Español

 

Guyana


Trinidad
& Tobago




Very usefull links



PW
Bookstore





News links

AP

AFP

Aljazeera

Dow Jones

Oil price

Reuters

Bloomberg

Views and News
from
Norway

 

 

 

Argentina's Macri places capital controls

Erica Canepa/Bloomberg

Mauricio Macri. Capital Controls Return to Argentina as Macri Fights to Survive

- Unclear how much will be hedged at what price: person familiar
- Annual hedge is seen as Wall Street's biggest oil deal

By Jorgelina Do Rosario and Philip Sanders / Bloomberg

BUENOS AIRES / SANTIAGO
Petroleumworld 09 02 2019

Argentina's President Mauricio Macri imposed capital controls in a blunt policy reversal aimed at containing the country's escalating financial crisis and earning a slim chance at re-election -- or at least seeing out the remainder of his presidency.

In a rare Sunday intervention, the central bank ordered exporters to repatriate foreign currency from the sale of their goods within five days, among other measures . Corporations will require the authorization of the bank to buy dollars in the foreign-exchange market, except in cases of international trade. Individual Argentines, meanwhile, will be limited to dollar purchases of no more than $10,000 a month.

Read More: Argentina Capital Controls Unlikely to Halt Peso Drop, Analysts Say

The move represents a bitter irony for the pro-market president, who set about dismantling capital controls as soon as he took office in 2015. Amid rising public panic and the looming specter of default, Macri is trying to stanch the haemorraghing of dollars from the country by ripping up his orthodox economic playbook, reintroducing the kind of interventionist policies he once excoriated.

With presidential elections eight weeks away, Macri trails former cabinet chief Alberto Fernandez by a seemingly insurmountable distance. While the latest measures are unlikely to turn the tide, they may help Macri become the first non-Peronist president to finish his constitutional term in recent Argentine history.

“There's a phenomenal crisis of confidence in the economy, and the government is trying to patch up the effects of this crisis with the controls,” Fausto Spotorno, economist and director of the Orlando Ferreres & Asociados consultancy in Buenos Aires, said. “We still don't know if these patches will work.”

In a note published later on Sunday, the International Monetary Fund described the move as “capital flow management” and stated that it would “continue to stand with Argentina during these challenging times.” Last week the Macri administration announced plans to renegotiate payments on $44 billion it has borrowed from the IMF.

Speaking on local TV late on Sunday evening, Economy Minister Hernan Lacunza said that though the measures might be uncomfortable they would avoid worse outcomes. “Argentina is like a boat stuck in circles, always returning to the same port. This isn't the port we dreamed of,” he said. “Now the challenge is to dock the boat on the pier on the 10 December.” That date is when Macri's mandate ends.

Macri's vice-presidential candidate Miguel Angel Pichetto also told local media that the government had taken the decision to ensure that volatility and short-term lack of liquidity did not impact Argentines. “When the dollar rises, supermarket prices go up,” he said.

The campaign has taken a backseat role as the government focuses on reassuring Argentines, according to an official from the presidency who declined to speak on record. While it's worse to campaign with currency controls in place, it's even worse with the exchange rate spiraling out of control, the person added.

Deepening Crisis

Sunday's move shows how the crisis has moved beyond international bond investors to affect ordinary Argentines, who may choose to save in dollar bank accounts.

In the aftermath of the Aug. 11 primary elections that showed Fernandez on course for victory in October, Argentine depositors withdrew hundreds of millions of dollars from their accounts -- cash the central bank counts as part of its gross foreign reserves. These withdrawals, coupled with policy makers' sale of dollars to shore up the peso, has led to a dramatic fall in the country's stock of reserves.

Around $3 billion drained out of the foreign-currency reserves on Thursday and Friday alone after the government changed the terms for its short-term debt. The country risks exhausting its net reserves, which stand at under $15 billion, within weeks if it keeps losing money at this pace.

Currency Collapse

The peso depreciated more than 25% last month after primary election results showed the market-friendly government has little chance of retaining power. Interest rates soared as the central bank tried to roll over debt, culminating Wednesday in a decision to delay payments on $7 billion of bills coming due this year.

Opposition advisers had called for currency controls. Fernandez himself said the government was in “virtual default” but added that he was unwilling to support the emergency measures designed to control rising volatility. Total central bank reserves have slumped to $54.1 billion, from $66.4 billion the day before primary.

As well as pushing back maturities on local short-term debt on Aug. 28, Argentina also said it will ask holders of $50 billion of longer-term debt to accept a “voluntary re-profiling.”

Fitch Ratings now classifies Argentine debt as RD, or restricted default; Standard and Poor's as CCC-; and Moody's as Caa2. Credit default swaps are pricing in a more than 90% chance of a fully-fledged default within five years.

For Juan Diaz Cruz, the director of political risk advisory firm Cefeidas, the economy minister and the central bank will have to adopt further measures in the days to come.

“Today the objective seems to be to contain the economic and financial deterioration,” he said. “To generate greater credibility in the ability of the government to make it to the elections at least minimally competitive.”

— With assistance by Jonathan Gilbert



Story by Jorgelina Do Rosario and Philip Sanders from Bloomberg.

bloomberg.com / 08 30 2019

________________________


We invite you to join us as a sponsor.Circulated Videos, Articles, Opinions and Reports which carry your name and brand are used to target Entrepreneurs through our site, promoting your organization’s services. The opportunity is to insert in our stories pages short attention-grabbing videos, or to publish your own feature stories.

________________________

Copyright© 1999-2019 Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ (PW) stories by anyone provided it mentions Petroleumworld.com as the source.

Other stories you have to get authorization by its authors. Internet web links to http://www.petroleumworld.com are appreciated.

Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!

We invite all our readers to share with us
their views and comments about this article.

Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels

Twitter: @petroleumworld1


TOP

Contact: editor@petroleumworld.com,

Editor & Publisher: Elio Ohep/
Contact Email: editor@petroleumworld.com

CopyRight © 1999-2019, Paul Ohep F. - All Rights Reserved. Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2019, Petroleumworld ™  / Elio Ohep - All rights reserved


This site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.