Argentine president fires central bank chief in dispute over debt payments

Argentine president fires central bank chief

BUENOS AIRES — President Cristina Fernandez fired Argentina’s central bank chief Thursday after he refused to step down in a dispute over whether the country’s international reserves should be used to pay debt.

An emergency decree signed by Fernandez and her Cabinet, and distributed by government news agency Telam, said Martin Redrado would be removed from the post for misconduct and dereliction of duties because he “failed to fulfill the duties of a public servant.”

“The decision was made because the central bank must keep functioning,” Fernandez told reporters later Thursday.

Redrado angered the president by refusing to comply with an order to use about $6.6 billion in reserves to help cover $13 billion in international debt falling due this year. He had said he would wait for Congress to ratify the measure. Opposition lawmakers accused Fernandez of violating the bank’s autonomy by ordering it to use reserves to pay the debt.

Fernandez asked Redrado to resign on Wednesday but he refused, setting up a standoff that rattled financial markets. Thursday’s firing was announced after Argentina’s stock market closed.

Financial analyst Claudio Loser, former Western Hemisphere director for the International Monetary Fund, said the bank shake-up could turn exchange rates against Argentina’s currency in anticipation of reserves being tapped.

“I hope I’m wrong, but I’m afraid there’s going to be a run against the peso and in favor of the dollar,” Loser told the Argentine news service DyN.

The government decree also urges prosecutors to seek unspecified “legal measures” against Redrado.

The former bank chief’s spokesman did not respond to messages left on his cell phone seeking comment.

Fernandez’s government named central bank vice president Miguel Pesce — who has opposed Redrado’s stance on using the reserves to cover debt — to take over the institution on an interim basis, according to TN news channel.

But political opponents and some analysts disputed whether Fernandez can legally fire Redrado and said she is undermining central bank independence.

Constitutional law professor Andres Gil said the bank chief’s ouster should first be recommended by Congress.

“He is not just a (Cabinet) minister whom the president can decide to fire,” said Gil, who teaches constitutional law at Buenos Aires University.

Aldo Abram, director of private economic think tank the Center for Investigating Institutions and Markets of Argentina, said the central bank’s original charter establishes its independence.

“That is, it doesn’t take orders from (the executive) nor are its employees part of the government. Therefore, the president cannot seek their resignations,” he said in a statement.

Fernandez’s government argued that since it is ultimately the president’s decision, skipping congressional action and firing Redrado directly was legal.

“There is no conflict of powers,” Economy Minister Amado Boudou said.

Fernandez’s administration says it is trying to clear up the country’s debt problems so that it can return to international credit markets that have been closed to it since a 2001 default on debt payments.

In 2005 Argentina restructured its debt, forcing investors to accept steep losses. About a quarter of bondholders rejected the offer and some sued Argentina, trying to recover the full value of their bonds. The lawsuits have blocked Argentina from returning to global markets.

The government is currently trying to work out a deal with those debt-holders.