The Central Bank of the Argentine Republic (, BCRA) is the central bank of Argentina, being an autarchic entity.
Article 3 of the Organic Charter lists the objectives of this Institution: “The bank aims to promote, to the extent of its powers and within the framework of the policies established by the national government, monetary stability, financial stability, employment, and economic development with social equity.
Establishment
Established by six Acts of Congress enacted on May 28, 1935, the bank replaced Argentina's currency board, which had been in operation since 1899. Its first president was Ernesto Bosch, who served in that capacity from 1935 to 1945.
The Central Bank's headquarters on San Martín Street (in the heart of Buenos Aires' financial district, known locally as the city), was originally designed in 1872 by architects Henry Hunt and Hans Schroeder. Completed in 1876, the Italian Renaissance-inspired building initially housed the Mortgage Bank of the Province of Buenos Aires. The Central Bank's offices were transferred to an adjacent address upon its establishment, and were expanded to their present size by the purchase of the Mortgage Bank building in 1940, as well as by the construction of a twin building behind it.
Drawing from a 1933 study on Argentine finance by Bank of England director Sir Otto Niemeyer, the institution's charter was drafted by Argentine economist Raúl Prebisch; Prebisch would serve as general manager until 1943. The Central Bank was a private entity during its first decade, and British Empire interests held a majority stake; the president of the Central Bank was appointed by the president of Argentina, but 11 of its 12 directors were private bank CEOs. Pursuant to the Roca–Runciman Treaty of 1933, Central Bank reserves accrued from Argentine trade surpluses with the United Kingdom were deposited in escrow at the Bank of England, and this clause, which had led to nearly US$1 billion in inaccessible reserves (more than half the total) by 1945, prompted the BCRA's nationalization by order of Juan Perón on March 24, 1946.
Modern history
Normally subordinate to the Economy Ministry in matters of policy, the Central Bank took a more prominent role during the Latin American debt crisis when, in April 1980, it enacted Circular 1050. This measure, enacted to shield the financial sector from the cost of receiving payments in suddenly devalued pesos, bankrupted thousands of homeowners and businesses by indexing mortgages to the value of the US dollar locally, which had risen around fifteenfold by July 1982 when Central Bank President Domingo Cavallo rescinded the policy.
During the years of Cavallo's Convertibility Law, which established a 1:1 fixed exchange rate between the Argentine peso and the United States dollar on April 1, 1991, the BCRA was mainly in charge of keeping foreign currency reserves in synch with the monetary base. The policy deprived the Central Bank of exchange-rate flexibility, however, and ended at the depth of a record economic crisis a decade later.
The repeal of the Convertibility Law in January 2002 was accompanied by a 70% devaluation and depreciation of the peso to nearly 4 pesos, and the Central Bank's role afterward was the accumulation of reserves in order to gain a measure of control of the exchange rate. The BCRA buys and sells dollars from the market as needed to absorb large foreign trade surpluses and keep the official exchange rate at internationally competitive levels for Argentine exports and to encourage import substitution.
As part of a wider debt restructuring effort that brought Argentina out of its default three years earlier, in December 2005 President Néstor Kirchner announced the payment of Argentina's IMF debts in a single, anticipated disbursement. The payment was effected on January 3, 2006, employing about US$9.8 billion from BCRA reserves. This decreased the amount of reserves by one third, but did not cause adverse monetary effects, save from an increased reliance on the local bond market, which requires somewhat higher interest rates.
The BCRA continued to intervene in the exchange market, usually buying dollars, though occasionally selling small amounts (for example, reacting to rumors of a possible increase of the Federal Reserve's reference rate, which caused a minor spike in the dollar's value). Its reserves reached US$28 billion in September 2006, recovering the levels prior to the IMF payment, and rose to US$32 billion at the close of the year. The exchange rate was maintained relatively undervalued, prompted by the BCRA's market intervention as a buyer.