Argentina hit currency controls on business on Sunday to prevent capital flight after the peso lost more than a quarter of its value after last month's primary election, in its latest move to prevent a fast-paced economic crisis.
The Central Bank will require exporters to repatriate foreign sales revenue, while all companies, not just banks, must seek permission to sell foreign currency pesos after losing $ 3 billion in reserves on Thursday alone and Friday.
The move follows the surprise. Wednesday's announcement that Argentina will seek to defer payments of $ 1
It overturns one of President Mauricio Macri's first major accomplishments, which shortly after taking power in December 2015, abruptly abolished the strict capital controls that have been in place since 2011. These checks prompted the MSCI index to revoke the status of Argentina as an emerging market, demoing it to a frontier market.
With markets worried about the prospect of a return to populism in Argentina, leading to a decline in Argentine asset prices as early as this week, on Sunday the government issued a decree aimed at reducing market volatility and "containing the effects of fluctuations in financial flows on the real economy "
" Considering the various factors affecting the development of the Argentine economy and the uncertainty caused by the financial markets, [government] and adopt a number of emergency measures aimed at ensuring the normal functioning of the economy, maintaining the level of [economic] activity and employment and consumer protection, "says the official statement.
The Central Bank specified that individuals would be limited to purchasing no more than $ 10,000 per month "to protect savers and to achieve greater exchange rate stability." He added that no one is restricted from withdrawing dollars from their bills as long as there are no barriers to trade or travel restrictions.
Investors were expecting some form of capital control. But some fear that the move could jeopardize the IMF's final payment of its $ 57 billion bailout program provided by Argentina during the currency crisis last year, with a $ 5.4 billion tranche due by the end of September.
"How is the IMF supposed to pay the last installment in this environment? "Asked Ed Al Husseini, a Columbia Threadneedle analyst, noting that it was a" massive moral hazard. "
Paul Greer, portfolio manager at Fidelity International, said that holders of local bank deposits, both in pesos and dollars, "now have to worry that they may be the next ones to restructure or realign their assets "That would not be unprecedented in Argentina's new history."
"The vacuum of power between now and probably taking Alberto Fernandez's post on December 10 makes all of Argentina's imbalances and macro-jaws much more challenging than normal," he added he.