Dollars, IMF, cepo – Economy Ministry’s expectations after Trump triumph

After news of Donald Trump’s victory broke, Economy Minister Luis Caputo joined in the celebrations. 

He had reason to watch the race closely. The United States elections are crucial for international interest rates and the strength of the dollar as well as for the superpower’s influence on international credit organisations, to whom Argentina owes the biggest debt in history.

Caputo retweeted President Javier Milei’s message to the president-elect in X: “Donald Trump, congratulations on your formidable electoral victory. Now make America great again. You know you can count on Argentina to go ahead with your task. Much success and blessings. Cordial greetings.”

The government is betting on ideological overlap between Milei and Trump helping Argentina to obtain the financing required to face the need for dollars. 

Cabinet Chief Guillermo Francos exposed the hard currency problem this week when he criticised farmers for having "many silobags, which have yet to be cashed in." 

The phrase slipped out in a speech during the inauguration of the reversal of the Gasoducto Norte pipeline, a project begun under the previous administration’s Economy  minister Sergio Massa, which will permit annual savings of US$1 billion by transferring gas from Vaca Muerta northwards.

Throughout their 11 months in government, La Libertad Avanza have maintained ‘cepo’ currency and capital controls with the promise to lift them when they have the dollars needed. 

This commitment has been modified ad hoc with the constant financial difficulties faced by the country.

Caputo’s relationship with Trump

For Caputo, as well as Trump, the present state of things seems a rerun of what happened six years ago. 

The Republican leader was serving as US president when Caputo was Argentina’s Finance minister in 2018. At that point the financing of Wall Street had run dry. Pressed for hard currency, then-president Mauricio Macri turned to the International Monetary Fund seeking the biggest loan since the creation of the IMF.

A couple of months later, with Caputo at the helm of Argentina’s Central Bank, the loan was expanded to US$57.1 billion. The current minister left the Central Bank on September 25 though, so that the final signatory of the document on behalf of the monetary authority was inked by his successor Guido Sandleris.

The role of Trump in all this was fundamental. The IMF did not view the economic model of the Cambiemos administration as viable, concerns which were passed on by its then-managing director Christina Lagarde to the White House. 

Washington advisor Mauricio Claver-Carone, in turn, took them to the Republican president.

As later revealed by Claver-Carone, Trump’s influence was indispensable and the IMF ended up transferring to Argentina the funds required to staunch the haemorrhage of dollars in a scenario of total lifting of the currency controls. 

Even if managed by others, the pre-existing good relationship between Trump and Macri was the key. Nevertheless, the funds were insufficient and Macri restored the ‘cepo’ in 2019.

This link will be fundamental again, since in 2025 Argentina will have to meet payments of US$24 billion between capital and interest. 

According to the figures from the Finance Secretariat and the Central Bank, next year’s debt payments will climb to US$11.29 billion in public bonds, to which must be added US$3 billion owed to the IMF, liabilities of US$4 billion to other organisations, almost US$6 billion in provincial debt and the first quotas of the currency swap with China.

A strong dollar 

International expectations from the Republican triumph, although moderate, will be to make the US currency more solid, causing the international price of gold to fall the day after.

Trump’s protectionism might also have repercussions for Milei’s intention to boost bilateral trade. Argentina and the United States do not have complementary economies but, on the contrary, various structural similarities to that the main local exports do not have such a receptive market in the north. 

That was one of the main obstacles facing Mauricio Macri, who in April, 2018  had celebrated in Tucumán the first shipment of lemons to the United States in 17 years.