Argentina
Macri decrees currency controls to contain the peso crisis
The President of Argentina announced a set of rules similar to those first implemented by Cristina Kirchner at the end of her term. It imposes an exchange limit of 10,000 dollars per month.

The Macri administration published this Sunday a Decree of Necessity and Urgency, similar to an Executive Order, that seeks to contain the escalation of the price of the dollar with a series of rules that restrict the exchange of U.S. dollars. It imposes a blockage or "clamp" on the purchase of foreign currency and limits transfers abroad, two measures that go in the direction of the model that had been implemented by Cristina Kirchner at the end of her term and that Macri harshly criticized when he took office.

"It is a cepolito, half a clamp, half a corralito", explained a source to LPO. The "corralito" was a decree by then-President Fernando de la Rua, who in 2001 limited how much money people could get out of their accounts.

In the Central Bank, they rejected this interpretation and made it clear that it is nothing like the "corralito" because people and corporations will be able to withdraw the dollars they already have in their accounts. There was not the same defense concerning the clamp.

The decree enables the Central Bank to establish the limits of the restriction. Sources from the Central confirmed to LPO that in the case of individuals the monthly purchase of foreign currency will be limited to USD 10,000. Anything above this amount will have to be authorized by the Central Bank. "Ninety percent of people buy less than 10,000 dollars a month," the sources told LPO.

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The companies will not have restrictions to pay imports or debt in foreign currency, but it will apply to the purchase of foreign currency with the purpose of savings. They will also need the authorization to transfer dollars abroad. The same goes for individuals who want to transfer more than 10,000 dollars abroad per month, although they will not have restrictions to transfer to their personal accounts located abroad.

The new regulation also stipulates that exporters have to sell the foreign currency resulting from their exports in the local market within a maximum of 5 working days after collection or 180 days after the boarding permit was issued (15 days for commodities).

Many of the specialists consulted by LPO recognize the measures as necessary but criticize the Government for their poor timing, since it would have been more convenient to announce them before last week's partial default. "The country needed either the currency clamp or the default, not both," an experienced Wall Street executive told LPO.

"It's a cepolito, half a clamp, half a corralito," a source said.

The truth is that with these decisions, Lacunza is taking a good part of the unpopular measures that Alberto Fernández should have implemented if he wins the upcoming elections. "Lacunza is Alberto's Lenicov Remes," a source close to the Peronist presidential candidate summed up.

The government knows that explicitly or implicitly they need to go in a direction that is endorsed by the Peronist candidate, to prevent him from continuing with the dynamic of inflammatory statements like those he made to the Wall Street Journal last Thursday.

The decree also imposes restrictions designed to hinder the process known as "contado con liqui" in its article three (see attached decree). Banks will not be able to buy bonds with dollars, but companies will be able to do so. In the Central Bank, they believe that with all these actions the reserves are going to last much longer, to be able to comply with the only objective that Lacunza outlined: Stabilize the exchange rate to avoid the spiral of inflation.

Finance Minister Hernán Lacunza

The measures were anticipated to the top of the IMF and after the decree was published the opposition was informed. But the synchronicity of the events -first the limited default, statements to the Wall Street Journal and finally the currency clamp- suggests that there was some kind of prior agreement with Alberto Fernández, who happened to choose this week to travel to Spain.

The Peronist candidate had been calling almost explicitly for the government to impose the clamp when he said the priority was "to take care of the reserves". Macri resisted for a while, but finally, the deterioration of the situation left him with no margin.

Banks are also allowed to operate from 10 a.m. to 5 p.m. during September. Each entity will be able to decide whether or not it wants to extend its opening hours. The intention is to avoid panic.

In the inner circle of the Peronist candidate, they say that "Lacunza is Alberto's Remes Lenicov" because the President is taking very unpopular actions that to some extent save Alberto part from doing some of the dirty work if he wins in the upcoming elections

In its arguments, the decree states that "in view of the recent economic-financial events, of public knowledge, and the uncertainty generated in the framework of the current election process, it is necessary to adopt transitory and urgent measures to regulate with greater intensity the regime of changes and, in this way, to strengthen the normal functioning of the economy".

"It is necessary to establish certain extraordinary and transitory rules related to exports of goods and services, with transfers abroad and with access to the exchange market, foreseeing that the Central Bank of the Argentine Republic will dictate the corresponding regulation, in which the situation of human persons must be distinguished from that of legal persons," the decree states.

The decree leaves a wide margin of action for the Central Bank to apply these rules. In its first two articles, the DNU, which Macri signed along with his entire cabinet, reads:

ARTICLE 1 - It is established that, until December 31, 2019, the equivalent value of the exportation of goods and services must be entered into the country in foreign currency and/or negotiated in the exchange market under the conditions and terms established by the CENTRAL BANK OF THE ARGENTINE REPUBLIC.

ARTICLE 2 - The CENTRAL BANK OF THE ARGENTINE REPUBLIC, in accordance with its Organic Charter, shall establish the circumstances in which access to the exchange market for the purchase of foreign currency and precious metals and transfers abroad shall require prior authorization, based on objective guidelines based on the conditions in force in the exchange market and distinguishing the situation of human persons from that of legal persons.

ARTICLE 3 - The CENTRAL BANK OF THE ARGENTINE REPUBLIC is authorized to establish regulations to avoid practices and operations tending to evade, through public titles or other instruments, the provisions of this measure. 

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