Argentina's Milei names former central bank chief as new economy minister

Argentina’s President-elect Javier Milei has announced he has chosen Luis Caputo, a former finance minister and Central Bank chief known as an expert in markets, to lead the Economy Ministry when the right-wing leader takes office on Dec. 10.

“Yes, the economy minister is Luis Caputo,” Milei said in a radio interview shortly after landing from a two-day trip to the United States, where he met with officials from the Biden administration.

As the first finance minister in former conservative President Mauricio Macri's government, Caputo was in charge of a debt restructuring and later became Central Bank chief.

Macri’s party backed Milei in the Nov. 19 presidential runoff and now his allies are jockeying for positions inside the president-elect’s Cabinet, leading to some tensions with his traditional libertarian allies.

The market has welcomed signs of Milei's choices for key Cabinet positions. Argentine stocks and bonds have increased while the local currency, the peso, has appreciated slightly in financial markets since he won the election.

Argentina’s economy is suffering from red-hot inflation running at an annual rate of 143 percent.

Milei had previously said he was going to hold off until his inauguration to unveil the post of economy minister, because he feared his choice could get blamed for any economic woes before he even takes office.

Dollarisation of the economy

One of Milei's main campaign promises involved getting rid of the Central Bank of Argentina as he said the country’s three-digit inflation rate was largely due to the monetary authority’s penchant for printing money.

The closure of the Central Bank was part of a broad plan that would eventually lead to the dollarisation of the economy, replacing the local peso currency with the US dollar. Since his election, Milei has made clear the dollarisation plan is on the backburner and could only become a reality once a slew of other measures are taken to shore up the economy.

“In conceptual terms, the central axis is to close the Central Bank, and subsequently, the currency (will be) whichever one Argentines choose freely,” Milei said in an interview shortly after his victory, characterizing a potential change in the national currency as “a second-order issue.”

His office has insisted that it plans to close the Central Bank.

“In response to the false rumors being spread, we wish to clarify that the closure of the Central Bank of the Argentine Republic is not a negotiable matter,” Milei's office said last week in a statement.

Caputo’s naming is no surprise as he was part of the small group of Milei aides who accompanied the new president-elect to Washington.

Milei had previously praised Caputo for his market expertise. In a television interview last week he said he believes Caputo could overcome the problem of short-term notes known as “Leliqs” — short-term loans the Central Bank makes to banks as a way to vacuum up excess pesos — and "end controls on the exchange rate.”

Milei has said he considers the Central Bank’s stock of “Leliqs” as one of the first problems he has to solve. He says the notes could spark hyperinflation because they increase the stock of pesos.

“I have to dismantle the ‘Leliqs’ ball to avoid hyperinflation,” Milei said in an interview. “There is no greater financial expert in Argentina than Luis ‘Toto’ Caputo. He is the ideal person to dismantle this problem.”

Milei, an admirer of former President Donald Trump, said he received a positive reception at the White House on Tuesday when he met with national security adviser Jake Sullivan.

“We were able to present our economic program and have also outlined our international alignment. The response was truly very positive,” Milei said.

Milei has said that his top allies as president would be the United States and Israel.

Caputo and Nicolas Posse, who will be Milei’s Cabinet chief, also held meetings in Washington at the Treasury Department and the International Monetary Fund. Argentina currently has a $44B loan program with the IMF.

“There was an excellent reception, and they fully understand the nature of the challenge we are facing,” Milei said Wednesday about the meeting with Treasury officials.

Milei also confirmed that Gerardo Werthein, a business magnate, will be Argentina’s ambassador to the United States and he wants Daniel Scioli, a former vice president, to remain as ambassador in neighboring Brazil for now.

Since his election, Milei has worked to smooth over tensions with the government of Brazilian leftist President Luiz Inacio Lula da Silva, whom he harshly criticized during the campaign as he praised former far-right Brazilian President Jair Bolsonaro.