Will Argentina Lift Capital Controls in 2024? JPMorgan’s Top Dog in Buenos Aires Thinks So

In an interview with Bloomberg Línea, the American bank’s Senior Country Officer for Argentina, Uruguay, Bolivia, and Paraguay also addressed inflation and profitability in the aftermath of exchange restrictions being lifted

Photo: Michael Nagle/Bloomberg
March 13, 2024 | 01:52 PM

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Buenos Aires — Facundo Gómez Minujín, Senior Country Officer for JPMorgan in Argentina and president of AmCham (American Chamber of Commerce in Argentina), is confident that, by mid-year, Argentina will leave behind the exchange controls that have been in place since September 2019, and which intensified during the Alberto Fernández administration (2019 - 2023).

The banker pointed out that “the gap [exchange rate difference between the official wholesale dollar and financial exchange rates] is very low,” in conversation with Bloomberg Línea, noting that “it’s a good time to start thinking about that [lifting exchange controls] in a couple of months from now.”

Speaking at an event shortly before Economy Minister Luis Caputo, a JPMorgan alumni, stated that he does not feel any rush to lift currency controls, the bank’s regional CEO reaffirmed that he believes a complete exit from exchange restrictions in 2024 is viable, as long as reserves continue to increase and the gap between the official and parallel exchange rates is maintained.

If it [the government] manages to obtain some dollars, continue increasing reserves, and narrow the gap between the official and parallel rates, with the upcoming harvest, I think it’s possible,” stated Gómez Minujín at the AmCham Summit 2024, held this Tuesday in the Buenos Aires.

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BCRA Rate Cut and March Inflation

The head of the investment bank in the Southern Cone also referred to the recent reduction in the monetary policy rate from the Central Bank of the Argentine Republic (BCRA). “They did this on purpose, because a very low dollar is also not good for this moment,” he affirmed, describing the decision to lower the rate by 20 percentage points as “a good way to try to manage the dollar without resorting to devaluation.”

Reactivating or overappreciating the peso too much is also dangerous,” he added, while dismissing the need to accelerate the crawling peg in the face of higher-than-expected monthly inflation data in March.

Regarding the possibility of the peso lagging too far behind the pace at which prices are increasing, he said: “If the March [inflation] data is very high, they shouldn’t have to accelerate the crawling peg, because it will generate more inflation.” He also emphasized that lower inflation data would be positive for maintaining the current dollar management strategy.

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JPMorgan’s Profitability in Argentina

Regarding the impact of a potential lifting of exchange controls on JPMorgan’s business in Argentina, Gómez Minujín noted that it would be significant. “Because our business is to help companies generate foreign currency, whether through IPOs [Initial Public Offerings], debt issuances, and primarily debt issuances initially. IPOs always come second,” he explained.

Regarding the bank’s profitability in the short term after the lifting of exchange controls, Gómez Minujín suggested that the closure of the Argentine market around 2019 had negatively affected the company. “The years when the market is closed are far worse. For us, at JPMorgan, the better the country performs, the better we do,” he asserted. In that sense, he expressed optimism about the reactivation of IPOs in the near future, although he noted it would be a gradual process.

Regarding JPMorgan’s base scenario for Argentina this year, Gómez Minujín stated that “it’s difficult to know,” although the bank estimates inflation to be around 4% by the end of the year and negative economic growth. “The growth for the year will be very poor,” he affirmed.