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Source: Bloomberg
By: Camila Russo

Luis Caputo is getting frustrated with the bond market.

He’s guarded about it—he has to be. After all, he’s the finance minister of Argentina, the biggest bond issuer in the developing world, which means he’s constantly hitting up investors for cash. But the tension comes out deep into an hourlong interview in his Buenos Aires office. Why is it, the former Wall Street banker wants to know, that the investing community doesn’t appreciate all that the country has achieved?

Eighteen months have passed since Argentina shed its status as an international pariah mired in bond default litigation. There was the elimination of currency controls, the stabilization of the peso, the revival of the mortgage market, the reduction of the budget deficit. Sure, investors have given some measure of respect to the government—after all, they were willing to fork over $2.75 billion in a sale of 100-year bonds with a 7.1 percent coupon in June—but the yields they demand remain high, the credit rating is low, and the country’s stock market is still in the same class as far-flung places such as Mauritius, Tunisia, and Bangladesh.

“I don’t understand why people aren’t more conscious of the big change that’s going on here,” Caputo, 52, says. And then he flashes a bit of that swagger that Argentines are so well-known for throughout South America. “I’m convinced Argentina will be the star of emerging markets for the next 20 years,” he says. “I don’t mean to be cocky, but it’s very evident.”

Perhaps. But 20 years is a long time. And investors have much more immediate concerns, such as the sluggish pace of the ­economic recovery, the stubborn nature of double-digit inflation, and a budget deficit that, while shrinking, is still large. “The fiscal numbers are the main concern,” says David Robbins, a New York-based money manager at TCW Group Inc., which owns Argentine dollar bonds and remains bullish on the debt despite a heavy issuance calendar next year and high inflation. “The most recent growth numbers are encouraging, and this quarter it looks like growth numbers will be very strong, and that should create more positive momentum.”

Most important for investors is the specter of ex-President Cristina Fernández de Kirchner. If Caputo and his boss, President Mauricio Macri, represent the globalist, free-market approach that’s sweeping much of the region once again, Fernández is the ­embodiment of the kind of populist, interventionist policies that foreign investors have loathed. “The old ways that have doomed this country over the last 70 years aren’t coming back,” Caputo says. “Cristina isn’t coming back.”

And yet Fernández is suddenly somewhat resurgent two years after leaving power, discredited by the economic disarray and claims of corruption she left behind. In August she garnered more votes than Macri’s candidate in a primary that’s seen as an accurate prediction of how candidates will perform in October’s congressional elections. Whatever happens, polls and those primary results suggest she’ll land one of the three provincial seats up for grabs in the Oct. 22 election. Once ensconced in the Senate chamber, Fernández would no doubt be a thorn in Macri’s side. How many votes she receives may signal her chances of rebuilding her Peronist party movement and even running in the 2019 presidential election.