Luis Caputo and Nicolás Posse met with Gita Gopinath, deputy managing director of the IMF (photo @GitaGopinath)
(Special envoy to Washington).- During his stay in the capital of the United States, Luis “Toto” Caputo met with important officials of the International Monetary Fund (IMF) and the Treasury Secretariat to describe the economic program that Javier Milei will apply when he becomes President. And before leaving today for Buenos Aires, the future head of the Treasury Palace will visit the offices of the World Bank, a multilateral organization that grants many soft loans to Argentina.
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The IMF and the Secretary of the Treasury are key pieces in the bureaucratic mechanism of power in DC. Without the endorsement of the Fund’s board and Secretary Janet Yellen, Milei and Caputo would not be able to advance in their political decision to put on track the agreement with the IMF that Alberto Fernández’s administration has not complied with for 10 months.
In this sense, the designated Minister of Economy arrived at the Treasury to hold a conclave with Michael Kaplan, assistant secretary for the Western Hemisphere, and Jay Shambaugh, assistant secretary for International Affairs. Nicolas Posse, future Chief of Staff, lined up alongside Caputo, and between the two they explained what Milei will do with the economy when he arrives at Balcarce 50.
The elected president Javier Milei and his future Minister of Economy, Luis Caputo
The Treasury has a very critical view of Argentina, and that perspective influences the decision-making of the Fund’s board of directors. Without the support of Jake Sullivan, Joseph Biden’s National Security Advisor, the current Peronist government would have fallen into default. A position that Yellen silently pushed despite Councilor Sullivan’s position.
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The Assistant Secretary for International Affairs of the Treasury, Jay Shambaugh, stated two months ago that the Fund “must be willing to withdraw if a country does not take the necessary measures,” in obvious reference to Argentina. And during his meeting with Caputo and Posse he listened carefully to what the future members of Milei’s cabinet explained.
Kaplan and Shambaugh, two busy Treasury bureaucrats who recently welcomed Silvina Batakis and Sergio Massa, flashed their best smiles and said the expected words in these cases: “We’re going to work with you.” But this diplomatic promise will turn into sharp barking if Milei and Caputo do not adjust the fiscal deficit as they have already promised.
Secretary Yellen has had more than one confrontation with Counselor Sullivan over Argentina’s situation in the IMF. And she now has a very convincing argument: everything she predicted to Sullivan happened. The current government failed to meet all the goals promised at the time of closing the Extended Facilities agreement.
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As happened during the administrations of Martín Guzmán, Batakis and Massa, the White House will compensate for the intransigent position of the Secretary of the Treasury. During his visit to the West Wing, Milei heard an opinion from Sullivan that surprised him. “Your success is our success,” said Biden’s National Security Advisor.
This support will be key when negotiating with the Fund. The times are against the next government: a capital debt of 1,000 million dollars matures in December, and there is not even a Staff Level Agreement (SLA) that allows speculation with a disbursement before the end of 2023.
Without SLA there is no possible treatment of the Argentine case on the board, and without a decision from the board, there is no disbursement to cancel the payments promised during Alberto Fernández’s administration. That is to say: Milei and Caputo face a possible crisis with the IMF, a few days after taking office.
Javier Milei with Jack Sullivan during their meeting at the White House
The meeting of Caputo and Posse at the IMF was extensive. They were with Gita Gopinath, deputy director of the Fund, and Rodrigo Valdés and Luis Cubeddu, director and deputy director of the Department of the Western Hemisphere. For almost three hours, the future Minister of Economy explained in detail the plan that he prepared with Milei, and answered each of the questions that Gopinath, Valdés and Cubeddu asked.
The staff and board of the International Monetary Fund have already heard many times the arguments of the successive Ministers of Economy who arrive and leave Washington. And in the case of Caputo they acted with the same bureaucratic logic: they will cover their backs, wait for the proposal and receive orders from the White House, the Secretary of the Treasury and the main G7 countries (Germany, France, Japan, Canada and the United Kingdom). ).
In the end, if, as it seems, there is the will of the Biden administration, Milei and Caputo will put on track the Extended Facilities agreement that, in other times, Alberto Fernández and Massa closed with Kristalina Georgieva.
The designated Minister of Economy, Luis Caputo, after leaving the Hay-Adams hotel heading to the Treasury Secretariat