Argentine Peso Showdown Looms as Central Banker Vows to Stay

  • Vanoli says he won't step aside if Macri is elected president
  • Macri has pledged to remove currency controls in first week

Opposition candidate Mauricio Macri’s pledge to end Argentine currency controls should he win Sunday’s election just got harder after the central bank president vowed to stay on, criticizing any attempt to devalue the peso.

Alejandro Vanoli, whose term doesn’t end until 2019, backpedaled on comments from Tuesday in which he said lifting restrictions on currency purchases implied a devaluation of 50 percent and that he would step down rather than having to implement it.

“It’s my duty to make sure the position is respected and I will do it,” Vanoli told reporters in Buenos Aires on Wednesday during a morning briefing with Cabinet Chief Anibal Fernandez. “You don’t appoint someone because they want a central bank that’s at the service of a devaluation.”

With less than a week to go before the first runoff in Argentina’s history, the campaign is focused on front runner Macri’s plan to lift currency controls that have been in place since 2011, enabling companies to repatriate dividend payments and step up imports. Ruling party candidate Daniel Scioli says that will lead to a devaluation and a spike in inflation, triggering an economic downturn.

While the official exchange rate is 9.6 pesos per dollar, many Argentine companies and individuals pay as much as 15 pesos per dollar on a number of parallel markets. Macri argues that the peso will find an equilibrium that represents the average of what most Argentinians already pay to gain access to foreign currency. That equilibrium will be less than the current price of the peso on the black market, which today traded at 15.3 pesos per dollar.

Fernandez’s Appointees

Macri has said he would seek to remove Vanoli if he is president, saying the former securities regulator is unqualified for the central bank job and an activist for President Cristina Fernandez de Kirchner’s political alliance. In the past year, Fernandez has appointed nine out of 10 directors on the central bank board, including Vanoli.

Fernandez in 2010 removed central bank President Martin Redrado after he refused to comply with her orders to use international reserves to pay debt obligations. The process took a few months. Vanoli and his board members could present a similar obstacle to Macri, said Fausto Spotorno, chief economist at Orlando Ferreres y Asociados in Buenos Aires.

“If Macri wins the first thing he’ll have to do is to modify the central bank,” Spotorno said. “If the bank wants to put up a fight with the government, it can do so but it won’t win.”

Macri’s allies lodged a complaint against the central bank on Oct. 30 for “defrauding the public administration” by selling dollar futures at an artificially low rate. Police inspected the central bank offices Tuesday as part of the investigation.

While the bank doesn’t publish data on the futures contracts, they may total as much as $10 billion, according to consulting firm Elypsis. The onshore future prices suggest the peso will trade at 10.3 per dollar in the next three months, compared with 14.9 pesos per dollar in the offshore market.

The estimates have led to growing concern that the central bank’s daily contract sales on the local futures market are creating a growing liability for the government before the country’s next administration takes office next month.

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