Argentina lifts restrictions on buying U.S. dollars, putting economy on new path

BUENOS AIRES, Argentina -- Argentina lifted deeply unpopular restrictions on buying U.S. dollars Wednesday, aiming to put an end to a byzantine monetary system that made it difficult for businesses to operate and spawned a booming black market.

See Full Article

The move, a campaign promise of new President Mauricio Marci, was outlined by Finance Minister Alfonso Prat-Gay. The decision, combined with the lifting of export taxes on many agricultural products announced earlier this week, will expose Latin America's third-largest economy to international market forces in ways not seen for a dozen years.

"This system choked the economy for the last four years," Prat-Gay said at a news conference that was broadcast live Wednesday night. "We are now returning to normal."

Attempting to shore up dwindling foreign currency reserves, the preceding administration of President Cristina Fernandez instituted restrictions on buying foreign currency in 2011. It was one of many protectionist policies instituted during 12 years of governments led by Fernandez and her late husband and predecessor as president, Nestor Kirchner.

Argentines who wanted to buy dollars, a common practice in a South American country with a long history of financial meltdowns, had to meet several requirements. And most were limited to a few hundred dollars a month -- when U.S. currency was available in banks.

The limits, locally called a "cepo," or "clamp," led to dual exchanges rates. Over the last year, while the official exchange rate was fixed around 9 Argentine pesos to the dollar, on the black market a dollar fetched as much as 16 pesos.

Businesses, especially those needing to deal in dollars, were deeply affected. While the Fernandez administration insisted that dollars coming into the country trade at the official rate, getting dollars out at that rate, if at all, proved difficult.

"The 'clamp' killed the supply of dollars. It didn't stop the demand," said Prat-Gay.

While the change will be celebrated by international investors and welcomed by many Argentines, there is also much fear about a sharp devaluation of the peso, and what that might do to already soaring prices.

Annual inflation this year is estimated at around 30 per cent. Between the time Macri was elected on Nov. 22 and his inauguration last week, many businesses jacked up prices in hopes of protecting themselves against any devaluation. Other businesses, such as factories, simply shut down to wait to see what happens to the peso.

In recent weeks, economists have estimated the true value of the peso is around 14 or 15 to the dollar. For the first time in four years, that will be put to the test when markets open Thursday.

There are concerns the lifting of currency rules could lead to a run on banks by Argentines eager to buy dollars. The nation's foreign reserves are just over $24 billion, a very small amount for an estimated $600 billion economy.

Without providing any details, Prat-Gray said that to insulate against this risk, his team had been negotiating with China and several financial institutions to quickly bring in several billion dollars over the next month.



Advertisements

Latest Economic News

  • Early cannabis sales 'unbelievably high' after legalization: feds' U.S. consultant

    Economic CTV News
    OTTAWA -- A U.S. consultant hired by Ottawa to assess Canada's eventual recreational pot market says jurisdictions that regulate cannabis should expect "unbelievably high" sales growth in the first few years as criminals are driven out of business. Source
  • Yo ho ho! Pennsylvania aims to smash U.S. embargo on Cuban rum

    Economic CTV News
    HARRISBURG, Pa. -- Pennsylvania's Cuban rum run got its start in a chance meeting last fall in the parking lot in front of the state capitol. "'You know, we have rum,"' a visiting Cuban government liaison told state Sen. Source
  • Is this the future of college: Online classes, but no degree

    Economic CTV News
    WASHINGTON -- Connor Mitchell's university classes take place online, he doesn't have any exams and he studies in a different country every year. Is he looking into the future or taking a gamble? With college costs rising steadily and with more courses available online for free, some observers are beginning to question the need for a traditional college education that may include lectures on Greek philosophy but burden students with massive debt. Source
  • New York City pitches to Canadian tourists amid 'Trump slump'

    Economic CTV News
    TORONTO -- New York's tourism industry is worried U.S. President Donald Trump's "America First" policies are turning off Canadian visitors, and they're heading north this week to woo Canucks and their tourism dollars. The head of New York City's official tourism organization, NYC & Company, minces no words in admitting he's keen "to counter a little bit of the negative rhetoric that is coming out of Washington. Source
  • Iconic Dad's chocolate chip cookies discontinued, customers bitter

    Economic CBC News
    For months, some Canadians have been searching in vain for their beloved Dad's chocolate chip cookies. A current Facebook thread on the topic is full of tales about quests for the item. Source
  • U.S. economy expanded at weakest pace in 3 years in first quarter of 2017

    Economic CTV News
    WASHINGTON -- The U.S. economy turned in the weakest performance in three years in the January-March quarter as consumers sharply slowed their spending. The result fell far short of President Donald Trump's ambitious growth targets and underscores the challenges of accelerating economic expansion. Source
  • Montreal landlord fined after tenants rent out condo illegally

    Economic CTV News
    A Montreal landlord says he’s been fined more than $1,200 because the tenant living in his condo listed the space on Airbnb without his knowledge. Gerry Galiatsatos said his unit came with tenants when he purchased it less than a year ago. Source
  • Swedish cows in a great moooo-d as summer pastures open

    Economic CTV News
    DROTTNINGHOLM, Sweden -- Despite a cold wind and chilling temperatures, spring has come to Sweden. At least, spring for the milk cows. In an annual event that warms hearts across the country, "koslapp" -- the cow release -- has become a popular family outing for urban residents. Source
  • Trump to spend Day 100 in office talking trade

    Economic CTV News
    WASHINGTON -- U.S. President Donald Trump is marking his 100th day in office by talking tough on trade.Trump's first 100: Day-by-day highlights Analysis: We've read all President Trump's tweets, so you don't have to The White House says the president will sign an executive order Saturday that will direct his Commerce Department and the U.S. Source
  • Trump says he's brought 'profound change' to Washington

    Economic CTV News
    WASHINGTON -- U.S. President Donald Trump on Saturday marked his 100th day in office by saying he had brought "profound change" to Washington and reaffirming that "my only allegiance" is to those he governs.Trump's first 100: Day-by-day highlights Analysis: We've read all President Trump's tweets, so you don't have to During an evening trip to Pennsylvania, one of the states that propelled his unlikely election victory, Trump planned to sign an executive order directing the Commerce Department…