They call Luis Caputo DVP on Wall Street. It is a term that means “delivery against payment” in English (Cash on delivery paymenttranslated into Spanish). This is an expression used at money tables when someone wants to lend money to another In return, it requires the counterparty to do their homework to ensure repayment ability.
“I don’t like the credibility we have.”Caputo opened this Tuesday to investors. “With everything we’ve done, I assumed at that point that country risk would be closer to 300 or 350 basis points. However, it’s at 600 points.”the minister was ashamed.
Sovereign risk appears unfazed given the announcement of a return to debt markets and reduction in retentions (it closed at 635 on Tuesday). On Friday in Economy magazine they were euphoric about the return to the debt market and the president is also optimistic that the spread will collapse to the level Caputo envisioned sooner rather than later. However, the index created by JP Morgan barely gave way.
The Minister of Economic Affairs admitted this Argentina is more dependent on Wall Street than any other country and that is its purpose “It’s about ending this dependency so that the majority of companies and the government can finance themselves on the domestic market.”
There are dollars in Argentina. Almost 200 billion US dollars are hidden under the mattresses of Argentines. Many prefer to lose 5% a year, as Guillermo Francella’s character says in the series “The Manager”.. “The dollars were piled up, one on top of the other under the mattress.” For Caputo “This is evidence of the psychological damage that has been done.”
This Wednesday’s placement is a good opportunity to maybe do that cleanly and quickly. The economic team will celebrate the $1 billion that Caputo says he wants to achieve. There is also talk of a loan or funds from private banks (repo) amounting to “at most” around $5 billion. The issue under discussion is what guaranteeable securities the government would provide.
What happened this Wednesday is not about a return to the international markets where Argentina competes with other countries to convince investors to lend the money to Caputo and not to another economy minister. It is an activity on the domestic marketsomething like hunting in a zoo, considering that there are records of deposits in dollars. Before the election there was $30 billion in banks, now it is $35 billion due to the dollarization of portfolios. The key to placement will therefore be to assess how much below 10% the rate closes and on that basis, several analysts argue, how quickly the dollar could reach the cap of the band (today the wholesale exchange rate is at 5.1% of the cap).
Before the elections, IMF staff were highly critical of the exchange rate system, according to private conversations with local and international analysts. Already in the staff report of last April, when the memorandum of understanding between Argentina and the IMF was signed – the stocks were left in place – the organization published that the peso had appreciated between 15 and 25% compared to a real equilibrium exchange rate. This calculation was not taken into account in the next report (August).
The government claims that the subsequent rise in the dollar offset this appreciation. A paper by the IIEP of the University of Buenos Aires confirms this: the competitiveness of the exchange rate, taking inflation into account, has improved by 24% since it left stocks. This is because the dollar has risen by 35% since mid-April, inflation has risen by 15% and the real has appreciated by 11%, the paper says.
Caputo reiterated yesterday that the tapes will not be changed and he went a step further by saying that the IMF thinks the same thing.
However, according to Allaria Ledesma, there will be no change in the exchange rate system with the IMF “a rhetorical adjustment and a change in de facto policy” as the original program allowed the BCRA to purchase foreign currencies within the band.
For the market, there is an opportunity or even a penalty for the government if it manages to produce these results, since in this way it will compensate the “Caputo DVP”.
In this sense, former Finance Minister Daniel Marx listed four challenges that Argentina faces in 2026: the refinement of the exchange rate system (“Accumulating reserves and laying out the path to gradually eliminate the “traps” for companies would lead to greater normalization.)expand the support base for fiscal policy (“Discussion and adoption of the 2026 budget”), increase activity and employment levels and adapt standards to criteria of efficiency and flexibility.
The minister admitted yesterday that it will take time for Argentina to overcome decades of mistrust in its institutions and officials. And that the replacement straps have been helpful ever since “It would be very presumptuous to try to fluctuate from one day to the next in a country with this level of volatility.”. Hence, for Caputo, the current government “It has to constantly show results, Make deliveryexplain, communicate and be supported by the results. But it’s a process and it’s missing.”
Disinflation processes usually take time. According to a presentation by American economist Carmen Reinhart, cited in a paper by Fundación Capital, it took 60% of countries more than seven years to reach single-digit inflation and 40% took more than ten years. Caputo is trying to make it work for now Delivery faster than its predecessors. Only later will they lend you money.
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