Martin Redrado, Argentinas former central bank
governor, has voiced concerns that his successor will use the
institution to fund development projects, instead of
concentrating on regulation and monetary policy.
His remarks came after the new central bank leadership
pointed to a wider role for the institution, and raised
questions about his tenure.
Redrado told Emerging Markets in an interview that
the new approach really shows the difference with these
people. They see the central bank as a development bank
He added: 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.
A central bank official who works with Mercedes Marco del
Pont, the new governor, told Emerging Markets that the
bank will take a much more active role than it has taken
under prior leadership, and added that Marco del
Ponts approach will follow the politics of economic
development with social inclusion.
The source added: The best way to preserve the value
of money is to promote economic development, creating jobs and
increasing the capacity of the productive sector. The new
director does not have a monetary vision towards
Redrado said that this model shows they have a
misunderstanding of the role of the central bank. They will
learn soon that you cannot give money away for free.
Argentine president Cristina Fernandez de Kirchner sacked
Redrado in December after he refused to comply with an
executive decree requiring him to transfer reserves to the
Treasury to pay 2010 debt.
She replaced him with Marco del Pont, who despite solid
academic credentials has been questioned for her closeness to
Fernandez de Kirchner.
Concerns about her independence grew earlier this month when
presidential executive decrees ordering further reserves to be
transferred to the Treasury were immediately implemented.
The opposition, which now has a tenuous majority in the
Senate, has since tried to overturn the decrees and sack Marco
del Pont, but has so far failed. Earlier this month it could
not obtain the votes to remove her.
Additionally, a judge ruled last week that a bicameral
Congressional committee, assembled by the opposition in the
hope of overturning the decrees, did not have the correct
composition of members.
Former bank president Redrado also responded to criticism
that he should have done a better job handling inflation.
The power of monetary policy in a country like Argentina
is weaker than in other countries, he said.