Argentina limits foreign exchange purchases and transfers abroad

The Government of President Mauricio Macri announced on Sunday a series of strict financial controls to try to stop the persistent collapse of the peso, in the midst of a crisis of confidence over the increase in political uncertainty before the October elections in Argentina.

The government established different restrictions for the purchase and transfer of currencies, as well as deadlines for the liquidation of exports, in order to increase the amount of dollars in the financial system and reduce its output, according to the new regulations published in the Official Gazette.

"Given the recent economic-financial events unleashed … it is necessary to adopt temporary and urgent measures to regulate the exchange regime more intensely," said the decree unusually published on a Sunday, showing the urgency of the measures.

Argentina's peso, bonds, and shares face sharp turbulence that began last month, after a primary election in which Macri suffered a resounding defeat against Alberto Fernández, the presidential candidate of Peronism who investors are suspicious of.

In a downward spiral for fear that Fernández adopts an interventionist policy, if his victory of the primaries is ratified in the general vote in October, the peso collapsed more than 26% in August alone despite the effort of the central bank to stop the crash through daily sales of their reservations.

Sunday's announcements, which will last until December 31, provide that Argentines will only be able to buy up to $ 10,000 per month, while certain foreign currency acquisitions of companies must be approved by the monetary agency, being prohibited the purchase for "hoarding."

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The restrictions also cover foreign currency transfers from Argentina abroad, profit and dividend transfers, and the acquisition with foreign currency settlement of securities in the secondary market, according to a communication from the Central Bank (BCRA).

"They are unfriendly measures. They are not measures for a normal country," Finance Minister Hernán Lacunza said in television statements.

"It is a preventive measure to preserve the resources of depositors," he added and said, "they are uncomfortable measures to avoid greater evils."

The monetary entity clarified that the ads sought to achieve greater exchange stability and protect the saver. He also pointed out that there will be no limitations to extract dollars from the accounts in that currency or impediments to foreign trade or travel restrictions.

The announcements, reminiscent of other controls that Argentina implemented in the recent past to try to deal with financial overflows, come shortly after the government announced other surprise measures, such as a bold postponement of debt payments last week.

The collapse of the peso accelerated an inflation rate that was already high, above 50% annually, in an economy hit by the recession. The International Monetary Fund (IMF), which last year gave a loan of 57,000 million dollars to Argentina, follows the serious situation closely.

The expectation immediately focused on how the Argentine exchange market would operate at Monday's opening. Since the primaries of August 11, the BCRA had to part with more than 2,000 million dollars to defend the value of the local currency.