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Tuesday, 24 April, 2001, 20:40 GMT 21:40 UK
Argentina's central banker 'must go'
Brazilian stock trader
Worries have made bond and stock prices plunge
Argentine President Fernando De al Rua is reportedly preparing to dump the president of the Central Bank to try and calm the financial markets.

A Congress committee has recommended that he fire incumbent Pedro Pou. Banker Roque Maccarone is expected to be named as his replacement.

Economy Minister Domingo Cavallo
Cavallo: "Pou lied to me"
Infighting between the central banker and the ecomony minister Domingo Cavallo has hammered Argentine share and government bond prices over the past week.

Mr Pou and the economy minister have been at loggerheads over how to lift Argentina out of its 33-month recession.

Argentina's economic trouble has been compounded by fears that it could default on loans, causing another global financial crisis similar to the Russian default in 1998.

New banker

"They have asked me if I would take the job if (Pou) quits and I have said yes," Mr Maccarone, a former Finance Secretary and ex-head of state-run Banco Nacion, was quoted as telling a local news agency.

There are mixed feelings in the financial markets over the departure of Mr Pou and replacement by Mr Maccarone.

While changes at the central bank are expected to calm the financial markets by ending the in-fighting between the economy minister and central bank, Mr Pou's replacement by Mr Maccorone could be seen as a political appointment.

Market impact

Argentine stocks closed firmer on Tuesday, rebounding from recent losses as investors pinned their hopes on the ousting of Mr Pou.

On Monday, Argentine bonds plummeted again as investors gave the decision to suspend an auction of up to $700m in domestic government debt to avoid paying high interest rates the thumbs down.

Many investors have sold on doubts that Latin America's biggest borrower can repay its $128bn in loans, despite a $40 billion aid package from the IMF.

Argentina's risk rating, which compares its government bonds to that of the US, widened more than those of Russia and Turkey on Monday.

Latin American traders
Traders have sold Argentine investments on fears of a default
Mr Cavallo blames the fall on "short-sighted" investors who have not take into account his spending cuts to meet budget deficit targets.

"It's professional irresponsibility," Mr Cavallo said on Monday, adding that "those who bet on a devaluation will continue losing a lot" of money.

The economic minister was appointed last month to deal with the growing investor confidence crisis in Latin America's third-largest economy.

But his plans, including adding the euro to the peso currency's 10-year-old peg to the dollar, have not convinced investors.

Maccarone

Mr Cavallo has endorsed Mr Maccarone, who worked for him in the 1990s while economic chief in the Peronist government of President Carlos Menem.

Mr Maccarone became head of the state-run Banco Nacion from 1996-99.

Mr Cavallo quit the Menem government at about the same time in 1996, alleging corruption in government.

Pou v Cavallo

Mr Cavallo has clashed with Mr Pou over demands that the independent Central Bank cut interest rates to inject cash into economy and help end a three-year recession.

He blamed the head of the central bank on Monday for contributing to the chaos by refusing to do as he wanted.

"Pou lied to me," Mr Cavallo said on Argentine television on Monday night, adding that the central bank president faced legal problems which made him "inclined to shirk... responsibilities and create a huge chaos".

Mr Pou is charged with mismanagement of the central bank during a widespread money laundering scheme in the 1990s.

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See also:

20 Apr 01 | Business
Latin American markets slump
20 Apr 01 | Business
Argentina pleads for trade unity
19 Apr 01 | Business
Latin American investment drops 20%
11 Apr 01 | Business
Slowdown hits developing countries
16 Mar 01 | Business
Real crisis in Brazil
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