Bank of Argentina

Argentina’s central bank on Thursday relaxed key monetary targets after overshooting annual goals for growth in monetary aggregates, heralding a stance that favours stoking growth over reining in inflation.

It is the first time the central bank has failed to meet the monetary programme since Argentina introduced the method in 2003, and points to a central bank increasingly at the service of a spendthrift government, which ejected the former central bank president earlier this year for refusing to hand over reserves to pay debt. 

By Jude Webber

Argentina’s government has unveiled stricter controls on dollar purchases in what it says is a crackdown on money laundering and tax evasion. Though people will still be able to buy $2m a month without justifying their purchases, the idea is to eliminate cash transactions and use tax data to scrutinise operations.

Here’s what economist Miguel Kiguel had to say before the measure – which was leaked in the press over the weekend – was formally announced:

In line with … higher demand and with the fear of losing reserves, it has emerged in the local media that the Central Bank is going to announce new regulatory measures for the currency market. We do not believe that these stricter controls will be effective to reduce capital flight but they could be taken as a sign that the government is willing to increase controls to avoid losing reserves. However, it is difficult for these stricter controls to prevent capital flight and it is more likely that they will end up an incentive for the informal market, increasing the spread between the informal and official dollar.

 

By Jude Webber in Buenos Aires

The gospel according to Argentina goes something like this: thou shalt not default.

According to former central bank chief Martín Redrado, Argentina may be in no position to dish out recommendations to the likes of Greece, but if there is one thing it learned in its 2001 crash – the biggest sovereign default in history on nearly $100bn – it is this: default is not an option.

Argentina knows first-hand the pain involved in bailing on creditors and a disorderly exit to a fixed currency regime. The cost was economic and social chaos and it is still paying the price.

Speaking to Bloomberg Television in London, Mr Redrado said markets remained sceptical about relying on fiscal adjustment and so Greece should reschedule debt in a market-friendly way. He also noted how Latin America had moved from fixed to flexible currency regimes and was now a “beacon of stability and growth” in emerging markets. He said: 

Simone Baribeau

Some Latin American countries have made some less-than-orthodox decisions during the crisis. What does the IMF have to say about them? For the most part, Nicolás Eyzaguirre, the IMF’s director of the Western Hemisphere department, was, if not supportive, not critical either.

Asked at a presser during the IMF spring meetings about Argentina’s decision to pay back its debt using central bank reserves (a saga which felled one resistant central bank governor), Mr Eyzaguirre responded: “Each country decides on its own sovereignty how it’s going to decide with debt management, so we don’t have an opinion on that.”

He was also emphatic that the Fund had not objected to Brazil’s decision to tax capital inflows. “Our first reaction 

From Ft.com

By Jude Webber, Argentina correspondent 

By Jude Webber, Argentina correspondent

After weeks of legal wrangling, Argentina’s government is free – at least for now – to start using a chunk of central bank reserves to pay debt after judges overturned the suspension of a controversial emergency decree issued by President Cristina Fernández earlier this month. 

Simone Baribeau

If ever there was a night to give fodder to critics of central bank politicisation, it was last evening.

South Korea maintained its interest rate at 2 per cent, after pressure from the government on outgoing central bank president Lee Seong-tae.

Then the Argentine Senate failed to achieve quorum today to debate the appointment of the new president of the Bank of Argentina. 

From Jude Webber on ft.com:

An Argentine senate committee on Wednesday voted against the nomination of central bank governor Mercedes Marcó del Pont, raising the prospect that the country could be looking for a second new bank chief in as many months

By Jude Webber in Argentina

After more than two months of legal and congressional battling, Argentine President Cristina Fernández on Monday unveiled a new bid to tap central bank reserves to pay off debts. 

Cristina Fernandez has told Congress that she’s scrapped a presidential decree to tap $6.6bn in foreign currency reserves to help pay the country’s debt. The plan had been blocked by the country’s courts, and was the reason central bank chief Martin Redrado was ousted.

But, hang on: Ms Fernandez has signed a new decree to allow $4bn reserves to pay multilateral lenders, eg the World Bank or IMF. $2.2bn of reserves had already been earmarked for the purpose. So we’re talking about $6.2bn instead of $6.6bn, the money would still be used to pay debt, but the creditors would be different.