Central Bank clamps down on loophole to gain from capital controls

Argentina’s Central Bank is adding measures to curb trades aimed at profiting from capital controls.

The monetary authority will require individual investors who buy dollars to hold those greenbacks for at least five days before they can buy bonds in the secondary market, according to regulation A 6780 released late Wednesday. To access FX markets, savers will have to submit a sworn declaration stating they won’t buy bonds within that timeframe.

The rule aims to curb arbitrage operations used by savers to profit from the return of capital controls, according to a person with knowledge of the matter. The measures are expected to be published shortly, as Central Bank officials and officials from the securities regulator discuss the finer points, according to another person.

The move follows a decision to bring back capital controls, a drastic measure taken by President Mauricio Macri after his poor showing in a presidential primary vote sparked a plunge by the peso and a drop in government reserves along with it. Argentine savers, who can buy as much as US$10,000 per month, soon found arbitrage opportunities in bond prices, which they called “el rulo” or “the curl.”

Foreign investors, meanwhile, use bonds that trade locally and abroad to take their dollars abroad, through an operation known as the “blue-chip swap rate.”

The Central Bank also conducted exchange house inspections Wednesday to ensure they comply with the new currency rules, according to a person with direct knowledge of the matter.