CENTRAL BANKER REPORT CARDS 2014

• Introduction - Trouble With Bubbles by Gordon Platt

• 2014 Central Banker Report Cards | The Americas

• 2014 Central Banker Report Cards | Europe

• 2014 Central Banker Report Cards | Asia

• 2014 Central Banker Report Cards | Middle East & Africa

• Central Banker Summaries | Europe

• Central Banker Summaries | Asia-Pacific

• Central Banker Summaries | Middle East & Africa

Central Banker Summaries | The Americas

Argentina’s economy is on the decline, sparking a 60% gap between official and unofficial dollar exchange rates, and inflation stands near 30%. Foreign reserves, which fell 40% since 2011 to a current $28 billion, could be further halved by 2015. The central bank raised interest rates to curb dollar outflows. In July there was a $539 million debt default amid ongoing battles with holdouts from a record 2001 sovereign default. Fábrega is critical of government policies but still follows direct orders from president Cristina Kirchner.

Despite president Evo Morales’s populist policies, which have boosted social spending, Bolivia’s economy remains strong. After growing 6.8% in 2013, fueled by mining and natural gas output, GDP is expected to expand by 5.5% this year, making it one of the region’s star performers. The central bank is working to control inflation, which was 3.8% during the first seven months of 2014, and is taking liquidity out of the market through foreign exchange policies. It also upped capital requirements to 12% in bolivianos and 66.5% in dollars.

Despite Tombini’s ongoing best efforts to curb inflation and spark economic growth, Brazil’s once-shining economy continues to lose its luster. Inflation remains high and is expected to end the year at 6.3%, placing it at the top end of the official target band. Brazilian GDP is forecast to grow by a meager 0.5% in 2014. The central bank has eased credit to fuel lending and consumer spending but remains sensitive to political pressures from the government, particularly as the October 5 presidential election draws nearer.

Although the Bank of Canada has not changed its key interest rate since 2010, Poloz has revealed himself to be slightly less hawkish than his predecessor, Mark Carney, who now heads the Bank of England. The former CEO of Export Development Canada, Poloz favors a competitive currency. At only his third policy meeting, Poloz dropped Carney’s signal of a potential future rate increase. Despite Poloz’s talking down the currency, however, the Canadian dollar has risen. External developments, including an improving US economy and high oil prices, are providing a boost to Canada’s exports.

Vergara is credited with helping the Chilean economy avoid a full-blown recession, even as it remains in slowdown mode. The world’s largest copper exporter, Chile has posted strong growth fueled by commodity exports that slowed amid tempered Chinese demand. The International Monetary Fund predicts GDP will grow by 2.5% in 2014 but agrees that the central bank and government are setting the stage for more dynamic growth in 2015. The central bank has cut interest rates to reverse GDP sluggishness, though fueling peso depreciation in the process.

COLOMBIA
José Dario Uribe Escobar
GRADE: A-

Uribe is commended for prudent policies that have helped control inflation and supported economic growth in what recently became Latin America’s third-largest economy (displacing financially challenged Argentina). The central bank has raised the benchmark interest rate in 2014 to keep inflation on target at 3%, as GDP is seen at full capacity. The economy is expected to expand by nearly 5% in both 2014 and 2015. Uribe says remaining security concerns, despite progress on that front, will produce a 5% drop in foreign investment this year.

Castro is one of the region’s newest central bankers, appointed after this year’s inauguration of president Luis Guillermo Solis in January. Having been deputy director of the central bank’s monetary department until his appointment at the bank’s helm, it is no surprise that Castro vowed to make overhauling foreign exchange policies a priority in order to curb forex market volatility. The inflation target remains at 4% for 2014. Castro contends there needs to be a strategic balance between controlling price hikes and stimulating local production.

Ecuador posted a current-account deficit for the past four years, with the 2014 gap expected at $4.5 billion. Public spending has more than tripled since president Rafael Correa took office in 2007, prompting the IMF to issue warnings for the administration to curb spending. The government continues to earmark reserves as collateral for foreign loans. Despite having a dollarized economy since 2000, Ecuador now faces currency shortages that prompted the central bank to unveil a plan to issue the world’s first state-backed digital currency.

Barquín’s four-year term as central bank governor expired on September 30 but was characterized by macroeconomic policies that kept Guatemala’s economy in growth recovery mode. GDP is projected to grow by 4% in 2014, with expansion sparked by stronger domestic demand combined with increased remittances from Guatemalans residing abroad. Remittances from the US alone are expected to reach $5.5 billion this year. Barquín will also be remembered for his campaign to end the country’s banking secrecy laws that positioned it as an international tax haven.

Mexico’s economy remains challenged by sluggishness in the US, which purchases 80% of Mexican exports. Carstens is optimistic the economy will grow by 5% by 2018, but the IMF slashed its 2014 growth forecast to 2.4%. The government launched an ambitious structural reform package to spark growth. Inflation is a concern, remaining at the 4% target ceiling this year, though likely to drop to 3% in 2015. Despite such challenges, reserves are a record $190 billion and are supplemented by a $75 billion IMF credit facility.

The economy continues to slow after a commodity-based boom, but the central bank has worked to keep it from slipping further, while creating an environment for recovery. The central bank cut interest rates this year in response to a 12% decline in exports during the first five months of 2014, which followed last year’s 9.4% export drop. The bank also eased reserve requirements to boost lending and fuel consumption. Fiscal stimulus, increased mining output and aggressive public works investments are expected to support a turnaround.

Attaining maximum employment is the main goal of the Fed under Yellen, who so far appears unworried about the recent acceleration in inflation. The danger is that the US Federal Reserve could wait too long to firm monetary policy, increasing the need for a sudden, large increase in rates. After a surprising contraction in real GDP early this year, economic growth has since picked up. With the economy and inflation both getting back on track, the time is nearing for the Fed to adopt a more balanced approach, economists say. Yellen sees substantial slack in the labor market but says that if employment improves more quickly than expected, the Fed could act.

When Graña, a long-term central bank official, was appointed governor in January, the decision was ratified with a unanimous Senate vote. Graña’s stated priorities were to reduce Uruguay’s troubling inflation, which ended 2013 at 8.5% and remains above 9% in 2014, while also facing the potential local impact of the United States’ unwinding of monetary stimulus policies. Among his immediate successes has been a plan to trade with Brazil using local currencies. Set to go into effect before year-end, the plan avoids dollar purchases and reduces transaction costs.

When Merentes was appointed governor in January, observers lauded his more pragmatic and less ideological stance. Analysts claimed Merentes, a former central bank chief and finance minister, advocated for loosening strict currency controls to provide businesses with access to dollars and halt the bolivar’s weakening. However, Merentes has since been cautious not to implement policies that could hurt president Nicolás Maduro’s reelection chances in 2019. He is unlikely to adopt significant measures until after 2015’s midterm elections, even as Venezuela’s socialist economy remains in a freefall.

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