Expanding the Central Bank mandate in the “Soy Republic” : an assessment of the impact of Central Bank governance on agricultural competitiveness and interest articulation in Argentina
This paper examines the impact of a new Central Bank mandate on agricultural competitiveness and on the ability of the agricultural sector to articulate its policy interests within Argentina’s policymaking process. Reforms to Argentina’s Central Bank charter, passed into law in April 2012, loosened restrictions on Central Bank lending to Argentina’s Treasury and authorized the Central Bank to act to reduce unemployment and spur economic development. The Central Bank carries out its new mandate within a policymaking process characterized by strong presidential authority, weak political institutions, powerful provincial governments, and a budget system that politicizes the transfer of fiscal resources from the federal government to the provinces. Within these policymaking dynamics, this paper analyzes the actions of the Mesa de Enlace, an interest group coalition comprised of Argentina’s four largest agricultural producer associations, and its response to changes in Central Bank governance. My argument is twofold. First, I argue that the new mandate in the long run will exert inflationary pressure on Argentina’s real exchange rate, a key determinant of competitiveness for primary commodity exports, particularly soy. Public statements made by various representatives of the Mesa de Enlace indicate strong opposition to the nominal overvaluation (atraso cambiario) of the peso. Second, I argue that the new mandate politicizes an already-politicized Central Bank. Given the agricultural sector’s waning influence in institutionalized policymaking channels, executive intrusion in Central Bank operations is economically harmful. Such government interference serves to diminish agricultural considerations in monetary policymaking and to encourage the Mesa de Enlace’s exploitation of informal channels for interest articulation, creating disincentives for robust investment and causing undesired work stoppages, hoarding, and social protest.