On Eve of IMF Deal, Argentina Changes Central Bank President

(Bloomberg) -- Argentine Central Bank President Luis Caputo resigned on Tuesday, a day after President Mauricio Macri said a revised aid deal with the International Monetary Fund would require a new approach to monetary policy.

Just three months since moving to the central bank from the nation’s finance ministry, Caputo cited "personal issues" as the reason for his departure. He was immediately replaced by Economy Minister Nicolas Dujovne’s deputy, Guido Sandleris.

The resignation is the latest chapter in Argentina’s fight to address a collapse in its currency and in Macri’s attempt to tweak the terms of a $50 billion credit line with the IMF. The yield on the country’s 100-year bond due in 2117 rose 20 basis points on the announcement before paring most losses to 9.19 percent. The peso fell 1.2 percent to 37.75 per dollar.

The shortness of Caputo’s tenure suggests he is taking the fall for the country’s failure to stem the slide in the peso as Macri renegotiates the IMF credit line. Macri told Bloomberg News on Monday the revamped agreement with the IMF “will bring confidence" to markets and investors.

"The positive out-take on this -- even if the IMF is pushing for a more independent central bank -- is that it could help Macri’s team communicate a more unified message to the markets," said Roger Horn, senior emerging markets strategist at SMBC Nikko Securities America.

Caputo raised rates in August to 60 percent, the world’s highest, but the move failed to stem the currency’s decline as investors questioned the country’s ability to meet its financing needs amid a second recession in three years. The peso has tumbled 50 percent, the most in emerging markets this year.

The IMF was swift to respond, with spokesman Gerry Rice issuing a statement that said the lender looked forward to a "close and constructive" relationship with the central bank. “Our staff and the Argentine authorities continue to work intensively with the objective of concluding the staff level talks in very short order,” Rice said.

Before taking the presidency of the central bank, Caputo -- a former JPMorgan Chase & Co and a Deutsche Bank trader -- was at the helm of the finance ministry where he helped arrange a deal for Argentina to sell century bonds, a rarity for a developing nation. He was a key figure in reaching a deal with debt holdouts from the country’s 2001 default, an accord that put Argentina on the path back toward normalcy after Macri’s election in 2015.

Unlike his predecessor, Sandleris has spent most of his career in academics. He has degrees from Columbia University, the London School of Economics and the University of Buenos Aires.

Sandleris has been one of the top Argentine officials at the negotiating table with the renewed IMF talks. Dujovne, the economy minister, said Tuesday that Sandleris has been deeply involved in reshaping monetary policy during the IMF talks. Dujovne called his former deputy a brilliant person.

In addition, officials announced that Veronica Rappoport, a professor at the London School of Economics who received a PhD in economics from M.I.T., will be second vice president at the central bank. Rappoport also taught at Columbia Business School prior to LSE. Her appointment comes after Lagarde told Dujovne in May that his all-male team was "short on women." Pablo Quirno, a director at the bank, is said to be leaving. And Gustavo Canonero, the first vice president, will stay as Sandleris’ deputy.

Still, analysts said they were underwhelmed because Caputo had market experience whereas Sandleris is a relatively unknown deputy with an academic background.

“The market doesn’t know Sandleris as well. He’s good on paper and has the credentials, but he’s not as much of a heavy-hitter as Caputo," said Kathryn Rooney Vera, head of global research at Bulltick Capital Markets.

--With assistance from Justin Villamil, Jorgelina do Rosario and Andres R. Martinez.

To contact the reporters on this story: Ignacio Olivera Doll in Buenos Aires at ioliveradoll@bloomberg.net;Patrick Gillespie in Buenos Aires at pgillespie29@bloomberg.net

To contact the editors responsible for this story: Simon Kennedy at skennedy4@bloomberg.net, Vivianne Rodrigues, Daniel Cancel

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