“I can’t force people to have pesos in their pockets”

“We were doing very well until June of last year and we suffered a setback in the last 7 or 8 months,” Caputo said during an interview within the framework of a symposium on capital markets and finance organized by the Argentine Institute of Finance Executives (IAEF).

The head of the economic portfolio focused on the demand for money to justify the rise in inflation in recent months. “We can’t control demand. I can’t force you to have pesos in your pocket if you don’t want to or if you want to use another transactional aggregate,” Caputo said.

Along these lines, he added that “the demand for money is more driven by trust and the reality is that what happened last year was a speculative attack that undermined confidence of the majority of Argentines, then there was a decline in the money market but not as a result of the issue but due to the drop in the demand for money. And that fall takes time to recover.”

Despite admitting the step backwards in the fight to lower inflation, Caputo stressed that the Government must continue along the same path. “Fiscal balance, a prudent monetary policy and generate investment and conditions for people will regain trust and demand pesos again“he highlighted.

For Caputo, “sooner rather than later” the inflation index will start at zero, as Milei proposed. “The timing of predicting that is more difficult, It can happen in three months, six or nine. What is sure to happen if you do things right is that the disinflation process will continue.”

The official once again targeted Kirchnerism due to distrust in the direction of the country, and questioned: “In Argentina today It is almost more difficult to deal with the skepticism of many people as a result of our past than with the economy.. Today the economy is tremendously in order, now there are many people who cannot help but think that things must be bad for Argentina. It’s not a complaint, it’s descriptive. “The psychological damage that Kirchnerism has done to people is brutal.”

The criticisms of Kirchnerism were repeated in different passages of the interview. He explained them in his arguments about why there was a setback in the decline in inflation and also due to the rise in country risk. Furthermore, by maintaining that the economic policy is correct, he focused on how the country would have fared with a Kirchnerist government in the face of the external shock caused by the war in the Middle East.

“Imagine this external shock two or three years ago. Two or three years ago our main allies were Venezuela and Iran and we were oil importers. We would have lasted a minute and a half. Today, thanks to what was done, geopolitically we are aligned with the correct side and far from having a medium-term cost we would have a benefit,” he emphasized.

He also targeted Kirchnerism, and specifically against the Buenos Aires governor Axel Kicillof, by highlighting the positive impact that the tax innocence law approved by Congress should have.

“The most we can do is pass laws. We pass a law that is absolutely bulletproof (fiscal innocence), Kicillof proof. The fear of if they come back: not even Kicillof can bully you, it is totally armored: There is no possibility of anything happening to them, no matter what the accountants tell them. Still, people think it and it is because of the psychological damage of Kirchnerism,” Caputo attacked.

The Minister of Economy was also emphatic in pointing out that at least for now the Government will not go out to the markets to take on debt. “We are not planning to go to the market. At some point we thought about November of last year, but no, we ruled it out,” Caputo said.

The official considered that his team should look for the cheapest financing. “Today We already have identified financing to cover the next three maturities of capital. This year’s July coupon, next year’s January coupon, and next year’s July coupon. I’m talking about the capital, the principal, the interests are paid with primary surplus. We are talking about the market, not the Fund, it is more or less 9,000 million and more or less we already have the sources identified,” he highlighted.

In any case, it opened the door to the markets if the country risk decreases. “If within a year the country risk was at 250 basis points somewhere around that would be something else, but at this level of rate as long as we have cheaper options, Fede’s (Furiase, Secretary of Finance) job is to go for the cheapest one.”

Caputo was very emphatic when asked about the current relationship with the International Monetary Fund, which this Thursday stated that Argentina is facing the effects of the war “relatively well” but warned about the impact of global financial conditions.

“The relationship with the Fund is spectacular. Argentina has never had a relationship like the one we have with this Fund. We have gained a level of trust, from them to us, the Fund was always much more skeptical with Argentitna because it has difficult stories, but also from us to them, and a relationship of great trust was generated. It is a pleasure to work with the Fund, there is no yes or no“Caputo highlighted.

And in that same sense, he added: “They have a lot of power over our opinion because we have shown them with results that what we have been saying we have been doing. We have gained enormous trust and that makes the relationship great.”

This Thursday, at a press conference in Washington, the organization’s Director of Communications, Julie Kozack, spoke about Argentina. He referred to the second review of the program that is underway. The Fund’s technical team is currently preparing with Economics officials the staff level agreementthe document with the details of compliance with this stage, to be submitted in the coming weeks to the organization’s executive board to give the final green light.

“Progress continues on some key fronts. Collaboration between IMF staff and authorities is very close and appropriate, and talks are moving forward,” Kozack said, noting that “over the past two weeks, the global environment has become more challenging with the conflict in the Middle East.”

However, the official noted that Argentina has dealt with the situation in the Middle East “relatively well so far, especially considering that it is now a net energy exporter.” And he added that in 2022, during the last major energy price shock due to the war between Russia and Ukraine, “Argentina was a net importer of energy, and now Argentina is a net exporter, with 8 billion dollars of oil and gas last year,” he highlighted.