Javier Milei's Battle with Banco Macro
The Allegations and Economic Impact
In a dramatic escalation, Argentine President Javier Milei has accused Banco Macro, the third-largest private bank in Argentina, of orchestrating a market coup. Milei claims that the bank's liquidation of 1.8 trillion pesos ($1.8 billion) in debt bonds on June 3 led to a spike in the free-market dollar price, destabilizing the government's economic plans. According to Milei, this action was driven by Kirchnerism, with the intent to undermine his administration.
The far-right president's accusations are rooted in the recent financial turmoil that saw the free-market dollar price rise from 1,405 pesos per unit to 1,500 pesos within a few days. The incident has been linked to the Brito family, owners of Banco Macro, who have historical ties with former Minister of Economy and Kirchner presidential candidate, Sergio Massa. Milei's administration views this as a deliberate attempt to destabilize the government, leveraging the bond repurchase insurance mechanism known as 'puts'.
Government's Response and Economic Strategy
Minister of Economy, Luis Caputo, has attempted to moderate the rhetoric, acknowledging the bank's actions but suggesting they were driven by a rational response to the government's economic announcements. Caputo explained that the bank's decision to activate the 'puts' was influenced by the belief that inflation was about to collapse, making their inflation-adjusted bonds less attractive.
Despite the tension, the government has continued its negotiations with private banks to dismantle the 'puts' mechanism, which requires the central bank to buy back bonds at the previous day's price, thereby increasing monetary issuance. Caputo emphasized the importance of macroeconomic order, noting that the market's initial shock was mitigated by the government's fiscal strength and quick actions.
Banco Macro has remained silent on the accusations, focusing instead on protecting depositors' money. The bank's decision to sell the bonds was aimed at preempting a decline in bond value, a move that Caputo ultimately described as a 'good lesson' in market dynamics.
As the government moves forward, it remains committed to eliminating exchange restrictions and enhancing the central bank's capacity to defend the peso against speculative attacks. The end of these restrictions, however, remains a distant 'phase three' of Milei's economic plan.
