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Article Excerpt
Political instability in Argentina remains a major issue, a year after the worst-ever international banking crisis. Last month, central bank president Aldo Pignanelli resigned after months of conflict with Roberto Lavagna, the economy minister. It is understood that he wanted Argentina to repay a $805m World Bank loan in mid-November because he believed it would help stalled negotiations with the IMF but the minister was opposed. However, his resignation calls into question the issue of central bank independence, one of the IMF's preconditions to a new accord with the country.
Mr Pignanelli's predecessor, Mario Blejer, also fell out with Mr Lavagna, over monetary policy. His replacement, Alfonso Prat-Gay, a former JP Morgan banker, is the fourth central bank president in a year. By law, the central bank is meant to be at arm's length from the government but ministers have been interfering in its affairs.
Record default
In December 2001, Argentina entered the record books by defaulting on $95bn of its $115bn of commercial debt. Many major international banks were caught and have had to make large provisions in their group balance sheets. Furthermore, in February 2002, Argentina took the dramatic step of turning dollar-denominated deposits and debts into pesos...
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