- Title: ARGENTINA: Country puts new controls on dollar purchases
- Date: 1st November 2011
- Summary: VARIOUS OF FRONT OF THE DAY'S NEWSPAPERS WITH HEADLINES ABOUT THE NEW GOVERNMENT RULING
- Embargoed: 16th November 2011 12:00
- Keywords:
- Location: Argentina, Argentina
- Country: Argentina
- Topics: Economy
- Reuters ID: LVA7X8BM4MFI8JUQ438SO2Z72DMH
- Story Text: Argentina's foreign exchange trade dried up on Monday (October 31) as banks struggle with the implementation of new government controls that are designed to stem the demand for foreign currency and reduce capital flight.
President Cristina Ferndandez, fresh from her landslide re-election win on October 23, has started her second term by unveiling a series of measures aimed at boosting dollar supplies, while also discouraging demand.
In Buenos Aires, foreign exchange houses were closed and turning customers away, as they scrambled to put a system in place.
The new exchange rules require that banks and exchange houses identify buyers' names, the currency they seek to buy as well as the amount and purpose of their purchase.
One Spanish tourist, Alicia Dominguez Otero, was one of the customers who were refused service in trying to change local currency.
"What happened is that I am Spanish tourist and I am leaving the country tonight and so I went to exchange [money] because I have Argentine pesos left over that I want to change into euros, and I was told I couldn't change them. And they didn't explain that there was a problem with the bank. And so now I have to take them to Spain and I will lose money," said Otero.
Many Argentines, who suffered the country's harsh 2001 economic crisis, are turning their pesos into dollars, as it is feared the peso will slump to offset the impact of high inflation the country has been experiencing.
As the street-level closures continued, the central bank sold $100 million on the formal foreign exchange market on Monday to keep the peso stable.
The central bank sold about $1.78 billion of its foreign reserves earlier in the month to keep the market supplied with greenbacks and stem depreciation.
Economic analyst Fausto Spotorno gave his opinion on the changes needed in the future.
"I think that, generally, the market is finding that the dollar has to rise more quickly, because if not, it will lose competitiveness and that it what fuels capital flight. I think that if the dollar had a more reasonable price or was more in line with the capacity of competition in the country, then probably this capital flight from the country would not exist," said Sportorno.
High inflation has eroded the currency's competitive edge for exporters, and investors, small and large, expect the central bank to allow a faster pace of depreciation in the coming months to protect local industry.
Criticism of these measures is rife, with many saying that they fail to tackle the root cause of the foreign currency demand.
Analysts say the plan could backfire and spur more demand. - Copyright Holder: REUTERS
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