Argentina: Dollars put in a tight jacket
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BANKING

Argentina: Dollars put in a tight jacket

Interpreted as designed to curb capital flight; Parallel market expected to grow

The Argentine government plans to introduce tighter controls on the purchase of dollars in the country, in a bid to reduce capital flight and build up its foreign-currency reserves.

The country’s central bank is expected soon to implement a new rule that will allow it to check that people who buy more than $250,000 a year have the income and wealth to do so according to their filings with the Argentina tax authorities. If they do not, the bank will prevent them from purchasing the dollars. The central bank will also restrict local commercial banks from selling more than $20,000 a month to a client and will ensure that this is carried out only from pesos deposited in a client’s account.

The authorities say that the measure is being introduced to tighten anti-money-laundering rules and that the type of restriction imposed does not limit the use of the money but rather the sources of it. However, experts believe it is another way in which the government can rein in capital flight, which gathered pace after the government nationalized the country’s private pension funds and dramatically removed the former president of the central bank, Martin Redrado.

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