Argentina returns to currency controls as debt crisis spirals
Macri’s government are trying to stabilize the economy as the presidential election loomsEuropost
Restrictions on access to dollars took effect in Argentina on 2 Sept. as the government tries to control a rapid loss of foreign reserves and an accelerating devaluation of the currency. The measure says residents can’t buy more than $10,000 a month without permission from the Central Bank. Institutions need permission for lesser sums. It also says that dollars earned for exports should be brought into the company within five days of the time they are paid. Importers also need permission to make payments. It also bars people from buying dollars to pay domestic debts.
The measures are far less restrictive than those imposed by the government of former President Cristina Fernández, which restricted even spending on vacations abroad and taxed credit card transactions in dollars, leading to the rise of a currency black market. But they still alarmed many Argentines who recall past crises, and lines formed outside several banks in the capital.
The government of Latin America’s third largest economy said in the decree that “the executive branch needed to adopt a series of extraordinary measures aimed at ensuring the normal functioning of the economy.”
Hours after the decree was published, a spokesman for the IMF, with which Argentina has a $57-billion standby agreement, said its staff were analyzing Argentina’s “capital flow management measures with the aim of protecting exchange rate stability and the savers.”
President Mauricio Macri’s government imposed the measures after a first stage of voting showed the left-leaning presidential candidate Alberto Fernandez far ahead of the conservative incumbent, scaring many investors and sending the country’s currency and stock market plunging. After the stunning upset in the 11 August primary vote, bonds, stocks and the peso currency plummeted on market fears over a potential return to the interventionist policies of Fernandez de Kirchner’s previous government. The peso has lost about 30% of its value. The main voting will occur on 27 October.
Treasury Minister Hernán Lacunza told reporters the measures are ‘uncomfortable” and “emergency measures to avoid greater evils and not increase poverty.” The government of Latin America’s third largest economy said in the decree that “the executive branch needed to adopt a series of extraordinary measures aimed at ensuring the normal functioning of the economy.”
The central bank has burned through nearly $1 billion in reserves since Wednesday in an effort to prop up the peso. But the intervention did not have the desired impact and risk spreads blew out to levels not seen since 2005, while the local peso currency extended its year-to-date swoon to 36%.
The central bank said in a statement that the measure did not limit people from withdrawing dollars from their accounts. It does, however, restrict people from buying more than $10,000 a month, or making transfers exceeding that amount per month. It also requires exporters to liquidate their foreign exchange earnings in the local market under deadlines. Companies will not be permitted to stockpile dollars, the bank said.
“(Foreign) trade is not restricted. There were restrictions before, but there are none now,” said a source familiar with the new central bank measure. “All of this is to preserve the economy as well as possible in this circumstance,” said the source, who requested anonymity because he was not authorized to speak to the media.