Argentina Central Bank head quits after Fernandez speech

2014-10-02 13:05:05

Argentine central bank President Juan Carlos Fabrega resigned less than 24 hours after President Cristina Fernandez de Kirchner publicly criticized the institution for allegedly leaking inside information.

Fernandez will nominate securities regulator Alejandro Vanoli as a replacement, presidential spokesman Alfredo Scoccimarro told reporters in a conference call after markets closed yesterday. Vanoli would be Argentina’s fourth central bank president in less than five years.

Since taking the job in November, Fabrega oversaw the largest devaluation of the peso since 2002 and pushed the interbank interest rate used as the benchmark by the local financial system to a decade high. After Argentina defaulted for a second time in 13 years in July, Fabrega clashed with Fernandez and Economy Minister Axel Kicillof over the exchange rate, said Alejo Costa, a strategist at Puente Hnos Sociedad de Bolsa SA.

“Fabrega wanted to bring forward a devaluation, something neither Fernandez nor Kicillof was prepared to do,” Costa, who studied under Vanoli at the University of Buenos Aires, said in a telephone interview. “Vanoli appears as someone who will be more receptive to the demands of Kicillof and Fernandez. We might see more creative ideas, such as the arrival of a dual exchange rate.”

In a speech Sept. 30, Fernandez said there was evidence that the central bank released inside information to lenders about a new policy obliging them to lower their foreign currency holdings. Fabrega attended the speech that took place in the presidential palace.

‘Sensitive Information’

“It seems that information was leaked because there were banks that had sensitive information, and just when all the banks were buying dollars, they sold,” Fernandez said. “We want this to be investigated or that they explain this to us.”

Fabrega’s spokesman, Jose Luis Olivero, didn’t respond to two voice-mail messages seeking his response to the allegations.

Argentina defaulted July 30 after a U.S. judge blocked a $539 million interest payment to holders of restructured bonds until it pays holdouts from a $95 billion default in full.

Speculation that Fabrega had resigned deepened losses in the bond and stock markets yesterday. Argentine dollar bonds due 2024 fell 3.6 cents on the dollar, the most since July, to 86.7 cents. The Merval index plunged 8.2 percent to 11,516, the most since July 31, which was the day after Standard & Poor’s declared Argentina in default.

Vanoli Promoted

Vanoli was promoted to president of the securities commission in November 2009 after serving as vice president for three years. In October last year he said that posting the price of the black market exchange rate for the peso is equivalent to publishing the price of cocaine. Newspapers such as Ambito and Clarin publish the black market price.

Fernandez hired Fabrega to replace Mercedes Marco del Pont last year amid sweeping changes to the cabinet that included the ouster of Economy Minister Hernan Lorenzino. In 2010, Fernandez tried to fire Martin Redrado over his opposition to her plans to pay debt with reserves. Redrado, who had served as the central bank’s chief since 2004, resigned less than a month later, saying that he had “ followed the Constitution, the law and the central bank rules.”

Before joining the central bank, Fabrega worked at Argentina’s biggest commercial lender for four decades. After landing a job straight out of high school at one of Banco de la Nacion Argentina’s branch offices, Fabrega worked his way up to becoming president of the company.

“One of the last voices of reason of the current administration has departed,” Alejo Czerwonko, a New York-based strategist at UBS Wealth Management’s chief investment office, said in an e-mailed response to questions. “This development points towards further radicalization of monetary and fiscal policy in the country.”

Senate Nomination

Vanoli will act as interim head of the bank until his nomination is voted on by the Senate, where Fernandez’s coalition has a majority.

His appointment will mean less fighting between the central bank and Economy Ministry, Diego Ferro, co-chief investment officer at Greylock Capital Management LLC, said in a telephone interview from New York.

“His performance at the securities regulator was really aligned with this administration, so I’m sure this can be assumed as someone who’s going to be more docile to Kicillof,” Ferro said.