister Luis Caputo to head the central bank follows several weeks of currency volatility that led Argentina to seek IMF support The appointment of Finance minister Luis Caputo to head the central bank follows several weeks of currency volatility that led Argentina to seek IMF support
Under ex chair Federico Sturzenegger the central bank had been criticized for lowering interest rates in January despite high inflation Under ex chair Federico Sturzenegger the central bank had been criticized for lowering interest rates in January despite high inflation
As part of the move, the finance ministry will be combined with the treasury ministry, giving Dujovne a stronger hand in running the Argentine economy As part of the move, the finance ministry will be combined with the treasury ministry, giving Dujovne a stronger hand in running the Argentine economy
Caputo worked for JPMorgan for more than a decade before joining Macri's team, and helped negotiate a deal with holders of the country's defaulted bonds in 2016. Caputo worked for JPMorgan for more than a decade before joining Macri's team, and helped negotiate a deal with holders of the country's defaulted bonds in 2016.

Argentine president Mauricio Macri appointed Finance Minister Luis Caputo as president of the central bank on Thursday, after the outgoing head of the bank resigned and acknowledged having lost credibility.

 The surprise shake-up follows several weeks of currency volatility that led Argentina to seek a US$ 50 billion lifeline from the International Monetary Fund, and may help restore trust in the central bank as the government seeks to calm markets.

Under its outgoing president Federico Sturzenegger, the central bank had been criticized for lowering interest rates in January despite high inflation. It later raised rates to 40%, the highest in the world, to support the peso.

As part of the move, the finance ministry will be combined with the treasury ministry again, Macri's government said in a statement. The two separate ministries had been created by Macri less than two years ago.

Caputo worked for JPMorgan for more than a decade before joining Macri's government, and helped negotiate a deal with holders of the country's defaulted bonds in 2016.

“All in all, this should be a positive move,” Neil Shearing, chief emerging markets economist for Capital Economics, said in a note. “But only if Mr. Caputo can articulate a coherent policy to markets and then stick to his guns.” Shearing said he expected the central bank to let the peso float under Caputo.

Last week, Sturzenegger suggested the central bank would stop intervening in the local spot market, but then it sold more than US$ 500 million on Tuesday and Wednesday before letting the peso slide 6.22% to a record low on Thursday.

Earlier on Thursday, Argentina outlined plans that included making the central bank independent in a letter of intent to the IMF that was signed by Sturzenegger and Treasury Minister Nicolas Dujovne.

In his letter of resignation Sturzenegger thanked president Macri for the privilege of having been part of the government team, but admitted having lost credibility. He was also responsible for issuing central bank short term debt to a record sum of a trillion Pesos, to help finance the national budget, but which demanded increasing interest rate to avoid an overall dumping of the debt. IMF strongly recommended the defusing of this financial instrument.

Categories: Economy, Politics, Argentina.

Top Comments

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  • Enrique Massot

    One day after the president of the BCRA was replaced and some 10 days after an IMF loan was announced, the US dollar continues its unstoppable race to the skies.

    On Friday it closed at a record 28.85 pesos, a 13 per cent increase in six days. In January, the US dollar was worth 20 pesos.

    In Argentina's dollarized economy, any dollar increase immediately reflects on prices.

    So much for president Mauricio Macri and his “best team of the last 50 years.”

    Meanwhile, whatever happened to the handful of MP cheerleaders who, until recently, kept repeating like a broken record that everything bad happening in Argentina was the fault of the CFK government?

    The Merry Gang will soon make Cristina's tenure look like a golden, well-remembered age.

    Jun 16th, 2018 - 09:47 pm 0
  • chronic

    Reekie, rg is eternally doomed - left or right.

    Rgs are defective.

    Jun 18th, 2018 - 07:25 pm 0
  • Enrique Massot

    Opposition legislators will be requesting that Federico Sturzenegger be prohibited from travelling abroad and that an investigation on his 'erratic' measures during his tenure as head of the Central Bank of the Argentine Republic.

    Of course, the measures Sturzenegger took may look unexplainable clumsy -- however, some financial institutions including the JP Morgan Chase made a lot of money in the process.

    Of course, this happens as the peso, which was supposed to enter a period of stability following Argentina's deal with the IMF, appears to be in a never-ending freefall.

    The arrival of Luis Caputo, who served as chief of trading for Latin America at JP Morgan between 1994 and 1998 to the BCRA, is not very reassuring.

    Jun 15th, 2018 - 04:13 pm -1
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