(Updates with Berkman comment in third paragraph.)
Feb. 14 (Bloomberg) -- Nicaragua’s Central Bank President Antenor Rosales quit following a disagreement with President Daniel Ortega over the use of foreign currency reserves to fund a regional bank for the Venezuelan-led bloc of eight nations known as Alba.
Ortega proposed that Finance Minister Alberto Guevara replace Rosales as head of the bank, according to lawmakers of the ruling Sandinista party.
“If you’re trying to force the central bank to transfer resources to a foreign institution, you’re clearly not allowing them to conduct an independent policy,” said Heather Berkman, political risk analyst at New York-based Eurasia Group Ltd. Ortega is “dictating what they should use the money for.”
In a Feb. 4 meeting in Caracas, Ortega agreed with some other Alba leaders, including Venezuela’s Hugo Chavez, to put 1 percent of their reserves, or about $17 million in the case of Nicaragua, toward the bank. Rosales told reporters in Managua on Feb. 6 that no one should be allowed to use the international reserves of Nicaragua.
“The resignation of Rosales sends a bad message to the people of Nicaragua,” opposition legislator Wilfredo Navarro said in comments at the National Assembly broadcast on TV channel 100% Noticias. “He was defending the legality of the country’s central bank institution. Withdrawing funds for an unknown bank is a violation of the institution.”
The appointment of Guevara has been sent to lawmakers for approval, Edwin Castro, the chief legislator for the Sandinista party, said on a government website today. He didn’t say whether Guevara would continue at the Finance Ministry.
Castro said Rosales’s resignation was “normal government procedure” and not a result of the disagreement with Ortega.
“It’s not a good signal in terms of usage of central bank resources, but I’d be hesitant to think Ortega is actually interested in changing monetary policy at large,” Berkman said. “It was more of a one-off that showed where Ortega’s priorities are. It really should be something that comes from the central government’s pocket, not the central bank, but Ortega doesn’t have a lot of tax revenues.”
Venezuela is willing to transfer $300 million dollars to the new bank, Chavez said on state television Feb. 4. The Alba members include Venezuela, Cuba, Nicaragua, Ecuador and Bolivia.
Chavez, who says he wants to eliminate the “dictatorship” of the U.S. dollar, has promoted the expanded use of the sucre, a virtual currency created by the Alba bloc in 2009, for regional trade.
The regional development bank, which is backed by Nicaragua, Cuba, Bolivia and Venezuela, is focused on supporting sustainable projects, reducing poverty, and promoting integration and sovereignty of member nations with a “just, dynamic, harmonic and equitable economic exchange,” according to the bank’s website.
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