The Inevitable Sacrifice of Argentina's Central Banker

(Bloomberg Opinion) -- Someone has to walk the plank when you want something big from the International Monetary Fund.

That's been true of IMF loans, generally, to emerging markets. And Argentina is into something big with the Washington-based lender. The country is looking for a top-up of its $50 billion credit line, and if President Mauricio Macri can demonstrate the country can pay its debts, then the interest rates demanded by investors should come down from their crippling levels.

A leader that turns to the IMF has to have economic officials who can disavow the past practices and oversee the required reboot. And thus the exit of Argentine Central Bank President Luis Caputo, who resigned Tuesday after a mere three months in the role. He pulled rates as high as 60 percent to try to steady the peso. That's firefighting, not something sustainable.  

Macri effectively fired Caputo yesterday, telling Bloomberg TV that a revamped deal with the IMF will mean a change of course at the central bank. "What it will involve is a clear monetary policy that will show where we are going," he said. "That's the most important part of the agreement."

A head also needs to be served up to the masses. Those borrowing costs of 60 percent will inflict pain on the country, pain for which Macri needs a scapegoat before next year's election.

There may be other departures, if the past is a guide. Caputo's exit may be a sign that some kind of IMF accord is close. The slide in the peso that immediately followed Caputo's resignation may in any case bring matters to a head.

IMF or no, Macri had to change course. No economy can survive interest rates that stratospheric. Let's hope he hasn't forced the wrong person overboard.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Daniel Moss writes and edits articles on economics for Bloomberg Opinion. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.

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