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The US asked how the Central Bank stopped the exit of deposits
Clarin
July 14, 2008

By Annabella Quiroja


Undersecretary of Treasury Brian O Neill met yesterday with Martin Redrado.

The U.S. government yesterday asked about the Argentine strategy to use US$3 billion in reserves to counter the "mini-run" against the peso that was produced amidst the conflict with the farm sector. It was the second and last day of the visit by the U.S. delegation, led by Thomas Shannon, the head of the U.S. diplomatic corps for Latin America. Yesterday, Shannon and Treasury undersecretary Brian O Neill met with Economy Minister Carlos Fernandez, Foreign Minister Jorge Taiana and Central Bank president Martin Redrado. It was in this last meeting where they spoke of the Central Bank reserves. At mid-morning, O'Neill declared himself as in agreement with the strategy that the Central Bank used very well against the mini-run, which was reflected in the exit of deposits and the rise in demand for dollars, according to what a high-level Argentine government official told Clarin.

In those weeks, the currency was quoted at 3.24 pesos. The Central Bank didn't stop injecting dollars into the market and to counter the rise, it burned US$3 billion in reserves, which lowered to US$47.5 billion. When the demand retreated, this allowed the dollar to fall to 3.04 pesos, to punish those who bet against the peso. It was seen as another signal. Yesterday Shannon also supported the decision by President Cristina Kirchner to send the export tax issue to Congress.

Redrado and O Neill are old acquaintances, from the times when both worked in Wall Street banks or financing firms. Another of the issues of this meeting was the strategy to combat money laundering, on which they agreed to trade information on the issue. It's seen as an issue which worries the U.S. related to financing of international terrorism.

Earlier, Shannon and his team had met with Carlos Fernandez and Finance Secretary Hernan Lorenzino.

There they agreed to set up annual meetings of Economy ministers of the American nations to analyze issues on an open agenda, according to what Ambassador Hector Timerman said after the meeting.

In his meeting with Shannon, Fernandez expounded on the solidity of the economy. And he explained how the conflict with the farm sector unfolded. According to Timerman, the Americans didn't show any concern about the impact of this fight on the economy. But a better part of the meeting was spent analyzing international finances from the prolonged crisis in the United States, and the high world prices of food. The members of the Argentine delegation swore that the controversial inflation indices at INDEC were not spoken about.

Although the Americans let loose with praise of various types, they also didn't manage to get the government to bring up the situation with the Paris Club, to which the country owes 6 billion dollars.

It is seen as an issue that interests the United States, which is one of the creditors. Speaking of the meeting, Timerman once again turned to humor. The word 'Paris' was not mentioned even as a tourist destination. And the only club that came up was Boca Juniors.