Central Bank of Argentina

Central Bank of the Argentine Republic
Company type	Autonomous institution
Industry	Central banking
Founded	May 28, 1935; 91 years ago
Founder	Ernesto Bosch (first president)
Headquarters	Buenos Aires, Argentina
Key people	Alejandro Vanoli (most recent president mentioned), Mercedes Marcó del Pont, Martín Redrado, Juan Carlos Fábrega, Domingo Cavallo, Raúl Prebisch, Ernesto Bosch
Products	Monetary policy, financial stability, currency issuance, public debt management

The Central Bank of the Argentine Republic (, BCRA) serves as Argentina's central bank, functioning as an autonomous institution.

Article 3 of its Organic Charter outlines its mission: to foster monetary and financial stability, promote employment, and encourage economic growth with social fairness, all aligned with the policies of the national government.

Establishment

Founded through six legislative acts passed by the Congress on May 28, 1935, the BCRA succeeded the country's currency board system that had been operational since 1899. Its inaugural president was Ernesto Bosch (1935–1945).

Situated on San Martín Street within Buenos Aires' financial hub, the Central Bank's main office was originally constructed in 1876 for the Mortgage Bank of the Province of Buenos Aires. The BCRA took over this building in 1940 and subsequently added a matching structure at the rear.

Economist Raúl Prebisch authored the institution’s founding charter and held the position of general manager until 1943. Initially established as a private entity with majority British shareholders, the Central Bank’s president was appointed by Argentina’s chief executive, while 11 of its 12 board members were CEOs from private banks. Under the Roca–Runciman Treaty of 1933, trade surplus reserves with the United Kingdom were kept in escrow at the Bank of England, resulting in nearly US$1 billion being inaccessible by 1945. This circumstance prompted Juan Perón to nationalize the BCRA on March 24, 1946.

Modern history

Although typically subordinate to the Economy Ministry regarding policy decisions, the Central Bank gained significant influence during the Latin American debt crisis through Circular 1050 issued in April 1980. This directive tied mortgage payments to fluctuations in the US dollar, leading to widespread bankruptcies among homeowners and businesses until it was revoked by Central Bank President Domingo Cavallo in July 1982.

With Cavallo's introduction of the Convertibility Law in April 1991, which pegged the peso one-to-one with the US dollar, the BCRA concentrated on maintaining foreign currency reserves commensurate with the monetary base. This strategy removed exchange rate flexibility but collapsed amid a severe economic downturn roughly ten years later.

After Convertibility was abolished in January 2002, the peso experienced a sharp devaluation of approximately 70%, reaching nearly four pesos per dollar. The Central Bank then prioritized rebuilding reserves to stabilize exchange rates by buying and selling dollars to manage trade surpluses, support export competitiveness, and encourage import substitution policies.

In December 2005, during Argentina's debt restructuring efforts, President Néstor Kirchner announced an early repayment of IMF loans using around US$9.8 billion from BCRA reserves. This reduced reserves by about one-third without causing significant monetary disruption but increased dependence on domestic bonds carrying higher interest costs.

The BCRA continued intervening in currency markets, primarily purchasing dollars to keep the peso undervalued. Reserves rebounded to US$28 billion by September 2006 and US$32 billion by year-end. From 2003 to 2007, monetary policy was notably expansionary, with annual money supply growth exceeding 23%. This drew criticism from Global Finance, which assigned Central Bank President Martín Redrado a D rating in 2006 for failing to control inflation projected at 12%. Official inflation figures were held near 9.8% through price controls, although public sentiment and private estimates suggested higher rates.

Despite inflationary pressures, the BCRA achieved remarkable returns on its reserve investments—US$1.4 billion (5.7%) in 2006—and maintained robust profits in subsequent years.

The global financial crisis in 2008 compelled President Cristina Fernández de Kirchner’s administration to seek domestic funding sources for public expenditures and foreign debt servicing by leveraging the Central Bank’s resources for political objectives. In December 2009, a US$6.7 billion fund was established at the BCRA for this purpose. Opposition from Redrado led to his dismissal by presidential decree in January 2010; he was succeeded by Mercedes Marcó del Pont, then head of the National Bank of Argentina.

Redrado's removal raised concerns about Central Bank independence among critics. A judicial injunction prevented Kirchner’s government from using reserves to redeem high-interest government bonds, safeguarding bank assets against lawsuits from holdout creditors.

The BCRA broadened its commercial lending role through creation of the Bicentennial Fund in January 2010, which financed US$2.4 billion in fixed investment projects over two years. Proposed legislative changes sought to formalize this expanded lending function.

In March 2012, legislation passed by Argentina’s Senate authorized increased use of Central Bank reserves for public debt payments and expanded credit provision to the Treasury, enhancing government fiscal capacity. Under Juan Carlos Fábrega (appointed in 2014), monetary policy shifted toward inflation control with benchmark interest rates rising above 28%, which reduced Central Bank earnings by up to 90% but absorbed liquidity and lowered inflation from an estimated 37% in 2014 to about 25%. This policy stance largely continued under Fábrega’s successor Alejandro Vanoli.

Foreign exchange reserves remained stable between US$47–50 billion from early 2008 until early 2012 but declined below US$30 billion by 2014 due to current account deficits near US$5 billion caused by shrinking trade surpluses, increased outbound tourism expenditures, foreign debt interest obligations, and capital account deficits around US$7 billion in 2013 amid counterproductive foreign exchange controls that were partially relaxed in January 2014.

The official exchange rate depreciated from roughly three pesos per dollar since early 2003 to approximately eight pesos by mid-2014 following global financial turmoil. A parallel "blue" market emerged during tightened currency controls starting in 2012 and stabilized near thirteen pesos after easing measures were implemented in 2014.

One of President Mauricio Macri’s earliest economic reforms involved eliminating four years’ worth of currency restrictions just seven days after assuming office in December 2015. This action triggered an approximate thirty percent depreciation of the peso and elicited mixed responses from financial markets and analysts alike.

External links

Establishment

Modern history

See also

External links