Argentine President Cristina Fernandez sent a bill to Congress on Thursday aimed at helping the government tap more central bank reserves to help repay foreign debt and defend the country's currency.
Economists panned the move, saying it will add to inflation, but share prices shot higher as the charismatic leader ended a three-and-a-half-hour-long annual address to Congress without announcing any moves against local banks or oil company YPF, which had been expected by the markets.
We have to know that the central bank is functioning for the good of the real economy, she said during the speech. The bank has about 46.9 billion dollars in foreign currency reserves.
Over the last two years, CFK unconventional government has resorted to paying private creditors with central bank reserves left over after what the bank needs to back up cash in the economy. Those excess reserves have shrunk to near zero, prompting her to request a change in the convertibility law.
Cristina Fernandez, loved by voters who benefit from her government's generous welfare spending, easily won a second four-year term last year despite rankling Wall Street with policies such as raiding central bank reserves and publishing unreliable economic data.
Orthodox economists fear the government is ignoring the country's inflation rate, estimated by private analysts at over 20% annually, and that CFK central bank reserve proposal will put additional upward pressure on consumer prices.
We're in a dangerous game, said Rodolfo Rossi, a former central bank chief who is often critical of Fernandez's policies. This is about inflation.
The president said she would not push for banking reforms that the private sector feared might obligate banks to make loans to small and medium-sized businesses.
Bank shares soared when CFK said it was not necessary to reform the financial entity law. Grupo Financiero Galicia shares jumped 5.7% and the stock price of Banco Santander Rio rose 4.3%.
Shares in YPF, controlled by Spain's Repsol, were up more than 13% in afternoon trade after Fernandez announced no new measures affecting the company.
The president had been expected to announce steps against the company, which has faced intense government pressure in recent weeks to boost its production of oil and natural gas. The Spanish government has lobbied Argentina to avoid any punitive measures against the company.
Top Comments
Disclaimer & comment rulesCFK: Raid and steal..Raid and steal..Raid and steal..Raid and steal..Raid and steal..Raid and steal..Raid and steal..
Mar 03rd, 2012 - 08:33 am 0*IMF enters stage left*
IMF: What are you doing?
CFK: Nothing
*IMF exits stage right*
CFK: Raid and steal..Raid and steal..Raid and steal..Raid and steal..Raid and steal..Raid and steal..Raid and steal..
Yes more growth. Argentina is the best economy in the world.
Mar 03rd, 2012 - 08:39 am 0haters go away :P
She's going for the full extremely expensive head transplant.
Mar 03rd, 2012 - 09:12 am 0Don't blame her.
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