Argentina’s Central Bank repurchased the majority of put options from financial entities Thursday, bringing President Javier Milei one step closer to lifting currency controls.
Private banks and other institutions resold 13.2 trillion pesos (US$14.2 billion) of put options stemming from sovereign peso bonds to the monetary authority. That’s more than half of the 20 trillion pesos in put options — pledges by the Central Bank to buy back the notes if they fall below a certain price — that existed when talks began a month ago.
Reducing the amount of put options held in the financial sector diminishes the risk that those financial instruments could suddenly be redeemed. That would force the central bank to print money — referred to as monetary emission — in order to make payments to buy back the notes. Pumping more pesos into the economy could fuel inflation that’s already at 272 percent.
“This operation significantly contributes to reducing uncertainty regarding the monetary program by eliminating one of the elements with the greatest potential of emission in the financial system,” the Central Bank said in the statement.
Milei made clear in recent weeks that eliminating the put options — an instrument he inherited from the previous government and expanded upon at first — is a key step for the Central Bank to eventually lift currency controls that discourage foreign investment. He has not yet specified when he will lift the controls.
When asked July 9 on X about lifting currency controls in the next 90 days, Milei outlined three steps, including eliminating put options on the peso bonds. He also referred to cleaning up the Central Bank’s balance sheet, and bringing monthly inflation in line with the peso’s government-controlled pace of devaluation, or crawling peg. He wants both inflation and the peg to be “in the area near zero percent monthly” before lifting controls. Monthly inflation in June accelerated to 4.7 percent.
by Patrick Gillespie, Bloomberg
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