Argentina eases public’s access to dollars

January 28, 2014 - 5:54:40 am
BUENOS AIRES: Argentina eased unpopular restrictions on dollar purchases for the first time in more than two years yesterday after allowing the peso to plummet in value last week in a bid to stem capital flight.

The peso held its value in early trading Monday at a little over eight to the dollar, the financial website said.

Buenos Aires kept a $2,000 monthly limit on the amount of hard currency its citizens will be allowed to purchase, as the new policy went into effect softening currency restrictions in place since 2011. Jorge Capitanich, head of President Cristina Kirchner’s cabinet, announced the limits at a news conference.

He said large businesses and investors will be barred from the hard currency purchases.

Instead, permission to purchase dollars will be restricted to “salaried workers, professionals, self-employed workers and small business owners,” provided they earn more than $900 (7,200 pesos) a month, Capitanich said. If their request is approved, he said, they will be given access to the dollars after 72 hours.

The transactions will have to be approved by AFIP, the national tax agency, he said. Capitanich said the government has reversed a decision announced last week to lower a surcharge on dollar purchases from 35 percent to 20 percent. That surcharge now will remain at 35 percent, he said.

Economist Rodrigo Alvarez said it was unlikely that the easier access to hard currency will lead to an end in black market trading. “We will continue to have parallel markets,” he said. “Everything depends on what happens once the spigot of dollars is opened, and that’s barely begun,” he said.

Buenos Aires made the announcement late last week that it was ending unpopular measures put in place in November 2011 that had restricted Argentinians’ access to foreign currency to prevent capital flight. Last week’s decision to ease access to dollars was made after the Argentine peso suffered its worst single-day fall in more than a decade.

Since the beginning of the year, the peso has lost about a fifth of its value, and the measure was seen as a bid to halt that precipitous slide by boosting confidence in the economy.

The recent economic upheaval comes 12 years after Buenos Aires roiled financial markets by defaulting on nearly $100bn in bonds, unleashing a tidal wave of capital flight and runaway inflation. Argentines remain traumatized by the 2001 collapse, which wiped out the savings of millions of people from the middle class and saw the end of the peso’s fixed exchange rate to the dollar.

Officials said this week’s currency market changes, which are a de facto devaluation of the peso, are being put in place to avoid a repeat of that fiasco. AFP