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Interview with Federico Sturzenegger, Chairman of the Argentina Central Bank, from the World Economic Forum 2017


Following are excerpts from a CNBC interview with Federico Sturzenegger, Chairman of the Argentina Central Bank, from the World Economic Forum 2017 with Julia Chatterley and Carolin Roth.

JC: Now, let's move on. Argentina sold more than expected in a two-part, $7 billion bond sale. That's much higher than the $3-5 billion the Finance Minister said the country was seeking. Argentina aims to raise $10 billion from tapping international markets this year, and I'm pleased to say we have Federico Sturzenegger, the Chairman of the Central Bank of Argentina, joining us now. Sir, thank you so much for joining us this morning. Congratulations on the cash raised here, significantly more than you were expected. You're straight off the blocks this year, raising cash. Can we assume by that you expect more volatility later on this year?

FS: No, not really. I mean, I think what-, Argentina has had a, I think, a fantastic turnaround over the last year. Like, last-, one year ago, we came here to Davos and we were talking about an economy which had exchange rate controls, which was in default with its creditors, and we've basically solved those problems over the last year, and I think the market is very optimistic over Argentina. I think that has shown in this transaction yesterday.

JC: As you point out, though, the economy still has huge challenges, it's still at the reliance of what happens in the United States, particularly as far as rates are concerned, as far as the US dollar is concerned. What are your expectations there, and what's Donald Trump going to mean for Argentina?

FS: Well, yes, for Argentina and for many of the emerging economies-,

JC: Of course.

FS: You know, I would think I would say, on the one hand, the fiscal push that one is expecting from the Trump administration is going to increase interests rates, so I think that is going to put a challenge for many of our economies, but I would say more than that, in the case of Argentina, Argentina has a very low debt ratio, so it's not a very significant issue, but I think it's more the issue of protectionism. I mean, we've had a trend in the world, over the last decades, in which the world has become more integrated, and I think that has been good for-, particularly for the emerging economies. So I think a backlash in that agenda is something that really worries us a lot.

CR: You make a very valid point, when it comes to protectionism, yet on the other hand, here in Davos, we've seen so much optimism on the part of business leaders, and also some of the politicians. I mean, the Chinese President, Xi Jinping, he was here, and he defended free trade, he defended globalization. Do you buy some of that optimism?

FS: No, I buy it because I think it's been good for the world, and one tends to think that the good ideas tend to stick in, so I definitely-, we definitely buy into that view, but it's going to be something that will have to be worked out, you know, by the whole community.

CR: The government in Argentina has seen a cabinet reshuffle at the back end of last year, and the country has got a new Finance Minister. The former Finance Minister was very critical of your job, saying that you didn't cut rates quickly enough. The new one, does he make your life easier? Does he make your job a lot more bearable?

FS: I think Argentina has had, for many years, an inflation problem. Countries that have reduced inflation in a very significant way have doubled their growth rate, so we are absolutely committed to reducing inflation in Argentina. We've had a drastic disinflation in the second half of last year, and I think the new Finance Minister is going to be much more keen on the fiscal issues, so Argentina has a large fiscal deficit, and we have to have fiscal sustainability. So I think in that term, it has been a change for the better.

JC: You also do have the challenge of elections coming up later on this year, as well, and as you say, it's a balance between monetary policy and fiscal policy here. Do you see Macri as an agent for change for Argentina going forward, is this what the country needs?

FS: Macri's a long-term thinker. As you know, populist leaders are leaders that are willing to forego the long-term, for some short-term gain, and Macri is someone who thinks in the long-term, of benefits for the country. So I don't think the elections, for us, are really, kind of, very relevant in terms of a reform agenda. Structural reform, reducing inflation, fiscal consolidation, are things that I think are going to go at a very speedy pace this year, as well.

JC: And just very quickly, is the future bright for Argentina in 2017, or-,

FS: Very bright.

JC: Uncertain, to some degree, too?

FS: No, no, no, very bright. I mean, remember, we come from ten years where the economy was closed to the rest of the world. There are so many opportunities, we are going to have a bumper crop this year, industrial exports of software, I mean, there are so many opportunities in Argentina, and that's what we've been receiving from the business community here. A lot of optimism and interest in Argentina.

JC: Chairman, thank you so much.

FS: Thank you.

JC: Federico Sturzenegger there, the Chairman of the Argentinean Central Bank.