Friday, December 9, 2022

ECONOMY | 01-09-2019 16:04

Government imposes currency controls in bid to halt flight of dollars

Exporters ordered to seek permission from the Central Bank of Argentina before purchasing foreign currency and and purchases of dollars limited to US$10,000 per individual a month.

The government of President Mauricio Macri on Sunday imposed foreign-exchange currency controls on Argentine exporters and citizens, at the end of a week of financial uncertainty that saw a sharp drop in the value of the peso.

Exporters were ordered to seek permission from the Central Bank of Argentina before purchasing foreign currency and precious metals, in a bid to halt the flight of dollars out of the country.

The Central Bank will also set a deadline for exporters to repatriate foreign currency, the government said in a decree published in the Official Gazette. Institutions will also require authorisation to sell pesos into the foreign exchange market.

According to the decree, which remains in effect until December 31, individuals may not buy more than US$10,000 a month, nor transfer more than that amount to accounts abroad.

Banks may also extend their trading hours until 5pm local time.

Sources inside the Casa Rosada said the moves were introduced at the request of the president, who sought high-impact measures to calm the exchange market.

Finance Minister Hernán Lacunza and the head of the Central Bank, Guido Sandleris, will make announcements tomorrow morning with further details, before the markets open.

The peso collapsed more than 25 percent last month after primary election results showed President Mauricio Macri has little chance of retaining power in October’s polls. Interest rates then soared as the Central Bank tried to roll over debt, culminating Wednesday in a decision to delay payments on US$7 billion of bills coming due this year.

The opposition had called for currency controls, with Peronist presidential hopeful Alberto Fernández saying the government was in “virtual default.”

As the Central Bank tried to shore up the currency, foreign currency reserves tumbled, losing US$3 billion on Thursday and Friday alone.

As well as pushing back maturities on local short-term debt on Wednesday, Argentina also said it will ask holders of US$50 billion of longer-term debt to accept a “voluntary reprofiling.” It also plans to renegotiate payments on US$44 billion it has borrowed from the International Monetary Fund.



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