Caputo looks for funds for Argentina in Washington

Economy Minister Luis Caputo is in Washington defending his reforms, but the International Monetary Fund does not plan to grant the US$15 billion that President Javier Milei says he needs to eliminate currency controls.

“The faster we get it, the faster we lift the ‘cepo’,” Milei told Radio Mitre a few days ago in an interview. He was referring to Argentina’s byzantine system of capital controls that have been in place since 2019 and limit access to dollars in a country where the greenback serves as a safe haven for savings.

Milei’s idea is that the International Monetary Fund – with which Argentina has an outstanding credit programme worth US$44 billion – will lend the nation more money.

And so, this is Caputo’s mission during his time in the US Capitol, which this week is hosting the spring meetings of the IMF and the World Bank.Talks with private investors are also planned.

From laggard to reformist

Caputo is multiplying his meetings in the search for funds. This Thursday he held a meeting with the IMF’s number two, Gita Gopinath.

President Milei’s government said in a statement: “We discussed the progress of the reforms being carried out in Argentina, the macroeconomic situation and the policy path to be taken in the short term.”

Not a word about fresh money. It does say, however, that “the excellent prospects for the next review of the programme with the Fund were highlighted.”

At the beginning of April, the IMF’s communications chief Julie Kozack stated that “at this stage, it would be premature to discuss the modalities of a possible future programme.”

Even so, the multilateral lender is satisfied with Argentina’s evolution and supports its controversial president, who took office in December with a promise to reach zero fiscal deficit by the end of 2024 via the means of a fierce “chainsaw” plan to slash government spending.

IMF Managing director Kristalina Georgieva reiterated that support for Milei and Caputo’s approach at a press conference on Thursday. Inflation in Argentina “is coming down a little faster than initially expected,” she said.

The Fund projects inflation, which is running at more than 250 percent annually, will remain high this year, before falling considerably to around 50 percent in 2025. Despite the astronomical figures, price hikes moderated for the third consecutive month in March to 11 percent, according to data from the INDEC national statistics bureau. 

“Look at Argentina, a country that has long been perceived as a laggard from the point of view of reforms, now moving very quickly in adjusting fiscal spending, gaining the capacity for private investment,” Georgieva said.

‘Impressive progress’

Caputo also met with senior US government officials while in Washington, including the US Treasury Department’s Undersecretary for International Affairs Jay Shambaugh, to discuss Argentina’s economic situation.

It remains complicated. Gross Domestic Product (GDP) will contract 2.8 percent this year, according to the latest IMF forecast, and demonstrations against Milei’s economic measures are ramping up in a country where almost half of the population lives in poverty. In his bid to trim government spending, Milei has embarked upon a large wave of public sector lay-offs.

“Undersecretary Shambaugh discussed the impressive progress made in reducing inflation and foreign exchange accumulation and encouraged continued efforts to protect the most vulnerable during a difficult stabilisation process,” the US Treasury Department said in a statement.

Caputo still has time to secure funding, but he will return to Buenos Aires with at least US$40 million from US President Joe Biden’s government “support defence modernisation,” the US Embassy in Argentina announced late Thursday night.

The FMF subsidy is an assistance reserved for important partners, permitting Argentina to buy defence ítems, training and services from the United States via this free assistance funding, and thus improving the interaction with US forces,” read the statement. 

“This subsidy will favour Argentina’s efforts towards military modernisation, contributing to the Argentine purchase of the F-16 supersonic combat jets.” it continued.

It “is the first time since 2003 that Argentina has received FMF funding from the United States,” noted the Embassy.

It’s an amount that’s not to be sniffed at, though Caputo still has some way to go to reach that US$15-billion target.

– TIMES/AFP