After a turbulent few weeks in Buenos Aires, Martin Redrado’s time as central bank governor of Argentina after more than five years is over. His departure will be Argentina’s loss.
In December, president Cristina Kirchner issued a decree stating that the central bank had to supply $6.6 billion in reserves to meet the country’s financing needs. The money represents a change to the initial budget set out last year; the pesos set aside to pay for dollar reserves would be retracted and placed in a separate debt-repayment fund.
Redrado refused to agree to the request. He feared that central bank reserves could be attached to government assets and therefore seized by the holdout bondholders from the 2005 debt restructuring. He also believed, quite rightly, that such a move would compromise the central bank’s autonomy.
Kirchner claimed the funds were needed as a liability management tool and would be used to buy back sovereign debt. This, she argued, would reassure bondholders and demonstrate Argentina’s willingness to pay debts that mature within the next 12 months.
Her argument is disingenuous.
If Kirchner has decided that a new market-friendly stance is important then why didn’t her government buy back the debt nine months ago when it was trading at near to 20 cents on the dollar, rather than wait for the bonds to rally to a 12-month high?
Perhaps a clue can be found in the opinion polls – Kirchner’s approval rating is at an all-time low.