Hear
The resignation of Joaquin Cottani to his position as Secretary of Economic Policy in the Ministry of Economy was far from unexpected. Luis “Toto” Caputo I’ve known about this for several weeks. His family lives in NY and it had become unsustainable both on a family level and on a logistical level to maintain the future double life between the Ezeiza and JFK airports.
The good relationship between the two is such that the possibility of collaborating from there had been considered, but this was equivalent to once again having a representation of the state in New York and Caputo ruled it out for two reasons: It meant increasing spending and he himself had closed it in his previous administration during the government of Mauricio Macri. On the other hand, since the search for fiscal balance appears as a maxim of the time, they are not considering being active in the debt market to justify that possibility in the short term.
“Joaquín is a gentleman. His departure was not surprising, we talked about it for a while and I understand his situation”, Caputo summarized to one of the members of his small table at the close of business on Friday. The timing of the formalization of the item was not coincidental either: the renewal of the swap with China was completed, inflation was 4.2%, a new phase was advanced with the International Monetary Fund (IMF), the president traveled to the G7 and the approval of the Bases Law in the Senate provided the ideal framework for communication. They completely cut off possible malicious versionsthey maintain in Balcarce 50.
The election of the successor was closed since the beginning of the week, although final details still need to be sealed before his inauguration. Jose Luis Daza, Caputo’s future number two, graduated from the University of Chile and has a Doctor in Economics from Georgetown University, in Washington. His name was even among the candidates to occupy the Chilean Ministry of Economy during the 2021 electoral campaign on the list of the far-right representative. José Antonio Kast, with whom he still maintains strong ties today. “He is the man we are targeting for his experience and knowledge, although since he lives abroad it is not something that can be produced from today to tomorrow.”, they graphed in Economy. Caputo and Daza worked together at different professional stages in both JP Morgan like at Deutsche Bank to the point of having shared the training program at the bank when neither of them had gray hair. They have known each other for more than 30 years and have a relationship of mutual respect. The set of points also forms a line with Demián Reidelthe long-term advisor to President Javier Milei, with whom Daza and the Argentine David Sekiguchi they co-founded QFR Capital Management.
The other movement that remains latent is that of Federico Sturzenegger as a minister in the Milei government. For this, the increasingly closer definition of the president is missing, although some libertarian leaders anticipate that they see him at the head of an eventual Ministry of Modernization version 2024 or of a Secretariat that reports directly to the President in a few days. “His focus will be microeconomics and we find great value in his work. They are strategic issues that Federico has been working on for a long time and there are countless reforms that demand follow-up and a lot of passion that he has. It is a total lie that he has rejected his appointment from Economy“, senior sources from the Ministry stated.
“The approval of the Base Law and the tax reform is an undoubted success for the Government. More important than what was achieved is what was avoided. If the law had been rejected, the economic and political dynamics would have taken a negative turn: fall in asset prices, rise in parallel dollars and gaps, external distrust, increase in internal conflict and radicalization of the government,” Alejandro summarizes. Catterberg, head of Polyarchy. One of the three most important businessmen from Argentina who lives in Uruguay believes in the same sense: “It would be foolish not to realize that the decline in inflation is already recovering the real salary of Argentines and even the pensions that had started off beaten are beginning to feel the positive impact of the macro corrections.”, he described from off. With fewer euphemisms, Marcos Galperín, the creator of MercadoLibre, appeared again, who fired at his 405,000 followers: “What will people feel who vote against a law that, after being approved, bonds go up, country risk goes down, The dollar falls, stocks rise… At some point will they reconsider that their ideas are bad for the country?
The political consultant Sebastian Lopez Perera went one step further. “I assure you that if I measure Milei today, Victoria Villaruel and Patricia Bullrich, their levels of acceptance in society improved greatly compared to our last measurement. The care of the streets, the reduction in inflation and the basic law give them the ideal framework,” he said. And he rescued an additional piece of information: “It seems to us that people value management more today, even than officials.”. This point surprises the main opposition leaders who closely follow López Perera’s barometer.
For his part, the analyst Jorge Giaccobe raises a 58.7% positive image for Milei, del 55.2% for Villaruel and del 55.1% for Bullrich. On the other side with a 74.6% of negative image is Máximo Kirchner, 69.1% Sergio Massa and 67.6% Cristina Kirchner, according to the same source. The positive image gives Luis Caputo a 51.6%, a number no less for the high adjustment season.
The Government’s relationship with the surveys remains the same as during the campaign: from the average they draw a trend and from the trend they analyze the social mood.
On the fifth floor of the Ministry of Economy they had a week to remember With some concrete results to the point that it exists in the hallways, they are considering, with some irony, a fundamental proposal: to start checking the public statements of economists with the data once they are disseminated. “We want to create a kind of VAR for football but aimed at evaluating predictions against reality“, they ironized. In addition to the survey of market expectations, the friendly fire of two economists who had predicted inflation around 7% for the last month still resonates and who did not admit the calculation error with the official data.
With rates, fuel and prepaid fees contained, inflation in May was 4.2%. It was the fifth consecutive deceleration of the official index and you have to go back to January 2022 to find a lower one. The Consumer Price Index (CPI) accumulated 71.9% so far this year and 276.4% in the last twelve months. It is the first slowdown in the year-on-year comparison since July 2023. However, The most significant data was that core inflation – that which does not contemplate regulated or seasonal prices – advanced 3.7%, the lowest number since January 2022.
“For June we do not believe that it will rise one point due to the increase in gas and electricity rates as some consultants said, but we do know that it may have an impact that will make it rise a little. We are not concerned because the macro is increasingly more organized and public spending is not negotiated,” they enthused in Economía regarding the projections for the current month. However, they added that the first week “did not break the downward inertia that has been sustained for several months now”. The most critical economists focus on activity levels and the loss of 100,000 jobs in the private sector.
The other point they celebrated is the swap with China. The Central Bank (BCRA) announced that it had reached an agreement with its counterpart from the People’s Republic of China (PBOC) to renew the “the entire activated tranche of the swap for RMB 35 billion (equivalent to US$5 billion) between both institutions for a period of 12 monthsyes.” Beyond the formality of the statements, it meant oxygen for the administration that has the exit from the stocks in its medium-term plans. “The market wanted to complicate matters and they said that we were going to return the US$5 billion. We knew that would not happen but we waited for the formality of the case,” they were honest in Economía. The celebration on social network X by the Chancellor Diana Mondino and the possible visit of President Milei to that country are two other axes of political pragmatism beyond opposing ideologies between the world of the Asian leader Xi Jinping and that of the anarcho-capitalists. “Both at this point and on the trip to the G7, a distance between the campaign dialectic and reality begins to be noticed. It’s the first time it’s been so obvious.“said an international analyst who preferred to keep his name confidential.
Fabian Marelli
Besides, The IMF approved the eighth review of the program with Argentina and cleared the way to move towards a new negotiation with the organization in search of fresh funds that will accelerate the exit from the stocks.. “The program remains firmly on track, with all quantitative performance criteria having been met with a margin by the end of March 2024,” the Fund said in a statement. But he also set his sights on “improve the quality of fiscal adjustment, initiate steps towards an improved monetary and exchange rate policy framework, and implement the structural agenda” to unlock investment, growth and improvement in formal employment. Additionally, the directors indicated that “it will be necessary to continue efforts to support the most vulnerable, expand political support and ensure agility in policy formulation,” according to the statement.
“Our concept is philosophical: we fix the macro and we do not get involved in the micro except to generate frameworks for greater competition and avoid abuses. The economy is no longer overheated and there is no surplus of pesos. So if you have the macro in order and fiscal balance as a rule, I am convinced that the path is the right one. There may be a little more or a little less volatility with the dollar but the underlying issue lies elsewhere and that is what worries us and concerns us, which is changing the Argentine matrix,” Caputo concluded this week in a closed meeting he had with a Minister of Economy of the region. Like the Chief of Staff, Guillermo Francos, was optimistic that the reform in the Income and Personal Assets Tax will come to fruition and that is why both are closely monitoring that the deputies return to the original version, which is the one they believe has the best chance of getting the green light. No more no less.
