Argentine Central Bank president resigns amid financial crisis, IMF bailout
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.
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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.
