What specifically did you object to when the
President first requested transferring central bank
That the central bank cannot be used to finance the public
sector deficit and that Argentina should go out as any normal
country and should regain access to voluntary markets.
Unfortunately the country has been looking for short cuts. I
wanted Argentina to go back to the voluntary markets and also
take advantage of the fact that emerging markets were coming
out strongly on the global financial crisis. Due to the work we
have done at the central bank, we have avoided the scenario of
default and devaluation that many analysts had predicted back
at the end of 2008.
So was that more important in your mind than the
fact a DNU [Decree of Necessity and Urgency emergency
decree] had been issued for the transfer of
No, one is conceptual and one is legal. A DNU has the same
legal status as a law. I have not mentioned before that I did
have a problem with DNU as well, in terms of principle.
Also it was rather awkward that after four days of the end
of ordinary sessions of Congress, they issued a DNU. In my
mind, any DNU that involves the central bank needs to be
discussed in Congress.
When were you first made aware of the December
On December 14, 30 minutes before [its issue].
Who contacted you?
President Fernández de Kirchner.
What did she say?
She told me about her idea. I started to tell her of the
risks andpotential problems, first of all with potential
embargoes that Argentina has. I tried to discuss options that
did not involve moving reserves from the central bank to the
But none of the ideas I brought up with her really matured.
She gave me no reason for my ideas not being accepted. I think
the key problem is that behind this decree was not the idea of
financing but rather to increase public expenditures
where one can find easy money to pump into public-sector
Was it clear if the initial DNU was meant to use
the reserves for paying debt or for government
At first, it was quite ill-defined. The government had very
different objectives that were not clear at the beginning, but
in the end they showed that they simply wanted to increase
expenditures and not go to the voluntary market. This was a way
to deal with the problem of a shrinking fiscal surplus.
A source at the central bank explained how the
new president will be different from you. The source said that
the new director does not have a monetary vision
only and that the focus will be on the productive sector
and social inclusion. What do you think of
That really shows the difference with these people. They see
the central bank as a development bank instead. The central
bank should create rules and regulations, but then the rest is
up to the private sector.
If you really want to support the productive sector, you
need a development bank. If you want to give subsidized loans
to different groups, you have to do it with fiscal resources.
There is no free lunch in the economy.
It shows they have a misunderstanding of the role of the
central bank. They will learn soon that you cannot give money
away for free.
Why isnt there a development bank in
Because we have had very bad experiences in the past with
During your tenure at the central bank, did the
Kirchners ever express interest in creating a development
No. There were many attempts on their part to use reserves
for things in my view that they should not be used for. In
2006, [then president] Néstor [Kirchner] asked me to
evaluate the possibility of buying [oil company] YPF with the
use of reserves. I told him that was technically impossible. In
2007, he asked me to look at financing infrastructure, which I
rejected. In 2008, he asked me to pay the Paris Club debt with
reserves. In 2009, he wanted to give re-discount lines in pesos
to stimulate the auto industry. In 2009, he wanted to place
compulsory bonds on local banks for their portions of dollar
You have been heavily criticized for
Argentinas high inflation over the last several years. To
what extent are you responsible, and how do you respond to the
I have no responsibility over that. The power of monetary
policy in a country like Argentina is weaker than in other
countries. I had two main tools: interest rates which have weak
and narrow implications in Argentina, and the exchange rate.
But one has to be careful using the exchange rate as a strict
anti-inflationary tool in a country with a heavy dollarized
economy like Argentina, because you can produce even more
What is right for Argentina cannot be extrapolated to other
countries. We have had a crisis every seven years for the last
30 years. When there is a move in currency, there is a run on
banks. We defeated the curse of the crisis, which was due in
I can take comfort in criticism that we had a gradualist
approach, but I view my term as a transition phase for the
central bank in Argentina.
The central bank was an anchor of stability during the
global financial crisis and is what kept Argentina afloat when
many thought the country was going to default, going back to
2008. We did not devalue the peso as much as other countries
did during the crisis.
How much of the reserves is kept at the Bank of
International Settlements (BIS)? Why does that continue and
whose decision was that? Did this come from the
I cannot comment on the exact amount but only say that more
than 50% of the reserves are there. But this was not my
decision. The reserves were at BIS well before my term
one of my predecessors made that decision. During my tenure, we
did not increase the percent kept there. We also found other
places to keep the reserves.
Also, this was not a decision by the Kirchners but by the
central bank. They did not discuss this at all with me.
One has to view the BIS beyond the narrow issue of legal
immunity. We are also a shareholder of BIS. We do not see it as
just a recipient of our funds. We exchange information with
them and have sent people to train there. We tried to broaden
and deepen our relationship. I would not have been chosen to
head the Americas Committee if it was not beneficial to the
BIS. We also started a Latin American bond fund so that central
banks in our region can invest in the bonds of their
neighbours. BIS did something similar with an Asian bond fund,
which played a critical role in integrating central banks in
You have been criticized for transfers the
central bank made to the Treasury every year during your
tenure, for example the tranferencias de ganancias and
adelantos transitorios. Why did you make these and was your
independence compromised in doing so?
First on the transferencias, the shareholder of the central
bank is the government. It is usually the ministry of economy
that capitalizes the central bank. This is as normal as in any
other central bank in the world.
I have been criticized by some for distributing the profits
made on the appreciation of the dollar. In 2008, for example,
the exchange rate went from 3.19 to 3.45 and there was a profit
of seven billion pesos from the appreciation. We did not
transfer all of that but only 4.4 million pesos to the
Treasury. But this is totally consistent with what previous
central banks did. In the past, they distributed profits
resulting from the appreciation of the euro.
As to the adelantos, or transitory loans, this is something
also implemented by past central bank governors. We followed
the specific limits detailed in Article 20 of the central bank
The government requested these loans but paid them back
every year. Even though Argentina had record growth and
surpluses, every government has to pay for capital and
amortization of debt. We did not even roll over capital
amortization on mature debt.
I see a clear difference between the government asking the
central bank for funds in order to address the public-sector
deficit (which I opposed in December) and asking for funds to
pay off debt amortization.
I have to emphasize that we were audited by KPMG and now
Ernst & Young, as well as Congress, and there has not been
a single word raised about these issues.