Argentine Central Bank president resigns amid financial crisis, IMF bailout

[sandensea]

Last edited Thu Jun 14, 2018, 10:00 PM - Edit history (1)

The president of Argentina's Central Bank, Federico Sturzenegger, announced his resignation today.

The announcement comes amid a collapse in the peso, which has lost one third of its value so far this year, and an unprecedented, $50 billion IMF bailout agreed to on June 8.

Sturzenegger, 52, was appointed by President Mauricio Macri the day he took office, on December 10, 2015. He will reportedly be replaced by Luis Caputo, Finance Minister for the last 18 months and a first cousin of Nicolás Caputo, best friend of President Macri.

Falling bicycle

Sturzenegger's tenure has been marked by the growth of a massive carry-trade bubble known locally as the “financial bicycle” - a bubble financed by the issuance of up to $60 billion in short-term, high-yield bills known as LEBACs.

The LEBACs, which yielded up to 15% in dollar terms during 2017, were typically rolled over, with investors using Sturzenegger's lax foreign exchange controls to wire over $22 billion in profits overseas last year alone.

The bicycle bubble, however, began to collapse last December as the country's current account deficit doubled to a record $31 billion in 2017, leading to investor fears as to its sustainability.

Central Bank reserves plummeted from a record $62 billion to $49 billion in the last two months as Sturzenegger sought to shore up the peso by raising the discount rate from 27% to 40%. The U.S. dollar nevertheless jumped from to 20 pesos in April, to 28.44 as of today.

Offshore and on

Caputo is himself a controversial choice, however.

Appointed Finance Secretary when Macri took office, Caputo, 53, was among a number of Macri officials and relatives found to have purchased millions in dollar futures contracts ahead of Macri's 40% devaluation on December 17, 2015.

While the devaluation led to 45% inflation by mid-2016 and a severe recession, Caputo's Axis fund made $50 million from betting on the move - a devaluation he himself arranged.

Caputo was later found, last November, to have managed a Miami-based offshore wealth fund, Noctua Partners, and three Caribbean affiliates with a combined portfolio of over $100 million. Their existence was confirmed this March by the U.S. SEC - but had not been declared in his financial disclosure, as mandated by Argentine law.

His Axis fund was also found last year to have received at least $30 million in investments by the nation's social security agency (ANSES). Axis was revealed in May profited by at least $700,000 during the recent peso crisis.

https://translate.google.com/translate?sl=auto&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.ambito.com%2F924598-en-medio-de-una-nueva-corrida-cambiaria-renuncio-sturzennegger-y-caputo-sera-el-presidente-del-bcra&edit-text=

Macri's “dream team,” Sturzenegger (left) makes a point as Caputo (right) reacts incredulously to assurances that “the worst has passed.”

Chief of Staff Marcos Peña and Economy Minister Nicolás Dujovne look on between them.

[Judi Lynn]

1. Every day reveals even more corruption, doesn't it?

So the new President of the Central Bank, and brother of President Macri's best friend profited already when "His Axis fund was also found last year to have received at least $30 million in investments by the nation's social security agency (ANSES)..." when he was only the Finance Minister.



Nice work when you can get it, Luis Caputo.

Always ready if he has to make a run for it, to visit Argentina's vast overseas private accounts.



Macri, standing with Luis' older brother, Nicolás Caputo:



Why are we not shocked he has all kinds of Miami connections, and Caribbean, as well? OMG.

Your photo of Macri's "dream team" has 4 very shifty looking people, all exactly the way you'd expect them to be. Simply slimy, every one.'' Wow. The President has surrounded himself with the very best, too, just like Trump.

Sure looking forward to the day they finally shoot themselves in the feet. This dirty business shouldn't be allowed to continue too long.''

Hope to see the population become released from bondage to these grifters and con-men, and assorted sleazeoids.

[sandensea]

2. It certainly didn't have to be this way.

They had so much going for them, Macri and his administration:

Support from local and international business, support from most local and international media (especially the business press), red carpet treatment in every major bank, and low foreign debt levels left over from Cristina Kirchner (as Dujovne himself admitted).

They could've limited themselves to sensible deregulation - something most Argentina observers, including myself, thought could restore some needed agility to the economy by way of higher real estate investment, for instance.

But instead, they decided to go full Bush: All-out financial and foreign exchange deregulation, plus trickle-down deficits and a boom in imports. Add to that the massive LEBAC "bicycle" and you get the makings of a Bush-style bubble - and its inevitable pop.

A lot like what they went through in 1981 (during the dictatorship), and to some extent in 2001 - but hopefully, with a softer landing this time.

Thanks, once again, for taking an interest, Judi, and for sharing your very incisive thoughts - and sense of humor! All the Best, and have a very nice weekend (not too hot, I hope!).

[Judi Lynn]

3. Good point, sandensea. They could have paced themselves and wildly enriched themselves.

But, noooooo.

Compulsive criminals. Maybe their demons told them they have to grab all they can grab with both hands because something could go wrong before they attain full dictatorship.

The world is so weary from hearing the "trickle down" claims. It has never worked, never will work, because not of the "human nature" in some people but because of the criminal nature in the greedy people.

(I enjoy seeing photos of Macri's associates. They do all look like criminals, don't they? Yikes.)

[sandensea]

4. They fooled a lot of voters in 2015, no doubt about it - with help from Clarin & Cambridge Analytica

While no administration can claim to have kept all its campaign promises (although Néstor Kirchner came the closest), these people have made a sport out of brazenly going back - often diametrically so - on just about everything they promised.

That said, the Macri era will go down as the first time in Argentine history that pseudo-fascist policies (particularly on the economic front) have been implemented by anything other than a dictatorship. In that sense, I suppose he made history.