Argentina FX Feud: Cavallo, Milei and Caputo Trade Public Insults
The Cavallo Milei feud over Argentina’s exchange-rate regime escalated into open public conflict on Tuesday, May 5, 2026, after former economy minister Domingo Cavallo, the architect of the 1990s convertibility plan, called current Economy Minister Luis Caputo “a trader without theory” in a streaming interview, then warned that the present system makes a 2027 currency crisis more likely than a fully liberalized one. Caputo replied within hours on X that “if there is resentment, try not to show it.” President Javier Milei piled on, citing the 1989 Plan Bonex, the 2001 corralito and the AFJP-era pension fund seizures as features of Cavallo’s own policy record. The substantive question between the men is whether Argentina should fully float the peso now or keep gradually opening the controlled market.
Key Points
— Cavallo called Caputo “a trader without theory” in a Tuesday streaming interview on Ahora Play.
— Caputo replied on X: “Mingo, if there is resentment, try not to show it,” with Milei joining within minutes.
— Cavallo demanded full peso liberalization, saying current rules raise the risk of a 2027 currency crisis.
— BCRA reserves rose to 6.5 billion dollars year-to-date; country risk is at 558 basis points after a 517 low.
— Provinces and corporates including YPF, Banco Macro and Edenor have tapped New York debt at single-digit yields.
What Cavallo Said
The Rio Times, the Latin American financial news outlet, reports that Cavallo argued in his Ahora Play interview that the only way to neutralize the threat of a future run on the peso is to let the currency find its own level under a single, fully liberalized FX market. He said the probability of a 2027 “currency bomb” is higher under the current regime because the central bank lacks reserves to defend the peso in a real run. Cavallo also urged the government to use any short-term peso strength to buy reserves rather than let the rate fall.
In a separate Norte y Sur Foundation interview alongside Orlando Ferreres, Cavallo said the Milei government has not completed what he calls a “monetary, exchange-rate and financial reform” and that without it, country risk will not fall below 300 basis points. The current spread is 558 basis points after a 517 low in April.
The Caputo and Milei Reply
Caputo’s response on X was personal: “Mingo, if there is resentment, try not to show it.” He accused Cavallo of past “massive expropriations” through the 1989 Plan Bonex, the 2001 corralito, and the AFJP pension fund use to underwrite government debt. Milei joined minutes later, backing Felipe Núñez, a BICE director and Caputo adviser who had told Cavallo to update his model after his earlier predictions that inflation would not fall below 20, then 8, then 4 percent.
Why It Matters for the Macro Track
Argentina’s market backdrop has improved sharply since November mid-term elections. The BCRA has accumulated 6.5 billion dollars year-to-date, country risk has compressed by 100 basis points, and Fitch upgraded the sovereign on April 30. Provinces including Chubut, the City of Buenos Aires, Córdoba, Santa Fe and Entre Ríos placed dollar bonds at single-digit yields, alongside YPF, Pampa Energía, Banco Macro and Edenor.
The official wholesale dollar fell 0.7 percent on Tuesday under 1,400 pesos, while the BNA retail rate closed at 1,375 buy and 1,425 sell. CPI rose 2.5 percent in March, and Q1 VAT collection fell 2 percent in real terms, reflecting weak consumption. Caputo on Tuesday ordered all ministries to cut current spending by 2 percent and capital spending by 20 percent.
| Indicator | Value |
|---|---|
| Country risk (current / April low) | 558 / 517 bps |
| BCRA reserves accumulated YTD | ~USD 6.5B |
| Official wholesale dollar (May 5) | Under 1,400 pesos |
| Official retail dollar (BNA, May 5) | 1,375 buy / 1,425 sell |
| CPI March 2026 | +2.5% |
| Q1 VAT collection real change | -2% |
| Caputo May 5 spending order | -2% current / -20% capital |
How the Feud Reframes the Plan
The substantive issue between Cavallo and the Milei team is not whether to dollarize, but how fast to lift remaining capital controls. Cavallo argues a single liberalized market would draw fresh foreign capital and let exporters keep the full price of their sales abroad. The government replies that gradualism has produced disinflation from triple digits to single digits in 18 months and a primary fiscal surplus.
For Argentine assets, the spat lands when investors had been pricing risk compression toward Cavallo’s 300-basis-point gateway. The current 558 level is back in the upper half of the 2026 range. Milei sent a bill to Congress on Tuesday capping the Zona Fría gas subsidy regime, while reinforcing gas subsidies for May to absorb the Hormuz shock.
Connected Coverage
For broader context, see our coverage of Bolivia’s $3.3 billion IMF program negotiation and national strike and our analysis of Venezuela’s $11 billion PDVSA corruption scheme tied to the Maduro family.
What Happens Next
- April CPI: Argentina’s INDEC releases April inflation later this month; consensus is in the 2.3 percent area.
- BCRA path: Watch for a fresh sovereign-bond placement if country risk compresses below 500 basis points again.
- Capital-controls track: Cabinet has signalled further loosening of corporate FX rules over the second quarter.
Frequently Asked Questions
What is the Cavallo Milei feud about?
The Cavallo Milei feud is a public exchange that escalated on May 5, 2026, when Domingo Cavallo called Luis Caputo “a trader without theory” on Ahora Play and demanded full liberalization of the peso. Caputo and Milei replied on X, citing the 1989 Plan Bonex, the 2001 corralito, and the AFJP pension fund use during Cavallo’s tenures. Cavallo says the current FX system raises the risk of a 2027 currency crisis.
Why is Cavallo pushing for full FX liberalization?
Cavallo argues that a single liberalized FX market would let exporters receive the full price of their sales, lower country risk, and end the expectation of a future devaluation. He says the BCRA does not have enough reserves to defend the peso in a real run, making the 2027 election a possible flashpoint. He also wants the government to use any peso strength as a window to buy reserves, rather than let the rate fall.
How has Argentina’s market reacted in 2026?
The BCRA accumulated 6.5 billion dollars year-to-date, country risk compressed from 613 basis points to 558, and Fitch upgraded Argentina at the end of April. Provinces such as Chubut, City of Buenos Aires, Córdoba, Santa Fe and Entre Ríos placed dollar bonds at single-digit yields, alongside corporate issues from YPF, Pampa Energía, Banco Macro and Edenor. The official wholesale dollar fell 0.7 percent on Tuesday under 1,400 pesos.
Is the Milei plan working?
The Milei plan has cut headline inflation from triple digits to 2.5 percent in March 2026 and produced a primary fiscal surplus, but Q1 VAT collection fell 2 percent in real terms, signalling weak consumption. Caputo on May 5 ordered ministries to cut current spending by 2 percent and capital spending by 20 percent. The new fiscal squeeze is what Cavallo argues makes a single FX float necessary to unlock private investment.
Updated: 2026-05-06T10:10:00Z by Rio Times Editorial Desk
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