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|Thu, 02-18-2010 - 1:30pm|
By Eliana Raszewski and Drew Benson
Feb. 4 (Bloomberg) -- The independence of Argentina’s central bank will be undermined following the nomination of Mercedes Marco del Pont to lead the institution, Goldman Sachs Group Inc. economist Alberto Ramos said.
President Cristina Fernandez de Kirchner yesterday named Marco del Pont, president of state-owned Banco de la Nacion Argentina, to replace ousted central bank chief Martin Redrado. The move came after a congressional committee backed Fernandez’s Jan. 7 decree dismissing Redrado for not supporting her plan to tap $6.6 billion of reserves to pay debt due this year.
“The new president is very closely aligned with the government and won’t have an independent voice,” Ramos said in an interview last night. “The government wants to continue spending at elevated rates to have short-term growth and the central bank won’t raise interest rates, it won’t have its own voice.”
Speaking to reporters on her way to the bank today, Marco del Pont said she would continue current monetary and exchange rate policies that aim to avoid sharp exchange rate fluctuations and maintain a “competitive” peso.
“I believe in operational autonomy of the central bank, but I don’t think it can be independent of a nation’s economic policies,” she said.
As a lawmaker in 2007, the Yale-educated economist sponsored a bill, which wasn’t passed, calling for changes to the central bank’s charter. Marco del Pont, 50, proposed broadening the institution’s primary mission from “preserving the value of the currency” to include “sustaining a high level of activity” and maximizing the use of “human and available material resources,” according to text of the bill.
“There’s a serious risk to the bank’s independence,” said opposition lawmaker Jorge Triaca, a member of the lower house finance committee, in a telephone interview last night. “The charter should remain as it is.”
Argentine bonds slumped yesterday on Marco del Pont’s appointment before rebounding today. The yield on the 7 percent dollar bonds due in 2015, known as Bodens, slid 22 basis points to 12.98 percent at 9 a.m. New York time, according to JPMorgan Chase & Co. The yield was 10.99 percent on Jan. 6, the day before Fernandez’s decree against Redrado sparked an institutional crisis when courts blocked the move, saying congress wasn’t consulted.
The government published decrees today confirming Redrado’s dismissal and naming Marco del Pont as president of the bank. The Senate needs to ratify the designation.
Fernandez said her nominee’s 2007 plan would have “reaffirmed” the independence of the bank.
“If there is no economic growth, consumption or employment the stability of the currency won’t last at all,” Fernandez told reporters yesterday.
Government reports say the rate of price increases peaked at 12.3 percent in 2005 and slowed to 7.7 percent in December 2009.
Economists and politicians, including Vice President Julio Cobos, say the official data underreports consumer price gains. Annual inflation accelerated to as much as 30 percent in 2008 compared with an official rate of 7.2 percent, according to Juan Pablo Fuentes at Moody’s Economy.com.
Under Marco del Pont, Argentina’s inflation “will remain among the region’s highest,” Ramos said.
An association of small and medium-sized Argentine companies, known as APYME, praised Fernandez’s decision to nominate “an economist who has shown her determination to further a model based on social inclusion.”
Central Bank Vice President Miguel Pesce has been the bank’s interim president since the government blocked Redrado from entering his offices on Jan. 24. Economy Minister Amado Boudou said last month that former central bank President Mario Blejer was the government’s choice to replace Redrado, whose term was set to end in September.
“Whoever is elected to assume the presidency of the central bank has to know that the bank’s independence has disappeared,” said Abel Viglione, an economist at the Latin American Research Foundation, known as FIEL, in a telephone interview in Buenos Aires.
Fernandez said the four-week dispute over the leadership of the central bank wouldn’t delay plans to restructure about $20 billion in defaulted debt dating to the country’s 2001 financial crisis.
“The settling of the drama is positive in the sense that it reduces the decibels of political discourse and because the normalization of relations between the central bank and the executive should reduce delays on the swap offer,” said Alberto Bernal, an economist at Bulltick Capital in Miami, in an e- mailed report.