Milei picks Santiago Bausili to lead Central Bank

Argentina’s president-elect Javier Milei picked an ally of his future economy minister to lead the nation’s Central Bank, with the mission to help find a solution for a pile of local-currency debt, lift currency controls and possibly introduce the dollar as an alternative to the peso in the future.

The appointment of Santiago Bausili, a close friend to incoming Economy Minister Luis Caputo, was confirmed by Milei’s spokesperson on Tuesday.

The nomination, which needs to be approved by the Senate, broadens the powers of the economic team Caputo is building to implement austerity measures and fight inflation. It also signals the new government isn’t planning to have an independent monetary authority for now.

Milei swept to Argentina’s Presidency with a series of radical proposals, including shutting down the Central Bank and dollarising the economy to stop money printing that fuels inflation, currently running at 143 percent a year in the South American nation. Yet his choices for the economy team signal he’ll prioritise a programme of fiscal adjustment he has described as “shock therapy.” Plans to eliminate the monetary authority and adopt the dollar could come later.

Bausili, 49, took part in the 2016 negotiations with holdout bondholders who had rejected Argentina’s debt restructuring offer after its 2001 default. The deal allowed the country to return to international capital markets. An economist with a degree from Universidad de San Andrés, Bausili previously worked for JPMorgan & Chase Co and Deutsche Bank. More recently, he’s been part of Anker Latinoamerica, the consulting firm Caputo leads.

Bausili also helped lead the team that negotiated a deal with the International Monetary Fund in 2019. The programme was put on hold and eventually abandoned by the current administration amid financial volatility.

Debt pile

One of his first challenges will be to find a solution for the equivalent of US$16.6 billion in local currency debt known as Leliqs — notes issued by the Central Bank to absorb pesos from the economy.

On the eve of Milei’s inauguration, investors are avoiding buying the paper, forcing the monetary authority to roll over only 1.8 percent of the amount offered at an auction Tuesday. Failure to sell the notes risks fanning inflation by increasing the amount of pesos in circulation.

After being elected, Milei warned the economy is headed toward “stagflation” as his austerity measures will immediately hurt economic activity but will take some time to rein in consumer price increases.

On top of that, the Central Bank’s foreign reserves are depleted after years of capital controls that added to economic distortions. With net reserves in the red, Milei’s pledges to dollarise the economy seem to be on pause.

Instead, he has said he will call Congress into an extraordinary session on December 11 to present his plans to shore up public finances, a key step before lifting capital controls and unifying the country’s numerous exchange rates.