Milei shuns Wall Street to raise dollars at rate lower than 7%

Economy Minister Luis Caputo’s strategy of resisting calls to raise funds in international markets appears to have paid off.

A few months back, tapping global markets would have come at a cost of roughly 10 percent. Even today, it would still be around nine percent. Instead, the government has avoided the return to markets and secured dollars through other avenues in order to meet a US$4.2-billion bond payment on July 9 at a rate below seven percent.

President Javier Milei’s economy chief stuck to a strategy that many investors initially saw as too risky: secure dollars through cheaper alternative channels, buy time and wait for spreads to come down.

“It worked, but it carried risks. If US Treasury yields had spiked or the war had escalated, the strategy might not have worked,” said Pilar Tavella, head of sovereign research at Balanz Capital, the largest local broker by headcount.

Bypassing Wall Street when the market was still demanding too high a premium helped Caputo to line up the funds at an average cost of just 6.7 percent in hard currency, according to PPI, another local brokerage. That’s about 200 basis points less than what it would have cost on Wall Street.

The government already has around US$3.6 billion in Treasury dollar deposits, Central Bank data show, enough to cover roughly 85 percent of the debt due. The rest will come from a combination of sources Caputo has been cultivating for months: local dollar placements, Central Bank purchases and financing backed by multilateral institutions.

Milei’s government relied on dollar bonds issued locally and maturing in 2027 and 2028. It also raised dollars indirectly by capturing pesos in its local debt auctions, for which it pays fixed rates close to 20 percent a year in pesos and real rates of around seven percent.

It’s a successful outcome for Caputo, who spent much of the past six months under market pressure to seize a window for external issuance. Since December, many investors had argued that Argentina should return to international markets as sentiment improved and Milei’s hand was strengthened by October’s legislative victory.

At the time, the government itself tested the waters. Argentina’s then-finance secretary, Alejandro Lew, embarked on a plan to raise funds in international capital markets. But his effort ran into Caputo’s strategy. That story ended quickly with Lew’s resignation.

Looking ahead, at least in the short term, multilateral backing will remain key. On Monday, a decree authorized Argentina to obtain as much as US$5 billion in dollar borrowing through operations backed by institutions such as the World Bank and the Inter-American Development Bank. Caputo, in a post on X, estimated the financing cost would be around six percent.