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Central Bank President Says Argentina’s Economy ‘Moving Towards Normalcy’

The announcement comes after a dramatic currency crisis in late August

By | [email protected] | September 7, 2018 12:57pm

B1brhlguQ_720x0__1Caputo assures that the situation in Argentina is "heading towards normalcy," via La Nación
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During his presentation this morning at the 39th Conference of the Argentine Institute of Executives in Finance (IAEF), in Mendoza, Central Bank president Luis Caputo assured that the market “understood the message” of the Macri administration, emphasizing that the country is “moving towards a situation of normalcy” after the latest currency crisis.

“The strategy has changed. Given the current conditions, it’s not possible for the Central Bank to set the exchange rate at AR $28, much less so with inflation,” Caputo stated.

“The floating exchange rate will allow us to absorb shocks. The market understood the message and yesterday, it found a balance. Now, we are moving towards a situation of much greater normalcy, much more calm. Not only in the exchange market, but in the bonds market,” Caputo emphasized, adding that Argentines should avoid panicking, as markets tend to “move in an exaggerated way, following a herd mentality”.

When he was asked about his decision not to travel to the United States earlier this week with Finance Minister Nicólas Dujovne to continue negotiations with IMF officials, Caputo stated: “On Monday at 6 PM I decided not to go because it had been a difficult day, and I was expecting another difficult day on Tuesday.” He assured, however, that “ [IMF director] Christine Lagarde understood the reasons.”

“Either way, we brought the IMF a monetary and exchange program that was very well received,” Caputo continued. “There are good people in the IMF, good technicians who are willing to help. Their prestige as an institution is at stake and they are doing everything possible to make this work. There are lots of things that you don’t know yet, but we are very confident that this new plan will work out very well”.

This is the first public appearance during which the head of the Central Bank has officially spoken publicly about the situation of the country after the dollar reached AR $42 at the end of the month, causing a dramatic currency crisis in late August. 

It was during this currency crisis that the Government dramatically restructured the Argentine Cabinet— downgrading half of the country’s ministers to the rank of secretaries— and President Mauricio Macri announced a new agreement with the International Monetary Fund.

Caputo assures that the situation in Argentina is “heading towards normalcy,” via La Nación

The delegation travelling to Washington to continue negotiations with the IMF, headed by Finance Minister Nicolás Dujovne, was planning  on including Caputo as the head of the Central Bank. However, the instability of the exchange rate in the days leading up to the trip led Caputo to remain in the country, so he might attempt to control the erratic exchange rate in Argentina.

Thus, while Dujovne continued negotiations in Washington, Caputo worked to lower the price of the dollar through currency auctioning and sale programs, bringing it down to AR $38.31 by yesterday afternoon.