What is the "cepo al dólar"?

It is a fairly popular economic policy in Latin America, but one that many people do not know what it consists of.

Hand holding dollars

We tell you what the stocks are and how it impacts the ability to save. / Photo: Unsplash

LatinAmerican Post | Ariel Cipolla

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Leer en español: Qué es el cepo al dólar y qué consecuencias trae

Saving in dollars can be an excellent way to prepare against inflation, but it is also limited by some governments, such as in Argentina and Venezuela. According to what the Clarín media mentions, the Argentine Government anticipated, through the Deputy Chief of the Cabinet of Ministers of the Nation, Cecilia Todesca, that Argentines should "befriend the cepo."

From her point of view, Argentina would need "regulations" for a time. In other words, the market could not be released in the short term. Even the website specialized in BeinCrypto markets highlighted that the Argentine quota of 200 dollars could disappear, generating some negative consequences for savers.

Knowing that it is an essential issue for the region's agenda, we decided to find out what specifically the "cepo al dólar" is, why governments decide to place it in certain circumstances, and what are the consequences of extending or limiting it for certain periods of time.

The "cepo al dólar"

First of all, we should conceptually understand what the term means. The specialized website of El Economista de América highlights that the Central Bank of Argentina established restrictions on foreign currency purchases, with the argument of being able to "protect national reserves" in the face of increased demand for dollars.

That is, in Argentina the purchase of 200 dollars a month through bank accounts is allowed, being 100 dollars a month in cash. From the point of view of La Nación, the "cepo al dólar" would be “the restriction on the purchase of foreign currency”, something that only applies in two countries in our region: Argentina and Venezuela.

One of the main criticisms of this type of measure is the constant negative balance. That is, unless the country's economy generates a greater quantity of dollars, if the demand for foreign currency remains constant, the result will continue to be in deficit. Therefore, the real exchange rate lags behind, since the value remains the same as it cannot genuinely increase, lagging behind inflation.

A more flexible measure was installed in Venezuela in 2018. According to El Litoral, the vice president of the country's Economy, Tareck El Aissami, had mentioned that the Government will once again offer foreign currency in the exchange system ... although it will not do so with US dollars, so it was a "half" measure.

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Returning to Argentina, we see that, according to iProfesional's business media, the "cepo al dólar" "arrived in 2011 and no government could remove it without suffering inflation." In other words, applying an exchange restriction implies containing the flight of dollars, although economic problems generally end up occurring that produce changes in the saving culture of the population.

This is what the Diario de Cuyo website highlights as the "culture of the saver in the face of the exchange rate stock", where people, faced with the excessive inflation of the Argentine peso, seek to protect themselves in the dollar for their savings. The problem is that, by not being able to buy a high amount of official dollars, an illegal “blue” dollar arises, with a much higher purchase value, which ends up harming those who seek to stay safe from economic instability in the world. saving.

Against this background, the Página 12 website highlighted that, in a television interview given to TN Noticias, President Alberto Fernández assured that he does not intend to devalue the Argentine peso or further restrict the purchase of dollars, in addition to always thinking that "the stocks are bad". Therefore, it remains to be seen how this measure that limits the saving capacity of Argentines continues.