Argentina's Brito Questions Central Bank Chief Vanoli's Policies

  • Vanoli's future may hinge on result of Nov. 22 runoff election
  • Macro CEO says central bank may only have $3 billion in cash

Jorge Brito, the president of Argentina’s largest banking association and head of Banco Macro SA, says he’s not entirely convinced of central bank President Alejandro Vanoli’s credentials, adding to a debate about his continuity if Mauricio Macri wins the presidency.

“The first thing we have to do is to see if Vanoli is qualified to be president of the central bank, and the same goes for the entire board,” Brito said in an interview at the bank’s headquarters in downtown Buenos Aires. When asked if Vanoli is qualified, he said, “I’m a banker regulated by the central bank. But if we look at what one understands to be qualified, I think you can answer the question yourself.”

While Vanoli says his term doesn’t end until 2019, leading candidate Macri has publicly said he would ask for his resignation. Alfonso Prat-Gay, an economic adviser to Macri and a former central bank chief, has been among the most vocal opponents to the bank’s policy of selling dollar futures at prices far below the levels of offshore contracts designed to tame devaluation expectations.

If Macri wins the presidency, his first battle could very well be with the central bank. Vanoli says he will not resign and that allegations by the opposition of fraud over the sale of currency futures are “political.” The opposition candidate has proposed lifting capital controls on the first day of his presidency to let the peso float and have a single exchange rate. Vanoli says that would equate to a massive devaluation that would hurt the purchasing power of Argentine workers.

“Vanoli’s qualifications were confirmed by the Senate,” the central bank’s press office said in an e-mailed response to questions for comment. “His 27 years of uninterrupted experience in financial activities and his academic formation and trajectory were taken into account.”

Legal Case

Brito said the legal case against Vanoli has three main parts. The central bank isn’t being subject to the same rules as commercial banks. The local dollar futures sold by the central bank trade at 11 pesos per dollar in three months compared with 15 pesos offshore. And while demand for the contracts has grown 10-fold, the price remains nearly unchanged. The official rate, controlled by the central bank, is 9.61 pesos per
dollar.

“Any kid who just began studying economics knows that if a market has demand you have to go raising prices,” Brito said. “These are things to review.”

There are $12.75 billion worth of dollar futures contracts outstanding at the Rofex exchange in Rosario. Investors purchase the derivatives in pesos and the seller must pay the difference if the exchange rate is higher than the price sold at maturity. The three-month local futures trade at 10.20 pesos per dollar compared with 14.44 pesos per dollar in the non-deliverable forwards market abroad.

While gross reserves at the central bank stand at $26.2 billion, the cash portion belonging to the monetary authority is close to $3 billion, Brito said. To rebuild reserves with the new administration starting Dec. 10, the most important thing is to generate confidence through clear policies and measures for investment, the 62-year-old banker said.

Presidential Debate

Ruling party candidate Daniel Scioli has vowed to keep Vanoli in his post at the central bank and to keep the crawling peg policy with the peso used during the past decade under outgoing President Cristina Fernandez de Kirchner and her husband Nestor.

Brito said that while he thinks Scioli would run things differently if he were president, he’s trailing Macri in polls because he hasn’t broken enough with the current administration since failing to win in the first round on Oct. 25.

“Scioli’s comments have been too similar to the Kirchnerist model, a model that I think is totally finished,” Brito said. “But I’ve talked to him an infinite amount of times and think that he has something else in his head that’s not this model.”

Brito, who voted for dissident Peronist Sergio Massa, said he’ll sit down with a pizza on Sunday and watch the only presidential debate to decide who to support in the runoff.

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