Argentina News Roundup: 27th January 2014

The official dollar rate earlier today (Photo: Tito La Penna/Télam)

The official dollar rate earlier today (Photo: Tito La Penna/Télam)

New Rules for Dollar Purchases: Cabinet Chief Jorge Capitanich gave details this morning about the new regulations for purchasing foreign currency in Argentina. From today, Argentines will be able to purchase US dollars and other currencies at banks and exchange houses for purposes other than tourism, subject to prior authorisation from the tax office, AFIP. Employees and independent workers can change up to 20% of their declared monthly net income (averaged over the previous year), provided that it exceeds $7,200, or twice the minimum wage. A maximum of US$2,000 can be purchased in any month.

According to the Central Bank directive ‘A5526’, currency purchases must be paid for via a bank transfer or cheque, not cash. In addition, those who put their dollars in a savings or fixed-term deposit account for 365 days or more will be exempt from the 20% standard tax advance applied to foreign exchange purposes. However, AFIP head Ricardo Echegaray confirmed today that currency purchases for tourism and travel purposes – which will not be affected by the new allowances for dollar savings – will still be subject to the 35% tax advance implemented in December.

President Meets Fidel Castro in Havana: President Cristina Fernández de Kirchner had lunch with Fidel Castro yesterday and met with Brazilian President Dilma Rousseff later. President Fernández travelled to Havana to attend the second Celac summit, which will take place tomorrow. She referred to the encounter with the former Cuban president on Twitter today, saying that she was honoured to have been invited to have lunch with him and his family. “We talked about everything but especially a symbol of the reunion of the whole of Latin America and the Caribbean,” she said, referring to the Celac summit, and anticipated that “the Celac summit will include a declaration of Latin America and the Caribbean as a Peace Zone.” She mentioned that they “also talked about [late Venezuelan president] Hugo [Chávez]. A lot. Unforgettable memories. Infinite nostalgia.” In the afternoon, President Fernández held a bilateral meeting with Dilma Rousseff. “We talked a lot,” she said on Twitter. “Main subject: speculative pressure on exchange rates in emerging countries. (Does that ring a bell?).”

More Confirmed Dead after Catamarca Deadly Storm: Thirteen are now confirmed dead and a further seven people remain missing after last Thursday’s storm and ensuing mudslide in the northern province of Catamarca. Torrential rains and strong winds caused a river to burst its banks near the town of El Rodeo, 38km north of the provincial capital, generating a mudslide that swept along cars, houses, and a bridge. According to the provincial government, three people feared day were today found to be safe and sound.

Polar Bear to be Transferred to Canada: Mendoza’s provincial government confirmed on Friday that they would transfer a polar bear resident in the city’s zoo to a reserve in Canada. Assiniboine polar bear conservation centre had offered to take the 29-year-old bear, called Arturo, and after a campaign backed by Greenpeace highlighting the record-breaking summer temperatures, the provincial government rescinded, and announced that Arturo will be moved as soon as he is given the medical all-clear. The move has been welcomed by conservationists, as last summer a polar bear in Buenos Aires city zoo died due to a combination of high temperatures and fireworks over the Christmas period.

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2 Responses to “Argentina News Roundup: 27th January 2014”

  1. Werner Almesberger says:

    About the loosening of the currency exchange restrictions.

    This was a very interesting day. I could hardly pull myself away from the various news sites. Here’s a more detailed summary of what has happened so far:

    The good: they actually did it. The authorization process is pretty “light” and transparent. The amounts are small but not ridiculous. The limitations are clearly spelled out. They added an incentive for not withdrawing cash, which will help to protect the reserves (but creates a significant risk for the saver.)

    The bad: the authorized amount is based solely on income. Existing savings are still “lost”, and people who live off their savings (think retirees) can still only watch their money evaporate. Also, people with highly variable income are likely to lose.

    The ugly: the way information was handled is a disaster, to put it very mildly.

    It began with the tax advance: Friday, just weeks after it was raised from 20% to 35%, they announced it will be reduced to 20% again. When asked to confirm that this applied to all transactions, not only dollar purchases but also credit card, etc., they confirmed it. On Sunday, that changed, and credit cards, etc., went back up to 35% again. Today, the 20% on dollar purchases also became an optional 0% if the dollars are deposited.

    Next, Kicillof’s left-populist (*) mantra that the rich will not make off with all the dollars. First of all, is he suggesting that there may not be enough for everyone ? After his blooper that moving a meager USD 3 M is enough to nearly capsize the country’s financial system in its wake, it almost seems that he’s trying to tell us something. Something very unpleasant.

    Second, the formula they came up with belies what he said: only about 20-25% of the working public can actually pass the minimum threshold to be allowed to buy dollars at all. Even if they may not be able to put aside great amounts each month, being able to buy at least a modest amount would allow them to save what’s left of any long-term savings they may have. But no, not even the country’s foremost Trotskyist is on the side of the lower ranks of the working class this time.

    As an aside, the threshold makes sense technically because it plugs the loophole of recruiting a bunch of poor people and making each exchange some amount on behalf of someone else. It’s just annoying that he couldn’t resist the temptation to sprinkle some propaganda lies over this.

    (*) Not to pick on the left – right-populist mantras are just as stupid and false.

    Then, this morning came Capitanich’s great performance in the role of mephisto: at the end of his presentation of the rules, he mentioned that the names of all those who exchange dollars will be published. The news sites just exploded. A few hours later, AFIP officials and then apparently Capitanich himself corrected this: AFIP will publish daily statistics (which they already did today [1]), but will refrain from violating fiscal confidentiality. Phew.

    Then the search for a culprit. After all, it couldn’t possibly be the government’s fault that confidence in the peso has eroded. Restrictions build trust. War is peace. Etc. The opening shot was fired in the direction of Shell, who did that 3 M USD transaction (duly authorized by BCRA, etc.) Shell angrily responded that it doesn’t make sense to accuse them of any wrongdoing there. I think this ludicrous accusation didn’t even merit a response.

    Today, the president, who hurriedly – apparently days earlier than originally planned – had left for Cuba on Saturday, twittered angrily, blaming banks, importers, exporters, “economical groups”. She left out the winged pink unicorns. They’re the worst.

    What all the weird public performance makes clear is that there is no master plan. Someone in the government has an idea, rushes to announce it with hardly any coordination, then others jump in and try to fix it, and so on. This means that the government is struggling to keep up with reality and is very far from controlling the situation, leading the market where they want it to be.

    This is bad not only because it does not help to build confidence, not only because someone who has no time to think is likely to make mistakes, but it’s also an invitation to anyone who may try to speculate against the country.

    Now, at the end of the day, did anything tangible happen ? Yes, but very little. [1] It seems that the authorization process at AFIP worked surprisingly smoothly, but since the rules were handed out piece by piece during most of the day, with some requiring further clarification, most banks didn’t dare to exchange dollars yet.

    The result is that operations of about USD 60 M were authorized but only some USD 100 k were executed, about 0.2%.

    This is not too bad. The amount is in the order of what BCRA spends on a daily basis to prop up the peso, and given that the rules were to be announced only today, I don’t think anyone seriously expected to be able to exchange dollars just yet.

    Alas, all this didn’t do much to stabilize the exchange rates: BCRA had to spend another USD 100 M to keep the official exchange rate stable and the “blue” went up a bit too.

    But it’s too early to tell whether the whole scheme will work or not.

    My overall impression is not too bad. They loosened the restrictions in what seems to be a reasonable way. It won’t solve everyone’s problems but it should reduce the “panic spending” people with disposable income have gotten into to escape inflation. It’s also prudent to open the flood gates only a little at first and see how things go. I think both AFIP and BCRA showed good craftsmanship, although they could have used one more day to tidy up things.

    What’s extremely bad is the way information was made public and the unflattering insights this gave into the state of the cabinet. Bringing some order into this would be Capitanich’s job. Both he and Kicillof should also rehearse their public speeches a bit more.

    – Werner

    P.S. There’s way too much stuff to reference. So just one link, with what all this amounted to at the end of the day.



  1. […] Argentina News Roundup: 27th January 2014 Argentina News Roundup: 27th January 2014 … From today, Argentines will be able to purchase US dollars and other currencies at banks and exchange houses for purposes other than tourism, subject to prior authorisation from the tax office, AFIP. … to … Read more on The Argentina Independent […]

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