Mrs.
Kirchner Gets Her Way And Will Pay Debts
With Central Bank Reserves
BUENOS AIRES - Argentine President Cristina
Fernandez de Kirchner and her cabinet signed
Thursday a disputed decree removing Central
Bank President Martin Redrado from office
amid a fight over the use of bank reserves
to pay debt due this year.
The five-article decree cited Redrado for
“misconduct” and “non-compliance” in
carrying out his duties as a public
official. It calls for the suspension of
procedures outlined in the Central bank’s
charter that require the president to
consult a special committee set up by
congress.
Opposition lawmakers and former central bank
presidents including Alfonso Prat-Gay said
Mrs. Kirchner doesn’t have the authority to
dismiss Redrado, who is due to complete a
six-year term in September.
“This is completely illegal and doesn’t have
any judicial validity” said Federico Pinedo,
an opposition lawmaker. “We will fight in
the courts to have this annulled; it is
Congress that votes for the Central Bank
president and it’s Congress that sacks him”.
Under the bank’s charter, Central Bank Vice
President Miguel Pesce will take over as
interim head of the institution. Pesce, a
graduate of the University of Buenos Aires,
served as a finance secretary of the city of
Buenos Aires, according to his official Web
page at the central bank.
The decree signed by President Cristina
Kirchner and 14 cabinet members also orders
legal proceedings to be brought against
Redrado. It says Redrado’s failure to carry
out an order to set aside 6.6 billion US
dollars in reserves, under the denomination
of Bicentennial Fund, to pay debt this year
the reserves had created “a kind of
anarchy.”
The government’s debt plan “was not just a
mere order from the executive branch, but
the use of an exceptional tool” that the
central bank is required to carry out,
according to the decree.
Pesce insisted that "even though the bank is
an independent institution, it is not
autonomous from the National Constitution".
He added "I believe that respecting
institutional order is essential to economic
stability". Pesce also referred to the
emergency decree that created the
Bicentennial Fund. He said that it "ought to
be obeyed." The decree was filed in order to
pay the debt the country is facing in 2010.
The dispute between Redrado and the
government is making Argentina less
attractive to investors, economists and
former bank presidents said.
“If it goes on too long, this will really
generate problems and bring a lot of extra
risk factors into the equation for
bondholders” former Finance Secretary Daniel
Marx said in an interview on Thursday. “The
government has lost its compass again.”
Cabinet Chief Anibal Fernandez and Economy
Minister Amado Boudou called for Redrado to
step down on Wednesday saying he had failed
to support the government’s economic
policies, including the planned use of
central bank reserves.
Mrs. Kirchner has offered Redrado’s job to a
former central bank president and renowned
economist Mario Blejer who originally had
considered the job but declined once he was
aware of the magnitude of the institutional
dispute.
The Argentine government is planning to
return to international markets this year
for the first time since defaulting on 95
billion USD of debt in 2001 by settling
claims with creditors.
Argentina which is South America’s
second-biggest economy used 10 billion USD
in reserves to pay off the International
Monetary Fund in early 2006. Central bank
reserves rose to 48 billion USD on January 6
from as little as 8.2 billion in January
2003, the Central bank pointed out in an
e-mailed statement on Wednesday.
Prat-Gay and former central bank President
Javier Gonzalez Fraga said Redrado, who
almost tripled reserves to 48 billion since
taking office in September 2004, was right
to refuse Mrs. Kirchner’s request.
“There is a legitimate debate over what the
optimal levels of reserves are but this
isn’t the way to resolve it,” Gonzalez Fraga
said on Todo Noticias television. “The cost
of trying to do things this way is much
higher than any benefit it would bring”.
Redrado, who studied economics at the
University of Buenos Aires and public
administration at Harvard University, was
president of Argentina’s securities
regulator, known as CNV, from 1991 to 1994.
He was fired from the commission by then-
President Carlos Menem after criticizing a
government plan for pensioners to sell
shares they had been granted in oil company
YPF SA.
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