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Tuesday, 10 December, 2002, 06:54 GMT
Argentina names new bank chief
Economy Minister Roberto Lavagna
Economy minister Lavagna favoured Mr Prat Gay
A former JP Morgan economist has been named as the new chief of Argentina's central bank, just hours after his predecessor quit.

Argentina's economic strategy of bolstering its currency, the peso, should remain largely unchanged when Alfonso Prat Gay takes over from Aldo Pignanelli.

Mr Pignanelli's resignation came soon after the economy minister Roberto Lavagna overruled his objections and opted to default on an $805m (509m) debt repayment to the World Bank.

More than half the country's 36 million people are living in poverty, and hunger has become a serious problem.

Against that background, Argentina informed the Bank that it could not meet its obligations and made only an interest payment of $79.2m.

Feuds over?

Following the recent power struggle between the central bank and the economy ministry over monetary policy and foreign debt repayments, few would expect Mr Prat Gay to gain the upper hand.

In fact, it has emerged that Mr Prat Gay's selection was favoured by Mr Lavagna, and as such tensions between the central bank and his ministry might ease.

"Obviously, [Mr Pignanelli's resignation] is not a good thing, but neither could one continue with the feuds with the economy minister," said Dario Lewkowicz, a trader at Exprinter Administradora.

"I'd say it is the lesser of two evils.

"It would have been a lot worse if the economy minister had gone."

Short-term career

Mr Prat Gay was recruited from his teaching post at a university in Buenos Aires.

Before his return to Argentina last year, he worked for JP Morgan in London.

The peso rose slightly following his appointment as the markets cheered the selection from their own ranks.

But, taking recent history into account, Mr Prat Gay should not consider his appointment a long-term career.

Turbulence at the top is common in Argentina where Mr Prat Gay will be the fifth central bank governor in just over a year.

Argentina has also seen six economy ministers and five presidents during the last year.

Argentina faces a fresh deadline this weekend to make a repayment on its debt to the World Bank.

Failure to do so could bring down the full wrath of the Bank which might freeze Argentina's existing loans.


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04 Dec 02 | Americas
20 Nov 02 | Business
16 Nov 02 | Business
06 Nov 02 | Crossing Continents
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