Argentina, Latin America’s third-largest economy, imposed currency controls on Sunday (Sept. 1) amid a debt crisis that has battered the peso.
Companies will have now to seek Central Bank of Argentina (BCRA) permision to sell pesos to buy foreign currency and to make transfers abroad.
Individuals looking to buy US dollars will be subject to a limit of 10,000 dollars a month. If they wish to buy more, they need BCRA permission.
The measure does not limit companies or individuals from withdrawing dollars from their bank accounts.
In an Official Bulletin issued on Sunday, President Mauricio Macri's government said that it was necessary to adopt "a series of extraordinary measures to ensure the normal functioning of the economy, to sustain the level of activity and employment and protect the consumers".
Meanwhile, "exporters will have to sell foreign currency derived from exports on the local market within a maximum of five working days after collecting or 180 days after the loading permit (15 days for raw materials)," according to the special measures.
All these new measures will remain in place until the end of this year. On Friday (Aug.30), the peso slid another 1.74 pesos against the dollar, devaluing a total of 33.2% compared with August 2018.
(Data source: Bloomberg)
Argentina’s national currency fell to a record low last month, after primary elections results on Aug. 11, cast serious doubt over the center-right incumbent’s re-election chances.
Business-friendly Macri lost by a far greater margin than expected to the opposition ticket of center-left Alberto Fernandez and ex-leader Cristina Fernandez de Kirchner.
On Aug. 12, the Argentine stock market plummeted more than 30 percent, while the peso lost more than 25 percent of its value against the US dollar.
The vote is seen by many as a key gauge for the first round of Argentina’s presidential election on Oct. 27.
Argentina has been struggling with a financial crisis, facing rising unemployment and one of the world's highest inflation rates — running at 22% during the first half of the year.
The South American nation's economy contracted by 5.8% in the first quarter of 2019, after shrinking 2.5% last year.
Since Aug. 11, the BCRA has sold some 2.038 billion dollars in reserves to stem sharp drop in peso while the Finance Ministry has sold another 626 million dollars over the same period.
Last week, following a previously scheduled visit by the International Monetary Fund (IMF), which has a $57bn standby loan agreement with Argentina, Finance Minister Hernan Lacunza announced the government will extend the deadlines for short-term debt payments to make more dollars available on the market to prop up the national currency.
The move prompted led credit-rating agency Standard and Poor's, to slash Argentina's long-term debt rating on Thursday and temporarily declare the country in "selective default", meaning it can pay some of its debts but can't meet all of its debt obligations.
On Sunday, an IMF spokesperson said the staff of the Washington-based institution would analyse the details of Argentina's "capital flow management measures."
According to the Economist Intelligence Unit, Argentina's foreign currency debt will continue to rise.
Another week of financial uncertainty has just began.