Overview: In addition to existing controls on foreign currency transactions, such as the US$2 million-per-month foreign currency purchasing limit, Argentina’s authorities have established additional restrictions with the stated intention of reducing money laundering and tax evasion. The main features are twofold: First, annual purchases above US$250,000 will require the buyer to provide proof of personal income (or balance sheet in the case of a firm) to verify that this is compatible with the amount to be puchased. Second, purchases above US$20,000 per month will have to be made via check or wire transfer, not in cash. This way, there will be a record of all the money declared.
* RGE View (Sep 17, 2010): Argentina’s Economy Minister Amado Boudou presented the 2011 budget bill to Congress based on a 4.3% economic growth, 8.4% inflation, a primary surplus of 2.46% of GDP and Argentinean peso fluctuating at a range of US$4-US$4.15. The economic growth forecast, however, falls short of a 6% growth expected by the finance ministry. Lower forecast growth in the budget enables the government to spend additional revenues derived from “extraordinary” growth. The bill also includes a plan to use approximately US$7.5 billion of international reserves to pay debt in 2011 (US$6.6 billion in 2010), replicating what the government did at the beginning of 2010. This will allow the government to increase spending, an important issue amid the run-up to the presidential election in October 2011. The government expects to increase primary spending by 17% next year, reaching almost 23% of GDP. In RGE’s view, the 2011 budget bill assumptions are somewhat misleading. Taping on central bank reserves will likely keep robust spending in place ahead of the election, while containing a severe damage to the primary fiscal surplus. Analysis RGE Bertrand Delgado, Juan Lorenzo Maldonado and Maria Paula Carvajal Sep 17, 2010 Intervention is Back
Argentine Peso
* On June 28, 2010, Adelmo Gabbi, the president of Argentina's stock exchange, announced a proposal to revise the country's capital control measures. The proposal suggests eliminating the requirement that foreign investors deposit 30% of any money they bring into the country with the central bank for one year, a policy that resulted in Argentina being demoted to “frontier” status by index provider MSCI Barra in May 2009. The proposal suggests instead keeping investors’ money in the country for a fixed amount of time by imposing a tax on investors who take their money out before the end of that period. This measure would only be applied to the shares of companies traded exclusively in Argentina. News Wall Street Journal Jun 28, 2010 UPDATE: Argentina's Bourse Wants To Ease Capital Controls News Wall Street Journal Jun 28, 2010 CORRECT:Argentina Stock Exchange Wants To Modify Capital Controls
* Argentina's Economy Minister Amado Boudou has denied the government has any plan to revise capital controls. Many analysts don’t expect the government to change the terms of capital controls since they are used to manage the local exchange rate, unless the government thinks the resulting rise in foreign investment would offset the money withdrawn by Argentines. News Wall Street Journal Matthew Cowley and Dow Jones Newswires Jul 19, 2010 UPDATE: Argentina Minister Denies Plan To Ease Capital Controls
* According to Argentine daily Ambito Financiero, by the end of the month President Cristina Fernandez de Kushner is expected to announce plans to ease capital controls by removing the requirement that investors deposit 30% of their money in the central bank for one year. Instead, investors will probably be required to maintain their investments for at least one year. News Bloomberg Drew Benson Jul 19, 2010 Argentina to Ease 2005 Capital Controls as Soon as This Month, Ambito Says
* The Argentine central bank announced that peso-denominated certificates of deposit rose 3.7% m/m in June to approximately US$30 billion, as Argentine investors bet against a likely fall in the currency. Barclays and UBS forecast the peso weakening to 4.3 and 4.5, respectively, by the end of the year. Expectations for a lower exchange are not totally backed by the behavior of the Argentine public, who in the last 16 months have been betting more on peso-denominated certificates of deposit. News Business Week Drew Benson Jul 19, 2010 Argentines Buck UBS Peso Forecast as Deposits Surge
* Adelmo Gabbi, head of the Buenos Aires Stock Exchange, Bolsa de Comercio, demanded the elimination of capital controls as a first step to attract more foreign capital after Argentina’s successful swap of debt. It seems that stock and derivatives exchanges are pushing the government to lift capital controls in order to boost volumes by opening the market to high-speed traders. News Financial Times Jude Webber Jul 18, 2010 Argentine bourse seeks to open doors to HFT
* According to La Nacion newspaper, Argentina's government is considering softening a restriction on investment flows as a way to rejoin an important international stock index. The restriction, which makes investors who want to buy Argentine financial assets deposit 30% of any money they bring into the country with the central bank for one year, may be eased for investments in shares of Argentine companies that don't have any shares listed overseas. News Wall Street Journal Jun 18, 2010 Argentina May Soften Capital Control On Financial Assets
* Argentina’s new foreign currency controls had a marginal impact in formal operations but in the parallel informal market the U.S. dollar surpassed four pesos, due to strong demand. The reduced impact on daily operations was expected since the measures are targeted mainly to control money laundering. On parallel, this measure will help government to have more information about corporations and their transactions. The parallel dollar is expected to converge towards formal market in the short run. The new rules limit US dollars or equivalent, cash sales to US$20,000. If they exceed US$250,000, a proof of assets and/or earnings must be provided to support the operation. News MercoPress. Jun 09, 2010 US dollar breaks through the 4 pesos barrier in Buenos Aires informal market
* According to reports in local newspapers El Clarin and La Nacion, rules made by Argentina's central bank, the tax agency AFIP and the anti-money laundering agency UIF designed to limit money laundering and tax evasion are suspected of having the ulterior motive of restricting the flow of U.S. dollars out of the country. The government has been keen to use the surplus of dollars flowing into Argentina as a buffer to protect the local economy from international financial turmoil. News Wall Street Journal Matthew Cowley and Dow Jones Newswires Jun 07, 2010 Argentina May Tighten Foreign Exchange Rules - Report
International Reserves
* On August 5, Argentina recovered its foreign currency reserves to US$50.036 billion after paying capital and interest on the Boden 2012 dollar-denominated bonds. The central bank followed the payout with dollar purchases on local currency markets to rebuild the reserves. Without this intervention, the rising inflow of export earnings would push the currency higher. The central bank also might increase the minimum reserve requirement for banks. News iMarkets News Charles Newbery Aug 09, 2010 LatamWatch: Argentina to Build Reserves, Buying Dlrs to Slow FX Appreciation, Infl
* Argentina’s central bank is selling debt to companies of up to ARP150 million (US$38 million) in central bank notes (Lesbacs) due up to at least three months at an ARP800 million auction. As stated by Carola Sandy from Credit Suisse Group, this is a strategy to drain cash from the financial system and to reduce inflation after dollar purchases pushed international reserves to a record US$51 billion. News Bloomberg Drew Benson Jul 27, 2010 Argentina's Record Reserves Get Companies an Invite to Weekly Debt Sales
* Argentina’s Ministry of Economy announced that international reserves exceeded US$50 billion, boosted by an intervention by the central bank in a record purchase of US$262 million and by an increase in agricultural exports. News MercoPress. Jul 10, 2010 Argentine agro-exports help boost international reserves to over 50 billion USD
* Argentina's central bank bought $262 million worth of U.S. dollars, in part to prevent the peso to fluctuate drastically. These fears came after exporters brought dollars to the economy by selling grain and oilseed products. A central bank official stated that: "This is an absolute record since the opening of the currency market in 2002." According to the official, international reserves have surpassed US$50 billion. News WSJ Taos Turner Jul 09, 2010 Argentina Stocks Up; Ctrl Bank Buys Record $262M In Forex Mkt
* The Argentine government intended to swap Boden 2012 bonds in order to push back debt payments, but it had to suspend these plans as a consequence of adverse market conditions. Therefore, the government will most likely use more central bank reserves to make debt payments. According to the Congressional Budget Committee, the country has already used $2.37 billion of these reserves to pay down foreign debt due this year. News WSJ Shane Romig Jul 08, 2010 Argentina Stocks, Bonds Rally On Wall Street, Crude-Oil Gains
* The central bank resumed accumulating international reserves in September, adding US$2.9 billion to US$47.7 billion by the end of 2009 (17% of GDP). Despite this, in RGE’s view, Congress will likely restrict the amount of reserves the central bank can transfer to the treasury and perhaps who the government can pay; the government will most likely be able to pay multilaterals. Analysis RGE Bertrand Delgado Jan 30, 2010 Argentina: Q1 2010 Outlook
Private Deposits
* According to Mercopress, approximately 16 out of 40 investment banks are leaving Argentina after the Central Bank tightened the requirements that ban the banks from “attracting Argentine deposits to send overseas to wealth funds.”
Source: www.roubini.com
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