Argentine Central Bank

Banco Central de la República Argentina

The Argentine Central Bank (Spanish: Banco Central de la República Argentina , BCRA) is the central bank of Argentina . It is based in the capital, Buenos Aires .

overview

The Central Bank of Argentina was established by six laws of the National Congress on May 28, 1935, replacing the Argentine Currency Board , which had existed since 1890. Its first president was Ernesto Bosch, who held the office from 1935 to 1945, the first director (Gerente General) was Raúl Prebisch .

Its headquarters on Calle San Martín 275 in the San Nicolás district was originally designed by the architects Henry Hunt and Hans Schroeder in 1872 as the headquarters of the Banco Hipotecario. The building with elements of the Italian Renaissance was completed in 1876. After the Banco Hipotecario moved to Plaza del Congreso in 1940 and the building was expanded and modernized, the central bank moved here in 1942.

Normally subordinate to the Argentine Minister of Economic Affairs, the central bank played a central role during the debt crisis in Latin American countries when it put Circular 1050 into force in April 1980 . This was intended to save the financial sector from the cost of payments made in the suddenly devalued peso. However, it resulted in the bankruptcy of thousands of homeowners and businesspeople by pegging mortgages to the value of the US dollar , which rose 15 times the value of the peso when Central Bank President Domingo Cavallo repealed Circular 1050 in July 1982.

During the validity of the Ley de Convertibilidad, with which the Argentine currency was pegged to the dollar, the BCRA was responsible for holding foreign exchange in relation to the monetary base . Since the repeal of the law in January 2002, the devaluation of the peso and the loss of purchasing power, the role of the central bank has mainly been to build cash reserves to control the exchange rate. The BCRA buys dollars on the market to compensate for the surplus in foreign trade and to keep the official exchange rate at 3.80 pesos per dollar, as this is seen as competitive for exports and useful for import-substituting industrialization .

Towards the end of 2005, the then Argentine President Néstor Kirchner vowed to repay the Argentine national debt to the International Monetary Fund (IMF) in one payment. That payment, made on January 3, 2006, reduced the central bank's reserves by $ 9.5 billion, roughly a third of the reserves.

BCRA continued to intervene in the foreign exchange market, usually by buying dollars, bringing reserves to more than $ 28 billion in September 2006, more than before the repayment to the IMF, and to $ 32 billion at the end of the same year. The exchange rate was relatively undervalued due to the BCRA's role as a buyer.

In October 2006, Global Finance magazine gave central bank governor Martín Redrado a D in its central banker rating. The magazine noted, “Redrado missed the opportunity to curb inflation when the economy was growing the fastest ... with inflation expected to hit 12% [in 2006] compared to 7.7% in 2005 and 4.4% 2004. “Indeed, the inflation rate reached 9.8% in 2006, but the population perceived it as higher due to the composition of the basket of goods .

Since 2008, the central bank has held foreign exchange reserves of between $ 47 billion and $ 50 billion.

The aftermath of the 2008 financial crisis prompted the government of Cristina Fernández de Kirchner to seek domestic financing options for growing public spending as well as for servicing debt. Kirchner therefore ordered the opening of an account in the amount of 6.7 billion dollars with the central bank, which was to be fed by the foreign exchange reserves, which provoked opposition from Redrado. On January 7, 2010, he was therefore removed from office. Economy Minister Amado Boudou first announced that Mario Blejer (who previously agreed to the measure) would be appointed as the next central bank governor. However, on February 3, Redrado was replaced by Mercedes Marcó del Pont , previously President of the National Bank.

Redrado's removal was reprimanded by the opposition, who, citing the central bank's nominal independence, had doubts about the legality of the decision.