Argentina will not take back the millions of Pesos that thousands of tourists spend in neighbouring Uruguay during the summer season. That was the reply to a request from Uruguay’s largest bank branch in the City of Buenos Aires, according to banking sources in Montevideo.
Following on the strict foreign exchange controls imposed by Argentina’s tax office, AFIP, on the purchase and sale of US dollars in an attempt to cut capital flight, many Argentines have been buying dollars in neighbouring Uruguay forcing its price to soar from the equivalent of the official 4.30 in Buenos Aires to 5.85 pesos.
This in practical terms means that the Argentine peso in Uruguay has suffered a depreciation ranging 20% since the week following President Cristina Fernandez landslide victory in the polls 23 October when controls were established.
With the summer season just round the corner when over a million tourists, mostly Argentines, flock to Uruguayan resorts and beaches, the government in Montevideo said the country was wiling to accept Argentine pesos.
“Argentines love to spend time in Uruguay, have property here and we will find the way to turn those pesos back to dollars”, anticipated President Jose Mujica who has a good relation with his Argentine counterpart Cristina Fernandez.
But given the uncertainty of such a scenario Uruguayan banks and exchange houses adopted the policy of selling dollars in Argentine Pesos a few cents more expensive than the “blue” or informal market in Buenos Aires, which erupted immediately the restrictions were announced.
The purpose of this was to discourage the massive purchase of Argentine Pesos until there was an official confirmation that Argentina would convert the Pesos into dollars as they generate during the summer months from December to April.
The idea was to have armoured vehicles transport the Pesos to Argentina and bring back the US dollars.
Uruguay’s largest bank which also belongs to the government, BROU made the official request last week through its main branch in Buenos Aires. Apparently this week AFIP replied that the measures implemented in the foreign exchange market to limit the purchase of other currencies will remain in place until considered necessary.
“Given this scenario the only thing left is to have an expensive dollar in Argentine pesos terms, not with the purpose of making windfall profits but rather to discourage Argentines from trying to sell their Pesos in Uruguay”, said a BROU source.
Compared to last week the value of the US dollar in Argentina pesos dropped a few cents in Montevideo banks and money exchange houses taking as a reference the BROU policy: BROU last Friday was selling the US dollar for 5.85 Argentine Pesos and on Tuesday this week was trading at 5.71 pesos.
But even when banks and money exchange houses in Montevideo, Colonia and Punta del Este are adopting these measures in the event of a flood of Argentine Pesos, the question remains: will the Argentines flock to Uruguay this summer season in the numbers that were expected or forecasted?