Caputo got off the trip to Davos and meets with the Fund’s technicians who are already in Buenos Aires

The Minister of Economy, Luis Caputo, got off the Davos summit in Switzerland and returned from the United States to Buenos Aires to focus on the final stretch of negotiations with the International Monetary Fund. The idea is to hold meetings with the mission of the organization that is already in the country and advance in a new agreement that will allow obtaining fresh funds to accelerate the exit from the stocks.

“Already in Buenos Aires. Excellent trip to Washington. I was not able to accompany the President to Davos because there will be three days of a lot of work between the Fund’s mission, the tender for accession announced yesterday, and measures that we are finishing designing from the Ministry of Commerce,” the official said this Wednesday in his account. x.

Caputo landed this morning in Buenos Aires after accompanying to the President on his international tour that took him to Washington to participate in the assumption of Donald Trump. Prior to the inauguration of the president of the United States, Javier Milei met on Sunday with the head of the IMF, Kristalina Georgieva, who praised the drop in inflation, economic growth and the population’s support for the adjustment plan.

The initial plan was for the Minister of Economy to travel with Milei to the World Economic Forum being held this week in Davos.. The President arrived this Wednesday in Switzerland, but arrived without Caputo, since the official returned to Buenos Aires before the sending of a technical mission from the Fund, something that Georgieva had anticipated on Sunday would happen soon. The technicians will hold meetings with the Economy team and the Central Bank.

The Government’s expectation is to unlock new disbursements of US$ 11,000 million to reinforce reserves and eliminate exchange restrictions. It would also be seeking a loan from the International Bank for Reconstruction and Development (IBRD), the CAF and funds from other countries. After closing a US$1 billion REPO loan in January, Milei said that, If he gets assistance from the IMF or large investment funds, “he will get out of the trap this year.”

Last year, Argentina registered its first financial surplus since 2010, recording a surplus of 0.3% of GDP after interest and virtually eliminating monetary issuance. But the IMF has been creating obstacles since July due to the insufficient accumulation of reserves, necessary to cancel the debt of US$ 43,000 million that the country maintains with the organization since Mauricio Macri took out a loan of US$ 44,000 million in 2018 and which he later refinanced. Alberto Fernandez.

In the ex post review of the program, presented last week, the Fund asked “adopt a credible strategy to dismantle exchange controls, greater exchange rate flexibility and a more significant role for monetary policy.”

While the Government announced that starting in February it will further reduce the pace of microdevaluations (crawling peg) to 1% per month, the agency warned in said report that “the presence of extensive exchange controls, which must be unrolled to alleviate distortions and regain access to capital markets, and the appreciation of the real exchange rate as a result of the preservation of a slow crawling peg could hinder the continued accumulation of foreign exchange reserves“.

In the last few hours, the former director of the Western Hemisphere Department of the IMF, Alejandro Werner, assured that “the only very complicated point in the negotiation is the exchange rate policy and the strategy for exiting the stocks.” “I don’t think the Fund will insist on a total exit in the short term, but it will have a clear and announced strategy.” And he estimated that if they coincide in the program, “there will be additional disbursements” and warned that “it would not be appropriate to force Argentina to resort to the market at high costs”.

The economic team seeks to keep the dollar anchored – which appreciates the exchange rate -, avoid a new devaluation and contain parity rates, all to sustain the decline in inflation ahead of this year’s elections. The other side is the reserves that the Central Bank must allocate to contain the price of the financial dollar. According to a presentation by the entity, between July 13, 2024 and January 16, 2025, it used US$ 1.6 billion to keep the exchange gap stable.

Since the Government decided to resume intervention on the parallel market in July of last year, it is estimated that it would have already used almost 60% of the US$2.4 billion originally available for these operations, according to calculations by the Cohen brokerage company. Meanwhile, between January 2 and 16, 2025, the Central Bank sold 47% of what it bought to contain the gap, according to PPI.