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. Read more
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: Read more
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 Read more
By Jude Webber, Argentina correspondent Read more
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. Read more
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. Read more
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. Read more
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. Read more
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. Read more
Argentina’s expected co-operation with the government has been confirmed explicitly by the central bank president and the economy ministry. Bank president Mercedes Marco del Pont told reporters that the Banco Central will co-ordinate its policies with the country’s Economy Ministry, while economy minister Amado Boudou announced the formation of a new economic council, which will group officials from both institutions.
Focus at the central bank will be on company output rather than inflation, said Ms Marco del Pont: “We want to focus on price stability but from a different, non-orthodox view, from the supply side.” Annual inflation is running at 32.1 per cent, according to a report by Graciela Bevacqua, the former head of the consumer price department at the national statistics institute. Read more
The peso hit an all-time low against the dollar during trading today, apparently because of dollar purchases. The current rate is lower even that that which followed the Argentinian debt default and devaluation.
I called the end too soon. The Argentine central bank fiasco has clearly outlived Martín Redrado stepping aside. In an unexpected twist, a presidential ally was chosen to head the country’s central bank.
From tomorrow’s paper… Read more
In a move that has surprised markets, Mercedes Marcó del Pont has been chosen as the new Argentinian central bank chief with immediate effect. Markets had expected the interim governor and former chief, Mario Blejer, to remain in office until September, when ousted chief Martin Redrado’s term was due to end.
The appointment heightens fears for central bank independence in the country. “Ms Marcó del Pont is seen as very close to the government, which means that the central bank will continue to be virtually subordinated, in terms of policy directives, to the government,” said Alberto Ramos, an economist at Goldman Sachs. Ms Marcó del Pont previously headed the state-run Banco de la Nación. (More from the paper)
Central bank governor Martin Redrado has gone, but the story continues. It transpires the Argentine President may seek changes to the central bank’s charter to allow the government to tap the institution’s reserves, an Argentine newspaper has said.
Cristina Fernandez de Kirchner and her husband, lawmaker Nestor Kirchner, want to be able to use the reserves to help create jobs or finance infrastructure projects, said La Nacion, without stating its source. Apparently the proposal may be sent to Congress next month.
After weeks of acrimonious fighting, Martín Redrado, the central bank president who President Cristina Fernández has been attempting to fire , accepted defeat.
Some background for those who haven’t been following the saga:
The dispute started last month, when Mr Redrado refused to hand over $6.5bn to help pay off government debt after an emergency decree from Ms Fernández. Mr Redrado argued that the move could leave the central bank open to suits from bondholders who are still trying to get paid back after Argentina’s $100bn default.
So, earlier this month, Ms Fernandez released another emergency decree: this time sacking Mr Redrado.
Problem was, Mr Redrado won’t comply with that decree either. Read more
By Jude Webber, Argentina correspondent
Will the real president of Argentina’s central bank please step forward. Read more
In the ongoing battle between the central bank and the government, it appears the government has taken the advantage. Bank president Martin Redrado, 48, was prevented from entering the central bank last night and hasn’t appeared at the institution today. In his absence, vice president Miguel Pesce is in charge.
Congress will decide who gets the job, and also whether central bank reserves may be used to pay for debt. If another bank president is found but funds are not allowed to be transferred, the Fernandez camp will have gained little from the furore: Mr Redrado’s refusal to transfer the funds without Congressional approval is the reason his resignation was called for.
The Argentinian justice system has ruled Congress should decide whether central bank governor Martin Redrado will keep his job. It was the courts that reinstated Mr Redrado following his presidential sacking. They also found in Mr Redrado’s favour, preventing the central bank from transferring a disputed $6.6bn foreign reserves, as requested by the President. The courts maintained that injunction today.