Clash for Argentina’s
Central Bank Reserves Turns Into Political
Turmoil
BUENOS AIRES - Martin Redrado was “restored”
Friday to his post as President of the
Argentine Central Bank following an
injunction from Federal Judge María José
Sarmiento. Redrado had been removed Thursday
by President Cristina Fernández de Kirchner
through an emergency decree for having
resisted releasing 6.6 billion US dollars
from the bank’s reserves
Redrado had refused to leave his post and
had been holding meetings with several
judicial advisors and attorneys. Sarmiento
issued the decision in a matter of hours, in
spite of Redrado's lawyer having asked for
legal protection.
Earlier, Sarmiento had a different
injunction filed by the opposition forces
Civic Coalition and PRO union. The ruling
blocks the Bicentennial Fund, --for which
the 6.6 billion USD had been earmarked--,
until Congress holds session.
The Bicentennial Fund with the 6.6 billion
USD in foreign currency reserves was ordered
by Mrs. Kirchner as an instrument to meet
Argentina’s growing debt obligations this
year. Cristina Kirchner, whose popularity
ratings are languishing at below 30%, faces
another tight financing year this year.
Economists say her government may need to
raise as much as 7 billion USD to meet total
debt obligations of 13 billion.
The row has rattled financial markets,
Argentina’s risk standing and deepened
political tension.
Martin Redrado argues that "reserves must
stay in the CB since they belong to all
Argentines, not to someone in particular".
He added that “I am committed to defend
monetary stability and currency exchange
predictability in Argentina".
“I’ve has put himself at stake to defend
that and if there's any alternative to the
use of that money, it's the Congress the one
who has to make that decision."
Meanwhile, Cabinet Chief Anibal Fernández
talked to the press and not only defended
President Cristina Kirchner's decision to
remove Redrado but also accused Vice
President Julio Cobos of "conspiring against
the government". He anticipated that the
government would appeal Federal Judge
Sarmiento’s rulings.
"The judge's ruling is provisional. It
suspends the decree until Congress can give
an opinion," a court source said, asking not
to be named. The injunction came from an
administrative law court.
The conflict has raised political
uncertainty in Argentina just as Mrs
Kirchner's cash-strapped government seeks to
charm investors and issue global bonds eight
years after a massive debt default.
Argentine bonds, stocks and the peso
weakened due to investor concerns over the
stability of Argentina's institutions and
fears the dispute could delay the sovereign
debt swap expected for later this month.
President Cristina Kirchner urged opponents
to let her govern and defended using part of
the Central Bank's 48 billion USD in
reserves to service the nation's debts.
"It's much better to use the reserves than
to take out loans with an interest rate of
15 or 14%. It's common sense" the President
said.
Legal experts are divided over whether
lawmakers or the courts can overturn
presidential decrees, but Kirchner
administration opponents say the decrees are
unconstitutional because both measures
needed approval from Congress.
"This is generating a conflict between the
branches of government, in the judicial
branch and the legislative branch, that is
unprecedented in our democracy," said
Christian Gribaudo, a member of Congress for
the centre-right PRO party.
Congress is in recess until March, but
opposition lawmakers started to cancel their
vacations and some vowed to seek an
emergency session of the lower house on
January 20 to debate the presidential
decrees.
Critics say Argentina's President wants to
use the reserves to pay debt to avoid
cutting social spending that is crucial to
boosting her popularity ahead of a 2011
presidential election. Some analysts say the
strategy risks stoking political conflict.
"This has happened for two reasons: The
government needs money and secondly, it's
about governing style. They can't stand
anyone saying 'no' to them," said Manuel
Mora y Araujo, a political consultant.
Political tensions have been high in
Argentina for much of Cristina Kirchner’s
term, but Argentine assets have rebounded in
recent months on hopes the government would
soon settle with holders of 20 billion USD
in bonds left over from a huge 2001/02
default.
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