Randomly Noted

There’s an interesting story playing out near the southern tip of Argentina that people who play the gold market should watch closely.

Andean Resources, a mining exploration company whose principal assets are gold and silver deposits in the Santa Cruz region of Argentina, had two gold companies offer to buy the company – Goldcorp, which made a $C3.6 billion bid, and Eldorado Gold, which offered $C3.4 billion. Andean accepted the higher offer but the market thinks another one could be coming.

The accepted offer translates into about $3.4 million. The value of the gold and silver reserves is about $3.6 billion. Now we all know there is a cost involved in extracting the gold from the ground, thus a bid should be at a discount. But this one seems very close to the reserves value. Which could mean a couple of things – Goldcorp and Eldorado are making a statement about gold and silver prices and that statement is they think prices will go higher. It could speak to the rarity of such desposits being available for sale. Or it could mean Goldcorp thniks there’s more gold in them hills. Likely a combination of the three.

And that could mean the bidding for Andean has only just begun.

Argentina’s embattled central bank chief, Martin Redrado, has resigned after weeks of battling the president over her desire to deploy some of the central bank’s $48 billion reserves to pay down government debt. The global economic crisis has spurred politicians in a number of countries to meddle with the instruments of monetary policy, which are best left independent in good times and bad. Argentina’s crisis has been marked by a particularly blatant brand of monetary meddling by President Cristina Fernandez – and has provided a window into the country’s fascinatingly flawed governance. I can’t say how large Argentina’s reserves should be and whether there’s slack that can be used for debt repayments. What I do know is when a politician tries to make such decisions in defiance of the central bank’s governor, the risk is that her own – and her party’s interests – may clash with the country’s long-term interest. All this said, it’s odd that Redrado quit rather than continuing to fight the politicization of his institution. Perhaps we’ll find out why as this story unfolds.

Argentina’s court system, it seems, is fully functional, even if its government isn’t.  Today’s developments in the riveting scandal forged by President Cristina Fernandez: Two presidential decrees were overturned in federal court – one decree would have shifted $6.6 billion in central bank reserves to the Treasury to pay down government debt; the other would have fired Central Bank governor Martin Redrado. So, the people of Argentina keep their foreign exchange reserves within the Central Bank’s prudent remit, and Redrado stays in his job. For now. Investors can’t rest easy, of course. Fernandez may well find another way to spend down the reserves and otherwise meddle with the Central Bank’s leadership. The government has a couple days to submit appeals to the federal judge. The situation had become so odd that Redrado’s No. 2, Deputy Governor Mario Angel Pesce, had temporarily taken over the top spot after the President had booted out the boss. Pesce is once again second-in-command. Again, for now. Stay tuned to more minute-by-minute reporting by DJN’s Matt Cowley and WSJ’s Matt Moffett, both in Buenos Aires.

Or she’s trying. As DJN colleague Matt Cowley reports, it’s not clear
Argentina’s President, Cristina Fernandez, can fire Martin Redrado as Central Bank governor, even after signing a decree sacking him for allegedly poor conduct and dereliction of duty. If you’re new to the topic, have a look at my blog on this yesterday. Fernandez’s administration said Deputy Governor Miguel Angel Pesce will be Redrado’s successor – but we are reporting that it’s not clear Redrado will step aside; he’s meeting with his lawyers. It looks as if the Congress will eventually review the Fernandez decree – and the head of the opposition party says Redrado should seek a court order to keep him in his job until that happens. All in all, not a confidence-boosting development.

The latest from Buenos Aires: The government of Cristina Fernandez is at an ugly impasse with the Central Bank’s president,  Martin Redrado. Long story short: the president demanded Redrado resign because he declined to allow central bank reserves to be used to pay off government debt coming due this year. Even as Redrado dug in his heels, Fernandez’s Economy Minister reportedly offered his job to a former Central Bank boss, Mario Blejer. Of course, Blejer  turned it down upon learning Redrado was refusing to bow to political pressure. Markets reacted blithely to a report in the Cronista newspaper that  Blejer had been offered the Central Bank job, mainly because he’s a respected and known quantity on the international stage whose appointment might usher in some much-needed stability. But anyone with a stake in Argentina should actually feel rattled, not reassured, by this turn of events. It’s a sign of governmental, and governance, rot.

Argentina’s stock and bond markets are up following the weekend’s midterm elections which dealt a humiliating blow to the ruling leftist Front for Victory coalition. In Honduras, many people are celebrating as its Chavez-embracing president is ousted – amid some odd tut-tutting by the Obama administration. WSJ columnist Mary Anastasia O’Grady raises this interesting issue: Why is Secretary of State Hillary Clinton, on behalf of President Obama, condemning what might be considered a legal ouster of a constitution-defying political leader? At the very least, one would think the U.S. President would avoid taking sides in this particular fight. Here’s the column:http://online.wsj.com/article/SB124623220955866301.html