- Title: ARGENTINA: Argentina limits dollar purchases under new currency regime
- Date: 27th January 2014
- Summary: BUENOS AIRES, ARGENTINA (JANUARY 27, 2014) (REUTERS) THE ARGENTINE FLAG EXTERIOR OF THE GOVERNMENTAL PALACE CABINET CHIEF JORGE CAPITANICH ENTERING NEWS CONFERENCE (SOUNDBITE) (Spanish) CABINET CHIEF JORGE CAPITANICH, SAYING: "All workers registered, whether dependent, self-employed, who are enrolled in the Federal Administration of Public Revenue [AFIP, Argentina's revenue service] in terms of regular or permanent monthly income will have access to obtaining dollars." DOWNTOWN BUENOS AIRES AND THE LANDMARK OBELISK PEOPLE WALKING VARIOUS OF NEWSPAPER HEADLINES ON THE RELAXING OF CURRENCY CONTROLS VARIOUS OF ECONOMIC ANALYST, ALDO ABRAM, LOOKING AT THE AFIP'S WEB PAGE IN HIS OFFICE (SOUNDBITE) (Spanish) ECONOMIC ANALYST, ALDO ABRAM, SAYING: "There is going to be a fixed rule here and this will make the system transparent. I think it is really good. In terms of its impact on the Central Bank, what will be bought will be small amounts, so I don't think it will really move the gauge if we have 10 or 20 million dollars bought a day. It could even turn out to be less. So what will happen here to the reserves in the Central Bank, which is what determines the sustainability of the model in time, will depend on if the exporters and importers believe the government will have a sustainable strategy in the future so this dollar at eight pesos increases over time, but little by little." VARIOUS OF PEOPLE WAITING IN LINE FOR BANK TO OPEN ITS DOORS SIGN NOTING FOREIGN EXCHANGE RATES VARIOUS OF CAPITANICH AT NEWS CONFERENCE (SOUNDBITE) (Spanish) CABINET CHIEF JORGE CAPITANICH, SAYING: "In Argentina we have seen the hoarding of $143 billion dollars over the last 10 years. As a result we think the methodology implemented now is precisely for small savers, for those who effectively want a level of dollar holdings. And this is what we are putting into effect." VARIOUS OF FOREIGN EXCHANGE HOUSES
- Embargoed: 11th February 2014 12:00
- Keywords:
- Location: Argentina
- Country: Argentina
- Topics: Economy
- Reuters ID: LVAAC1UO9C1KOIMAN0ZERRO03GOJ
- Story Text: Argentina set monthly limits on dollar purchases on Monday (January 27) widening the gap between the official and the black-market exchange rates with an erratic currency that has rattled investors and battered the peso.
On Friday (January 24) Argentina said it would relax currency controls it had long defended as essential.
The policy reversal was forced by high inflation and a sharp fall in the country's currency.
But dollar buying was set to a fifth of monthly wages, reviving doubts the government is committed to the more liberal currency measure announced last week.
On Monday Cabinet Chief Jorge Capitanich said that under the plan all Argentines registered with the country's AFIP revenue service would be eligible to purchase dollars.
"All workers registered, whether dependent, self-employed, who are enrolled in the Federal Administration of Public Revenue [AFIP, Argentina's revenue service] in terms of regular or permanent monthly income will have access to obtaining dollars," Capitanich said.
The currency controls had largely backfired by fueling a scramble for dollars on the black market, which in turn contributed to one of the highest inflation rates in the world.
News of the relaxed policy was mostly welcomed in Buenos Aires and came as central bank reserves fell beneath $30 billion, a level suggesting its interventions in support of the anemic peso had become unsustainable.
But allowing average wage-earners to access U.S. dollars was sure to pressure reserves as well, because the central bank is the main source of foreign exchange.
However, economic analyst Aldo Abram told Reuters the effect could prove minimal.
"There is going to be a fixed rule here and this will make the system transparent. I think it is really good. In terms of its impact on the Central Bank, what will be bought will be small amounts, so I don't think it will really move the gauge if we have 10 or 20 million dollars bought a day. It could even turn out to be less. So what will happen here to the reserves in the Central Bank, which is what determines the sustainability of the model in time, will depend on if exporters and importers believe the government will have a sustainable strategy in the future so this dollar at eight pesos increases over time, but little by little," Abram said.
Capitanich also said the measures were designed to target wage-earners and small-time savers.
"In Argentina we have seen the hoarding of $143 billion dollars over the last 10 years. As a result we think the methodology implemented now is precisely for small savers, for those who effectively want a level of dollar holdings. And this is what we are putting into effect," Capitanich said.
Previous economic crises in the South American country have conditioned Argentines to almost obsessively save in dollars.
The ending currency control regime forced people to go to the black market for dollars people had sought to protect them from the weak peso and fast-rising consumer prices. - Copyright Holder: REUTERS
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