For several weeks now, President Javier Milei has brought to the forefront a problem whose resolution is crucial to restore not only a degree of normalcy to Argentina but also to put it back on the path of greatness from which it once strayed, captured by an interventionist political class. I am referring to the reform of the Central Bank's Organic Charter.
In his most recent public address, during the vigil for the 210th anniversary of our independence, the President emphasized the urgency that “the main function [of the BCRA] be to preserve the value of the currency instead of financing the projects of the current politician”, ending “91 years of political scams against good Argentines.”
Let us pause on this idea that, while it may seem trivial, has serious implications.
Although the Central Bank of the Argentine Republic was created in 1935 through the enactment of Law 12,155, the foundation of its current regulatory framework did not arrive until 1992, with Law 24,144. In its Article 3, this Organic Charter clearly established that: “It is the primary and fundamental mission of the Central Bank of the Argentine Republic to preserve the value of the currency.”
It also stated that “in the formulation and execution of monetary and financial policy, the Central Bank shall not be subject to orders, indications, or instructions from the National Executive Power.”
Now, these norms are diametrically opposed to the interests of traditional politics, as they severely restrict its maneuvering margin. In fact, that was precisely the idea. It is worth remembering that at that time, the hyperinflation of 1989, which had reached peaks of 3000% annually and led to the early handover of President Raúl Alfonsín's mandate, was still fresh in the memory of Argentines.
As we already know that inflation is at all times and places a monetary phenomenon, it is not surprising to learn that the main cause of the catastrophe was the violation of the independence of the Central Bank, forced by the Executive Power to issue money to finance the fiscal deficit. For that reason, to lend some credibility to its Convertibility Plan, Carlos Menem's government needed to break the harmful link between the Central Bank and the Treasury. The result was a decade of virtually zero inflation.
Some time later, after the 2001 crisis, and thanks to the new turn of the Latin American political class towards the infamous 21st Century Socialism, the State entered an expansive phase again. Private companies were nationalized, social programs multiplied, and populist measures reached their peak, as was the case with Football for All. The Kirchnerism took advantage of the dramatic resignation of De la Rúa and the collapse of convertibility – effectively the decoupling of the peso and the dollar – to subordinate monetary policy to its own power project.
Thus, as the Kirchnerist adventure advanced and the limits of wastefulness were pushed, the old practice of undermining the independence of the Central Bank and financing the fiscal deficit through issuance returned, ensuring a gradual but certain return of the inflation tax.
It is worth noting that since 1935, financing politics through monetary issuance was carried out more or less covertly, as if one knows they are doing something reprehensible. However, Kirchnerism introduced the novel element of institutionalizing the scam through the reform of the Central Bank's Organic Charter enacted in 2012.
The new Article 3, currently in force and displayed on a sign at the entrance of the building located at Reconquista 266, states: “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.”
In this way, the independence of the Central Bank was replaced by a subordination to governmental guidelines, also having to obey the ridiculous number of five objectives, several of them with a high degree of discretion and potential contradiction. All of this formulated, of course, in a language of social sensitivity. Nothing more convenient for the government of a Cristina Fernández de Kirchner willing to go “for everything.”
Mercedes Marcó del Pont, president of the entity between 2010 and 2013, justified the reform on a radio program in 2012, stating that “with the approval of the Organic Charter, the national public sector regains greater capacity to implement public policies and regulations that are functional to the development project that is currently in force in our country.”
Judging by how that project ended, with 211% inflation in 2023, with the country on the brink of a new hyperinflation and the worst crisis in its history, these statements seem more like a confession of a crime. The leader of the movement is currently serving a sentence under house arrest.
Argentina is emerging from a regime in which politics systematically defrauded good Argentines by financing the chaos of public accounts through various tricks such as indebtedness, suffocating taxes, or printing money. The entrenchment of statism in our institutions has been such that, until the emergence of President Milei, most of us had normalized its countless abuses.
Finally, Argentines said enough, and voted for a decisive and lasting change. Today, after more than 16,000 deregulations, multiple bills passed, and so many other transformations in the pipeline, we continue to work together to repair the damage caused by the fatal arrogance of the leaders. In this context, the reform of the Central Bank's Organic Charter seeks, on the one hand, to restore the preservation of the value of our currency as the main purpose of the organization; and on the other, to prohibit the financing of the treasury through issuance.
Argentines deserve to live again in a country that respects life, liberty, and private property. Making the Argentine Republic the freest country in the world is now a priority for a government and a President who, for the first time in a century, place morality above political utility.
1 The question arises by itself: what should this Central Bank do if “creating employment and development with social equity” threatens monetary and financial stability? The Kirchnerist record has already given us the answer.
