| Central Bank of Argentina Banco Central de la República Argentina |
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| Headquarters | Reconquista 266, Buenos Aires | ||
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| Established | 1935 | ||
| President | Mercedes Marcó del Pont | ||
| Central bank of | Argentina | ||
| Currency | Argentine peso | ||
The Central Bank of Argentina (Spanish: Banco Central de la República Argentina, BCRA) is the central bank of Argentina.[1]
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Established by six Acts of Congress enacted on May 28, 1935, the bank replaced Argentina's Currency board, which had been in operation since 1890. Its first President was Ernesto Bosch, who served in that capacity from 1935 to 1945.
The Central Bank's headquarters on San Martín Street (in the heart of Buenos Aires' old financial district, known locally as the city), was originally designed in 1872 by architects Henry Hunt and Hans Schroeder. Completed in 1876, the Italian Renaissance-inspired building initially housed the Mortgage Bank of the Province of Buenos Aires. The Central Bank's offices were transferred to an adjacent address upon its establishment, and were expanded to their present size by the purchase of the Mortgage Bank building in 1940, as well as by the construction of a twin building behind it.
The Central Bank was a private entity during its first decade, and British Empire interests held a majority stake. Pursuant to the Roca–Runciman Treaty of 1933, Central Bank reserves accrued from Argentine trade surpluses with the United Kingdom were deposited in escrow at the Bank of England, and this clause, which had led to over US$1 billion in inaccessible reserves (more than half the total) by 1945, prompted the Central Bank's nationalization by order of Juan Perón in December.[2]
Normally subordinate to the Economy Ministry in matters of policy, the Central Bank took a more prominent role during the Latin American debt crisis when, in April 1980, it enacted Circular 1050. This measure, enacted to shield the financial sector from the cost of receiving payments in suddenly devalued pesos, bankrupted thousands of homeowners and businesses by indexing mortgages to the value of the US dollar locally, which rose around fifteenfold by July 1982, when Central Bank President Domingo Cavallo rescinded the policy.[2][3] During the years of Cavallo's Convertibility Law, which established a 1:1 fixed exchange rate between the Argentine peso and the United States dollar in March 1991, the BCRA was mainly in charge of keeping foreign currency reserves in synch with the monetary base.
Since the repeal of the Convertibility Law in January 2002, the devaluation and depreciation of the peso and the end of the economic crisis, its role has been the accumulation of reserves in order to gain a measure of control of the exchange rate. The BCRA buys dollars from the market to neutralize the large surplus of the foreign trade balance and keep the official exchange rate at the level desired by the government, currently around 3.80 pesos per dollar, considered internationally competitive for exports and useful to encourage import substitution (see Foreign trade of Argentina).
Near the end of 2005, President Néstor Kirchner vowed to pay the Argentine public debt with the International Monetary Fund in a single, anticipated disbursement. The payment was effected on 3 January 2006, employing about US$ 9.5 billion from the BCRA's reserves. This decreased the amount of reserves by one third, but did not cause adverse montary effects, save from an increased reliance on the local bond market, which requires somewhat higher interest rates.
The BCRA continues to intervene in the exchange market, usually buying dollars, though occasionally selling small amounts (for example, reacting to rumours of a possible increase of the Federal Reserve's reference rate, which caused a minor spike in the dollar's value). Its reserves reached more than US$ 28 billion in September 2006, recovering the levels prior to the IMF payment, and rose to US$ 32 billion at the close of the year. The exchange rate was maintained relatively undervalued, prompted by the BCRA's market intervention as a buyer.[4][5]
In its October 2006 issue, the influential Global Finance magazine gave Martín Redrado, President of the Central Bank, a D grade in its survey of global central bankers. The magazine held that Redrado "missed the opportunity to act to curb inflation when the economy was expanding at its fastest ... with inflation expected to reach 12% in 2006, up from 7.7% in 2005 and 4.4% in 2004." Inflation for 2006 eventually amounted to 9.8%, helped by price controls, though the public's perception of it was higher due to the composition of the sample used to measure the index.[6] The BCRA obtained exceptionally high returns on investment funded by its reserves, for a total of US$ 1.4 billion USD (a yearly rate of 5.7%) in 2006.[7]
Since early 2008, the Central Bank of Argentina has held foreign exchange reserves of between US$47 and US$50 billion.[8] The official exchange rate, which had oscillated around 3 Argentine pesos per US dollar since early 2003, was adversely impacted by the international, 2008 financial crisis, and weakened to nearly 4 pesos per dollar by the first half of 2010. [8]
Fallout from the 2008 financial crisis later forced the left-wing Argentine government of President Cristina Fernández de Kirchner to seek domestic financing for growing public spending, as well as for foreign debt service obligations. The president ordered a US$6.7 billion account opened at the Central Bank for the latter purpose in December 2009, implying the use of the Central Bank's foreign exchange reserves, and drawing direct opposition from Redrado. He was dismissed by presidential decree on January 7, 2010, prior to which Economy Minister Amado Boudou had announced that Mario Blejer (who had expressed support for the measure) would be appointed in his stead.[9] Following an impasse, Redrado was ultimately replaced by Mercedes Marcó del Pont, President of the National Bank, on February 3.[10]
Redrado's removal triggered a vocal rebuke from opposition figures in Congress, who, citing the need to preserve the Central Bank's nominal autarky, expressed doubts as to the decree's legality.[11] A court injunction blocked Kirchner's planned use of reserves for the retirement of high-interest bonds, a move that could have provided numerous vulture funds (holdouts from the 2005 debt restructuring who had resorted to the courts in a bid for higher returns on their defaulted bonds) a legal argument against the central bank's autarky, and thus make judgement liens against the central bank's overseas accounts possible.[12]
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