Cristina Kirchner battles for cash

Cristina Kirchner battles for cash

It's not a joke but Argentina now has two presidents of the Central Bank: The first one is Martin Redrado, who was fired by Cristina Kirchner, the country's president, last Thursday. The second one is Miguel Pesce, the former vice president of the Central Bank who was supposed to succeed Redrado.

It all started when Kirchner passed a decree to create a "Bicentennial fund" to pay Argentina's debt. That fund would be formed with money from the Central Bank’s reserves.

Martin Redrado angered the president by refusing to comply with the order to use about $6.6 billion in Bank’s reserves to help repay nearly $13 billion in international debt.

The problem is that a judge recently reinstated Redrado in his former job and has granted an opposition request to block the government from using Central Bank’s money to pay foreign debt…The government has appealed the judge's decision, so it's not clear yet who will remain president of the Central Bank.

Both sides are claiming justice is on their side. The Central Bank's charter says the executive cannot fire it’s president and that its an independent entity. The government insists that the constitution allows the executive to use exceptional decrees when it considers them necessary.

Why is this important? Because the government got to this standoff unnecessarily. They tried to create a fund when Congress had just started it's summer recess and that's the key reason why Redrado did not liberate the funds initially. He wanted to cover himself because Kirchner wanted more money than the amount he could legally give without Congress's approval, and considered the governments’s move illegal.

Many in the opposition say they would have approved the fund if the government had gone through Congress. Almost everyone here agrees that Argentina needs to pay back international organizations after the enormous economic and institutional crises it suffered in 2001.

Analysts here say that the governmet wanted the reserves so that it could free up cash from its own budget to cement its power in the run up to the elections in 2011.

It’s well know how politics are handled in Argentina. Election years tend to be expensive for those governments wishing to remain in power. Money starts to be distributed among the poorer sectors, in many cases in exchange for their vote.

But Kirchner gave her reasons: ”It is a lot better to utilize reserves than to ask for loans with interest rates at 15 or 14 percent when we could pay with the reserves at 0.5 or 1 percent. This is something even someone who has only gone to primary school, or not even that, can understand”

If the government loses this latest battle, it could have big political implications. They lost the legislative elections last June, they now have a minority in Congress and have to figure out how will get the money to pay the foreign debt.