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, Central Banks, Latin America / Comments Off
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.