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ECONOMY | 26-11-2021 03:06

Argentina tightens exchange controls to curb outflows of dollars

Argentina’s Central Bank publishes two new measures intended to curb access to hard currency amid expectations for a devaluation.

Argentina’s Central Bank published two new measures Thursday intended to curb access to hard currency amid expectations for a devaluation. 

The institution published one rule change affecting banks and another affecting consumers, as it tries to preserve its store of dollars to help defend the value of the peso. 

The measures follow midterm elections this month in which the government lost control of the upper house of Congress, and come at a time in which authorities are expected to step up negotiations with the International Monetary Fund over above US$40 billion in payments owed. It also adds to a string of existing currency restrictions, as savers seek refuge in hard currency amid inflation running at 50 percent annually. 

The spot peso is controlled by the Central Bank through a crawling peg. 


Fresh restrictions

In the measure targeted at consumers, the Central Bank said it will ban credit card operators from financing payments through installment plans if these are intended for tourism abroad, including plane tickets and car rentals. Such plans are popular among Argentines looking to finance their spending in as many as 18 installments which allows them to lock in prices before inflation pushes them higher. The measure was published one day before the so-called Black Friday shopping day, when stores cut prices to entice consumers. 

In a separate regulation published late Thursday, the Central Bank said it will no longer allow banks to hold net cash dollar positions at the end of a trading day. The rule becomes effective December 1.

The central bank has spent US$1 billion to defend the peso in the spot market since October 28, according to official data that go as far back as November18. The ‘blue-chip swap’, an implicit exchange rate derived from operations with assets that trade in pesos and dollars, has weakened 65 percent ​​since President Alberto Fernández took office in 2019, to 219 per dollar on November 24. Its gap with the official peso, which closed at 100.7 per dollar on Thursday, stands at around 120 percent.

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