Panic, pressure and fighting: the secret story of Macri's arrival at the IMF a year ago – 04/05/2019

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Macri's message on television lasted three minutes. Almost the same as the conversation with Christine Lagarde, a little before.

That morning, early on, there was a meeting at La Rosada between the deputy chief of staff, Mario Quintanaand the ministers of finance and finance, Nicolás Dujovne and Luis Caputo. "You have to go to the IMF," agreed the three. They called Marcos Peña. "We'll tell the president," he told them.

"Is it so imminent?"Macri asked. "If they are convinced, let's go now."

The story of how Argentina came to the IMF and negotiated the agreements is a web of misunderstandings, different timetables, miscalculations and opposing views on economic policy between Argentine officials and the IMF . All this, exposed to the president.

Perhaps an indication of what was coming was Macri on January 3, 2018 when Caputo told him Cumelen, a closed neighborhood of Villa La Angostura with houses on the beach of Nahuel Huapi: "It will be a difficult year, markets can be closed, I'm going out tomorrow to take on debts."

Investors offered Argentina $ 36 billion at 5%. Caputo took $ 9 billion. He had more money, cheaper than a year ago and no road show. Caputo and his two badociates, Pablo Quirno and Santiago Bausili (today's finance secretary), were to move around this weekend, but as Mexico decided to pay off its debts, they rushed to carry out the work. operation on the phone. A storm in New York that morning endangered the fact that traders go to their offices and start the tour. Finally it was done.

Argentina was always a successful story for the markets. Macri traveled to Davos two weeks later and he checked. But at the end of the tour, from Europe, he called Caputo.

– "How do you see everything?"

– "Think about Plan B, at the IMF "

February arrived and in three days, the S & P 500 fell 7% and the Dow Jones 8%. Wall Street has received Jerome Powell -the replacement of Janet Yellen at the head of the reserve-, with the worst reception reserved for a holder of the history reserve. Powell is more optimistic about the US economy. and that was interpreted as an increase in rates that year. He raised them four times.

Argentina's debt has started to become more expensive. "We will not be placing more bonds," Quirno and Bausili told New York. The market was saturated with Argentine debt and Argentina had an external deficit of US $ 31,600 million in 2017.

In April, the noise increased. The government implemented the financial income tax (This generated a debate between the Treasury and Finance-BCRA) and the UCR, as well as the opposition, asked Macri free rates.

On April 25, the alarms sounded. Sturzenegger sold 1,471 million US dollars in reserves and the dollar was firm at $ 20.55. "It was a mistake," admits an entity manager at the time. "But Casa Rosada was on the bench."

The Sturzenegger exchange rate was floating. But the bank had intervened three times in a year and a half, for example, when there were "disturbances" such as Brexit. "But the month of April was definitely a mistake, in part, because the Rosada insisted." The messages came from the president and sometimes the dialogue was direct.

The sparks between the bank and Jefatura continued in 2017. A few days before December 28 of this year, Peña and Quintana asked Sturzenegger to lower the rate. 1000 basis points in six months. And that in the first announcement "will cut" 250 points. Dujovne supported Peña and Quintana. Caputo too.

The bank lowered the rate, but not in the extent mentioned. Instead of 250 points were 75. At headquarters and the Treasury did not fall well the attitude of Sturzenegger. "Only 75 points" does not show him as a convinced person.

The government's desperate attempts to resist the pressure of the market were quickly brought to light. He turned his rate policy of 180 °: in January, he lowered it and in April he raised it by 1,275 points in one week, from 27.25% to 40%. And to show that Dujovne danced the same tango as Sturzenegger, the Treasury announced the same day the reduction of budget targets from 3.2% of GDP to 2.7%.

Forty-eight hours later, the President announced the trip to the IMF. He called on Cambiemos' political partners and informed them. He spoke on television and lowered the dollar. But then, Dujovne gave a press conference and the exchange rate went up again. The station intervened by selling futures contracts, but the dollar ended the day at $ 22.90.

On May 8, the same day of the announcement, Dujovne flew to Washington. It was on a flight via Atlanta. I was going for 48 hours in Washington.

In Hacienda, they point out that the meeting was organized with the Undersecretary for International Affairs of the Treasury, David Malpbad -I am President of the World Bank. "With his support, it was easier to reach the rest of the countries," said an official at the meeting.

From there, the team went to the IMF to meet Lagarde. "You seem to be short of women", received that of the Fund to the Argentine delegation. The minister arrived accompanied by Sebastián Galiani, Ariel Sigal, Guido Sandleris and Rodrigo Pena. Lucas Llach, vice president of the entity, was at the Central Bank. Also the finance secretary, Santiago Bausili. He joined the team Gabriel Lopetegui, representative of Argentina at the IMF.

Lagarde expressed support and perhaps a clue as to what would be one of the three foreground axes. "How is Federico?"he asked Sturzenegger. Rebuilding trust – after September 28 – and BCRA badets, as well as the budget balance and the free dollar, were a priority for staff.

The Fund and the Argentinian team agreed that Caputo would seek funds in the market and Dujovne would allocate this money to buy back the government securities that Sturzenegger held as badets in the bank. The plan was closed with the central bank that used these pesos to cancel Lebacs. "The mistake was setting a goal at that point," admits an official of this team today. In the first year, the BCRA sheet is expected to improve by $ 312 billion. Another mistake was overestimating the IMF's ability to attract capital in a country with a balance of payments crisis.

The negotiations on the calculations, the agreement and the amount of availability with the staff took four weeks. Sandleris and Pena worked in an IMF building office with Roberto Cardarelli and his team. Including some weekends. "Cut here, play the Lazio"Said the Italian one Sunday.

June 20, the IMF's Board of Directors approved US $ 50 billion for Argentina, a record number. Two days later, some 15,000 million US dollars corresponding to the first disbursement were credited to a BCRA account in Switzerland. Dujovne used half of it to hold auctions and keep the dollar at bay, a mission that Sturzenegger did not fill and where Caputo took his place.

The & # 39; Toto & # 39; arrived at the power station with the record of success of a week before Templeton bought 75% of bonds issued while he was finance minister (2,250 million US dollars). At the same time, Sturzenegger – still at the bank – placed a wall of $ 5 billion to block the $ 25 dollar. And it worked. But when he removed the wall, the dollar exceeded $ 26. "For $ 25, it's not a right to intervene, we're seeing $ 30," Lagarde told Macri, Dujovne, Caputo and Sturzenegger one of those days during an appeal to Olivos. Two people confirmed this directive from Madame.

The dollar continued to press and the order came from the Rosada disavowing the IMF: "Intervene". Sturzenegger sold $ 800 million in two days and left. In his mandate, nearly 11,000 million US dollars.

What followed was the amplification of two previously launched trends. First, the dollar was stable at $ 28, while Dujovne sold $ 7.5 billion. Was it confirmed that we had to intervene? On the other, an increase in tension within the economic team and with the IMF for the BCRA to sell reserves.

In August, at a meeting of the Jackson HoleIn the United States, where all central bankers meet once a year, Caputo informed Powell of the difficulties faced by the IMF's program to stabilize the peso. It was necessary to modify the free float. "You can, but do it via the IMF and to lobby politically. Ask your president to speak with my president. And with Merkel too"Powell said.

In a few days, the dollar in Argentina would rise from 30 to 40 dollars. Macri asked his team. "What does the IMF say with the dollar?" Let them put in writing and take charge. "The contact with the BCRA was minute by minute.

The Treasury and the IMF observed Caputo's CV: they said (and said) that their profile was not suited to monetary and exchange rate policy, that it was rather a trader waiting for the strategy to use to hold the dollar everyday instead of continuing. a ruler. Caputo, in turn, referred to "academic" economists because he said that they were trying to understand what had happened rather than anticipating what was going to happen. "I can not not be in the market," Alejandro Werner, IMF director for the region, told Caputo in Caputo.

On the eve of Macri's announcement of the IMF I plan, there was one meeting (another) at La Rosada. Quintana and Caputo were inclined to act quickly. "Is this for all that?" Peña asked.

From the following, there are different versions. One shows Caputo as Rasputin who convinced the president to stand in front of the screen and deliver a message half an hour before the opening of the markets, saying he had agreed to an advance disbursement with the IMF while that was not the case. The other, that Dujovne and Caputo had said the day before that Macri would speak after the IMF has sent a statement that they were working on a second agreement. But the agency asked for 48 hours and the president spoke the same way. Did Macri exert pressure, as Powell had said, or act improvised, judging by the market? That day, the dollar rose 7.3%. And the next day, 16%. The jump that is registered at the get out of stocks.

The IMF, finally, supported Macri. According to the Treasury, the president's "piletazo" provoked amazement from the IMF and the Treasury. To make matters worse, this weekend, rumors of resignation and changes in the cabinet have arrived. The IMF has decided to expand its badistance and advance $ 20 million to Macri for its management related to the previous program. The program included technical adjustments – zero growth of the monetary base, commitment of a non-intervention zone and zero deficit. David Lipton, two IMF members, spoke with Peña and gave the green light to the deal. But he observed that Caputo was a disruptive element in the decision-making chain because he did not agree with the float. The head of BCRA was selling $ 5,007 million in reserves.

A IMF spokesperson, consulted by this article, pointed out that "the success of the economic program of the authorities IMF support will depend on continued and resolute implementation. This will require broad support for policies that protect the most vulnerable, alleviating economic vulnerabilities, increasing Argentina's growth potential and boosting market confidence. " Argentina today accounts for 45% of the Fund's effectively disbursed portfolio..

The body this week has accepted the intervention of the BCRA. Macri, in complete privacy, popular.