In a year of world­wide anti-wall Street sen­ti­ment, Ar­gentina puts the bankers in charge

Govern­ment ▶ Pres­i­dent Macri sur­rounds him­self with bankers and traders ▶ The group is “tech­ni­cally skilled” and has “the abil­ity to de­liver”

Bloomberg Businessweek (North America) - - News -

Hours af­ter Ar­gentina cut a deal with New York hedge funds to end a nasty, 15-year-old debt dis­pute, the govern­ment’s top eco­nomic of­fi­cials took to the podium in Buenos Aires to bask in the mo­ment. First to speak that Fe­bru­ary evening was the fi­nance min­is­ter, Al­fonso Prat-gay. He’s an old Jpmor­gan Chase guy, a cur­rency strate­gist. To his left sat Luis Ca­puto and San­ti­ago Bausili, the two men in charge of the min­istry’s debt pro­gram. They, too, are Jpmor­gan alums, and both also did stints at Deutsche Bank. To PratGay’s right was Mario Quin­tana, deputy cab­i­net chief for Pres­i­dent Mauri­cio Macri. Quin­tana founded Pe­ga­sus Ven­ture Cap­i­tal in 2000.

Since win­ning of­fice in Novem­ber, Macri, a for­mer busi­ness­man, has loaded his ad­min­is­tra­tion with bankers, traders, fi­nanciers, en­trepreneurs, and econ­o­mists. It’s not the kind of move a leader would con­sider right now in, say, Spain or Greece, places where anti-wall Street sen­ti­ment runs deep. In Ar­gentina, where a decade of state in­ter­ven­tion in the econ­omy has fu­eled run­away in­fla­tion and stalled growth, the pop­u­la­tion is more open to the idea. Macri wants to undo the in­ter­ven­tion­ist poli­cies of the for­mer regime as quickly as pos­si­ble, and he wants pro­fes­sion­als schooled in free mar­kets to do it.

“Peo­ple got tired of liv­ing in a place where the state stuck its nose in ev­ery­thing,” says Miguel Kiguel, ex­ec­u­tive di­rec­tor of Buenos Aires-based con­sult­ing firm Econ­views and the coun­try’s fi­nance un­der­sec­re­tary back in the 1990s. In Novem­ber elec­tions, Ar­gen­tines voted for an end to “ab­surd” reg­u­la­tions, he says.

The hir­ings are help­ing Macri win the con­fi­dence of in­ter­na­tional in­vestors, a cru­cial step to­ward re­gain­ing ac­cess to global cap­i­tal mar­kets more than a decade af­ter a $95 bil­lion bond de­fault dropped Ar­gentina from in­vestors’ shop­ping lists. Kiguel says the group is “tech­ni­cally skilled, strong,” and made up of pro­fes­sion­als who “have the abil­ity to de­liver.”

That’s not likely some­thing any econ­o­mist would have said of the staff of Macri’s pre­de­ces­sor, Cristina Fernán­dez de Kirch­ner. Her last econ­omy min­is­ter, Axel Ki­cillof, was fa­mous for rail­ing against for­eign in­vestors, say­ing that Spain’s Rep­sol was “loot­ing” the coun­try and that the de­faulted bonds held by hedge funds were as worth­less as card­board.

A Buenos Aires na­tive, Prat-gay joined Jpmor­gan in 1994, about the same time as Ca­puto. By 1999, Prat-gay had the top job in the bank’s cur­rency re­search group in Lon­don, a po­si­tion he left af­ter the de­fault to head Ar­gentina’s cen­tral bank.

Prat-gay and his hires have re­moved re­stric­tions on dol­lar pur­chases, al­lowed the peso to trade freely, and pared back govern­ment spend­ing. In the next year they’ll try to stem in­fla­tion by work­ing with the cen­tral bank to keep in­ter­est rates high and tighten the money sup­ply. And they must lure for­eign busi­nesses to Ar­gentina so they will hire lo­cal work­ers.

One move that still needs con­gres­sional ap­proval is the bond set­tle­ment Prat-gay ne­go­ti­ated with bil­lion­aire Paul Singer and other hedge fund moguls. Kirch­ner’s al­lies are sharply crit­i­ciz­ing the terms of the deal as too fa­vor­able to in­ter­na­tional cred­i­tors. Af­ter the de­fault, Ar­gentina set­tled with most bond­hold­ers for 30¢ on the dol­lar. In Fe­bru­ary, Singer and the other hold­outs got more than 70 per­cent of their claims. Therein lies a vul­ner­a­bil­ity for Macri: the per­cep­tion that his Wall Street-groomed pol­i­cy­mak­ers may be too cozy with in­vestors. Ar­gen­tines also re­call that the last govern­ment dom­i­nated by busi­ness­men and bankers, in the late 1990s, cre­ated the con­di­tions that led to the coun­try’s de­fault on its for­eign debt obli­ga­tions.

Th­ese reser­va­tions may prove more of a con­cern if Macri fails to sta­bi­lize the econ­omy. For now, peo­ple just want to live in a nor­mal coun­try, says Econ­views’ Kiguel. At last count, an­nual in­fla­tion was about 30 per­cent. Fix that, and peo­ple may not care how much money for­eign­ers make.

The bot­tom line In the U.S., the num­ber of dis­cour­aged work­ers is drop­ping, while in Europe it’s ris­ing de­spite a re­cov­ery. The bot­tom line Ar­gentina’s fi­nance min­is­ter has hired bankers to pro­duce free-mar­ket so­lu­tions for the coun­try’s prob­lems.

Edited by Christo­pher Power Bloomberg.com

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