Argentine Central Bank standoff shifts to Congress

By Reuters Staff
January 26, 2010

By Helen Popper

BUENOS AIRES, Jan 26 (Reuters) – An Argentine congressional commission summoned top economic officials on Tuesday as it debates the president’s firing of the central bank chief in a row over using foreign reserves to pay debt.

The commission’s decision is non-binding, but President Cristina Fernandez wants it to give its opinion quickly to end a crisis at the Central Bank that has rattled financial markets and raised concerns a planned debt swap could be delayed.

“For there to be certainty about Argentina, the commission must reach a conclusion on the removal of the former president of the Central Bank this week,” said Miguel Angel Pichetto, head of the ruling party bloc in the Senate.

Pro-government bank directors have already appointed a new interim Central Bank president, Miguel Pesce, who had been the bank’s vice president, to replace Martin Redrado. Redrado, who was barred by police from entering the bank’s premises on Sunday, says he remains president.

But even opposition leaders who welcomed Redrado’s refusal to transfer central bank reserves to the Treasury have joined the government in calling for him to step aside in order to end the leadership crisis at the bank.

The row over using $6.6 billion in foreign reserves to pay debt has shaken markets and highlighted political uncertainty in Latin America’s No. 3 economy just as Fernandez’s administration seeks to charm investors with a $20 billion swap of defaulted bonds.

The special congressional commission is made up of opposition deputy Alfonso Prat-Gay and ruling party lawmaker Gustavo Marconato. The commission is presided over by Vice President Julio Cobos, who split with the government and is now a leading government critic.

They summoned Economy Minister Amado Boudou and the Central Bank’s Pesce, seen as a government ally, on Tuesday and asked Redrado to appear on Wednesday.

It is not clear how long it will take for the commission to reach its conclusions.

The government is pushing for the process to be wrapped up within days rather than weeks. Prat-Gay, however, said the commission would take all the time it needed.

“The president was the one who took two weeks trying to fire Redrado by decree when she wasn’t allowed to. … If the government’s in a hurry now, they should look at their own responsibility,” he said.

RESERVES FUND

Fernandez, in an effort to defuse the deepening political and legal battle, asked lawmakers to debate the presidential decree that fired Redrado.

Last week, a court ruled that Congress must give its opinion on Redrado’s fate before a new, permanent head of the bank could be appointed.

It also upheld a previous ruling that blocked the transfer of reserves to the Treasury, but Fernandez vowed to press on with her drive to tap part of the central bank’s $48 billion in reserves to meet debt payments of some $13 billion this year.

The reserves fund, “with which we’re going to forge ahead with across the country, will allow us to keep on growing without taking on debt at usurious interest rates,” Fernandez said.

Some economic analysts have suggested the battle over the reserves fund could delay the government’s planned debt swap, which is expected to launch in the coming weeks. Government ministers say it remains on track.

Argentina’s government hopes the exchange of bonds left over from its massive 2002 default will allow the country to return to global credit markets after eight years.

Fernandez accused opposition leaders of trying to sabotage the planned debt operation. “This is what they want for this swap; they want it to fail so we again have to take loans at rates of 17 or 18 percent,” she said in a speech.

Opposition leaders say Fernandez wants to use the reserves to help free up government resources to increase social spending and boost her languishing popularity ratings in the run-up to next year’s presidential election. (Additional reporting by Guido Nejamkis and Juliana Castilla; Editing by Leslie Adler) ((helen.popper@thomsonreuters.com; +54 11 4318 0655; Reuters Messaging: helen.popper.reuters.com@reuters.net))

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