Dollar deposits and loans erosion in Argentina as restrictions become stricter
The strict and tightening US dollar purchase restrictions imposed in Argentina were clearly exposed in the banking system dollar deposits and loans during the last week of July when they dropped 3%, having accumulated 43% in the last few weeks, according to official data from the central bank.
The restrictions on the US dollar trading that were launched last October and have gradually extended to all areas of business, banking, trade and travelling have also had an impact in the exchange rate where the gap between the official dollar rate in Pesos and the parallel market has a gap ranging between 30% and 45%.
Argentine citizens fearful of President Cristina Fernandez administration hunt for US dollars, and recalling not so distant experiences have been withdrawing their US dollars deposits as uncertainty and lack of confidence spreads.
The latest central bank data shows that in the week ended 27 July, deposits in dollars dropped an additional 222 million while the stock of loans in dollars fell 245 million dollars, which represent 2.3% and 3.4% of totals respectively.
Regarding deposits almost 60% of the contraction is people with saving accounts in US dollars that withdrew another 122 million at an average of 24.4 million per day. The rest belongs to public sector operations. In the case of loans it refers mainly to loans extended with export documents as collateral.
Argentine imposed the strict measures since it still has difficulties in access to voluntary money markets because of pending remnants from the 2012 default, and the double surplus equation is not working as in past years. Overspending has the budget in red and the trade surplus drooped dramatically as the global economy slows down and the energy bill surged to 11 billion dollars in 2011.
Further tightening the “dollar clamp”, on Monday the Official Gazette published that the tax revenue office, AFIP, established new measures for Argentine residents wishing to travel overseas.
Through resolution N° 3356, AFIP states that those who travel abroad may only acquire in the exchange market the legal currency of the country of destination and determined that all tourism operations need to be confirmed by shipping companies or travel agencies.
Under the new rule, the AFIP “shall consider, for purposes of validation, the destination and currency reported to be acquired and, thus, enable the person intending to travel to access the purchase of legal currency used in the destination country”.
This means that if heading to Uruguay the traveller will only be sold Uruguayan Pesos or if Brazil, Real, Europe, Euros or Britain, pound sterling.
The resolution, which will come into effect on August 13 also establishes that “purchases of foreign currency for travel or tourism purposes required for validation, that all data reported by the potential buyer to be confirmed by the transport company, or, if necessary by the tour operator.”
The resolution also warns that “wherever it appears the breach of obligations under this general resolution, the person responsible may receive the sanctions provided by law 11,683”.